##### Table of Contents









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 March 31,
    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 March 31, 2004 was:

|                                                               |  |               
|-------------------------------------------------------------- |  | --------------
|Exelon Corporation Common Stock, without par value             |  | 330,488,032   
|Commonwealth Edison Company Common Stock,
    $12.50 par value |  | 127,016,486   
|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.



---






---



##### Table of Contents










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  | 
|                                   |  | Condensed Combined Notes to
    Consolidated Financial Statements                             |   |          | 22  | 
|Item 2.                            |  | Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations |   |          | 57  | 
|                                   |  | Exelon Corporation                                                                            |   |          | 59  | 
|                                   |  | Commonwealth Edison
    Company                                                               |   |          | 80  | 
|                                   |  | PECO Energy Company                                                                           |   |          | 89  | 
|                                   |  | Exelon Generation Company,
    LLC                                                            |   |          | 97  | 
|Item 3.                            |  | Quantitative and
    Qualitative Disclosure About Market Risk                                 |   |          | 107 | 
|Item 4.                            |  | Controls and
    Procedures                                                                   |   |          | 115 | 
|                                  
|PART II.                           |  | OTHER
    INFORMATION                                                                         |   |          | 115 | 
|Item 1.                            |  | Legal
    Proceedings                                                                         |   |          | 115 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 115 | 
|                                   |  | Commonwealth Edison Company                                                                   |   |          | 115 | 
|                                   |  | Exelon Generation Company, LLC                                                                |   |          | 115 | 
|Item 3.                            |  | Defaults Upon Senior
    Securities                                                           |   |          | 116 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 116 | 
|                                   |  | Exelon Generation Company, LLC                                                                |   |          | 116 | 

1



---



##### Table of Contents



|           |  |                                      |     |          |     | 
|---------- |  | ------------------------------------ | --- | -------- | --- | 
|           |  |                                      |     | Page No.
|           |  |                                      |     |         
|Item 5.    |  | Other
    Information                |     |          | 116 | 
|           |  | Exelon Corporation                   |     |          | 116 | 
|           |  | Commonwealth Edison Company          |     |          | 116 | 
|           |  | PECO Energy Company                  |     |          | 116 | 
|           |  | Exelon Generation Company, LLC       |     |          | 116 | 
|Item 6.    |  | Exhibits and Reports on
    Form 8-K |     |          | 116 | 
|SIGNATURES |  |                                      | 117 |         
|           |  | Exelon Corporation                   |     |          | 117 | 
|           |  | Commonwealth Edison
    Company      |     |          | 117 | 
|           |  | PECO Energy Company                  |     |          | 118 | 
|           |  | Exelon Generation Company,
    LLC   |     |          | 118 | 



2



---



##### Table of Contents






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

Except for the historical information contained
herein, 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
2003 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 2003 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.

3



---



##### Table of Contents



PAGE INTENTIONALLY LEFT BLANK

4



---



##### Table of Contents





PART I. FINANCIAL INFORMATION



Item 1.     Financial
Statements

5



---



##### Table of Contents






EXELON CORPORATION



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |       |       |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                                                                                                                                                        |                                                                                |                                        
|                                                                                                                                                                        |                                                                                | Three Months                           
|                                                                                                                                                                        |                                                                                | Ended March 31,                        
|                                                                                                                                                                        |                                                                                |                                        
|                                                                                                                                                                        |                                                                                | 2004                                    |       | 2003 
|(In millions, except per share data)                                                                                                                                    |                                                                                |                                         |       |      
|Operating revenues                                                                                                                                                      |                                                                                | $                                       | 3,722 |       |       | $ | 4,074 |      
|Operating expenses                                                                                                                                                      |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Purchased power                                                                |                                         |       | 562   |       |   |       | 840   |      
|                                                                                                                                                                        | Purchased power from AmerGen Energy Company, LLC                               |                                         |       |      |       |   |       | 67    |      
|                                                                                                                                                                        | Fuel                                                                           |                                         |       | 836   |       |   |       | 830   |      
|                                                                                                                                                                        | Operating and maintenance                                                      |                                         |       | 1,115 |       |   |       | 1,109 |      
|                                                                                                                                                                        | Depreciation and amortization                                                  |                                         |       | 301   |       |   |       | 274   |      
|                                                                                                                                                                        | Taxes other than income                                                        |                                         |       | 192   |       |   |       | 197   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        |                                                                                | Total operating expenses                |       |       | 3,006 |   |       |       | 3,317 |  
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Operating income                                                                                                                                                        |                                                                                |                                         | 716   |       |       |   | 757   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Other income and deductions                                                                                                                                             |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Interest expense                                                               |                                         |       | (130  | )     |   |       | (221  | )    
|                                                                                                                                                                        | Interest expense to affiliates                                                 |                                         |       | (93   | )     |   |       | (4    | )    
|                                                                                                                                                                        | Distributions on preferred securities of
    subsidiaries                      |                                         |       | (1    | )     |   |       | (12   | )    
|                                                                                                                                                                        | Equity in earnings (losses) of unconsolidated
    affiliates                   |                                         |       | (24   | )     |   |       | 18    |      
|                                                                                                                                                                        | Other, net                                                                     |                                         |       | 55    |       |   |       | (141  | )    
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        |                                                                                | Total other income and deductions       |       |       | (193  | ) |       |       | (360  | )
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Income before income taxes and cumulative
    effect of changes in accounting principles                                                                                |                                                                                |                                         | 523   |       |       |   | 397   |      
|Income taxes                                                                                                                                                            |                                                                                |                                         | 149   |       |       |   | 148   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Income before cumulative effect of changes in
    accounting principles                                                                                                 |                                                                                |                                         | 374   |       |       |   | 249   |      
|Cumulative effect of changes in accounting
    principles (net of income taxes of $22 and $69 for the three
    months ended March 31, 2004 and 2003,
    respectively) |                                                                                |                                         | 32    |       |       |   | 112   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Net income                                                                                                                                                              |                                                                                |                                         | 406   |       |       |   | 361   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Other comprehensive income (loss) (net of
    income taxes)                                                                                                             |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Cash-flow hedge adjustment                                                     |                                         |       | (203  | )     |   |       | (146  | )    
|                                                                                                                                                                        | Foreign currency translation adjustment                                        |                                         |       |      |       |   |       | 1     |      
|                                                                                                                                                                        | Unrealized gain (loss) on marketable securities                                |                                         |       | 40    |       |   |       | (5    | )    
|                                                                                                                                                                        | SFAS No. 143 transition adjustment                                             |                                         |       |      |       |   |       | 168   |      
|                                                                                                                                                                        | Interest in other comprehensive income (loss) of
    unconsolidated affiliates |                                         |       | 6     |       |   |       | (9    | )    
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        |                                                                                | Total other comprehensive income (loss) |       |       | (157  | ) |       |       | 9     |  
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Total comprehensive income                                                                                                                                              |                                                                                | $                                       | 249   |       |       | $ | 370   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Average shares of common stock
    outstanding  Basic                                                                                                                  |                                                                                |                                         | 330   |       |       |   | 324   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Average shares of common stock
    outstanding  Diluted                                                                                                                |                                                                                |                                         | 333   |       |       |   | 326   |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Earnings per average common share 
    Basic:                                                                                                                          |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Income before cumulative effect of changes in
    accounting principles        |                                         | $     | 1.14  |       |   | $     | 0.77  |      
|                                                                                                                                                                        | Cumulative effect of changes in accounting
    principles                      |                                         |       | 0.09  |       |   |       | 0.34  |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Net income                                                                     |                                         | $     | 1.23  |       |   | $     | 1.11  |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Earnings per average common share 
    Diluted:                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Income before cumulative effect of changes in
    accounting principles        |                                         | $     | 1.13  |       |   | $     | 0.77  |      
|                                                                                                                                                                        | Cumulative effect of changes in accounting
    principles                      |                                         |       | 0.09  |       |   |       | 0.34  |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|                                                                                                                                                                        | Net income                                                                     |                                         | $     | 1.22  |       |   | $     | 1.11  |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      
|Dividends per common share                                                                                                                                              |                                                                                | $                                       | 0.55  |       |       | $ | 0.46  |      
|                                                                                                                                                                        |                                                                                |                                         |       |       |       |   |       |      

See Condensed Combined Notes to Consolidated
Financial Statements

6



---



##### Table of Contents






EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |      |      |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---- | --- | ---- | ---- | ---- | ---- | ---- | -
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | Three Months                                                                   
|                                                              |                                                                                             | Ended March 31,                                                                
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | 2004                                                                            |                                                                         | 2003
|(In millions)                                                 |                                                                                             |                                                                                 |                                                                         |     
|Cash flows from operating activities                          |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                              | Net income                                                                                  |                                                                                 | $                                                                       | 406  |     |      | $    | 361  |     
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                                 |                                                                         |      |     |      |      |      |     
|                                                              |                                                                                             | Depreciation, amortization and accretion,
    including nuclear fuel            |                                                                         |      | 458 |      |      |      | 423  |     
|                                                              |                                                                                             | Cumulative effect of changes in accounting
    principles (net of income taxes) |                                                                         |      | (32 | )    |      |      | (112 | )   
|                                                              |                                                                                             | Impairment of investments                                                       |                                                                         |      | 3   |      |      |      | 205  |     
|                                                              |                                                                                             | Deferred income taxes and amortization of
    investment tax credits            |                                                                         |      | 217 |      |      |      | (64  | )   
|                                                              |                                                                                             | Provision for uncollectible accounts                                            |                                                                         |      | 23  |      |      |      | 31   |     
|                                                              |                                                                                             | Equity in losses (earnings) of
    unconsolidated affiliates                    |                                                                         |      | 24  |      |      |      | (18  | )   
|                                                              |                                                                                             | Net realized gains on nuclear decommissioning
    trust funds                   |                                                                         |      | (3  | )    |      |      | (6   | )   
|                                                              |                                                                                             | Other operating activities                                                      |                                                                         |      | 7   |      |      |      | (7   | )   
|                                                              |                                                                                             | Changes in assets and liabilities:                                              |                                                                         |      |     |      |      |      |      |     
|                                                              |                                                                                             |                                                                                 | Accounts receivable                                                     |      |     | 22   |      |      |      | 4    |  
|                                                              |                                                                                             |                                                                                 | Inventories                                                             |      |     | 71   |      |      |      | 43   |  
|                                                              |                                                                                             |                                                                                 | Other current assets                                                    |      |     | (82  | )    |      |      | (290 | )
|                                                              |                                                                                             |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities    |      |     | (165 | )    |      |      | (217 | )
|                                                              |                                                                                             |                                                                                 | Net realized and unrealized mark-to-market and
    hedging transactions |      |     | 24   |      |      |      | 25   |  
|                                                              |                                                                                             |                                                                                 | Pension and non-pension postretirement benefits
    obligations         |      |     | (85  | )    |      |      | (77  | )
|                                                              |                                                                                             |                                                                                 | Other noncurrent assets and liabilities                                 |      |     | (37  | )    |      |      | 82   |  
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows provided by operating activities               |                                                                                             |                                                                                 | 851                                                                     |      |     |      | 383  |     
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash flows from investing activities                          |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                              | Capital expenditures                                                                        |                                                                                 |                                                                         | (439 | )   |      |      | (427 | )   
|                                                              | Proceeds from nuclear decommissioning trust fund
    sales                                  |                                                                                 |                                                                         | 307  |     |      |      | 572  |     
|                                                              | Investment in nuclear decommissioning trust funds                                           |                                                                                 |                                                                         | (378 | )   |      |      | (622 | )   
|                                                              | Change in restricted cash                                                                   |                                                                                 |                                                                         | 70   |     |      |      | 74   |     
|                                                              | Net cash increase from consolidation of Sithe
    Energies, Inc.                            |                                                                                 |                                                                         | 19   |     |      |      |     |     
|                                                              | Other investing activities                                                                  |                                                                                 |                                                                         | 48   |     |      |      | 20   |     
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows used in investing activities                   |                                                                                             |                                                                                 | (373                                                                    | )    |     |      | (383 | )   
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash flows from financing activities                          |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                              | Issuance of long-term debt                                                                  |                                                                                 |                                                                         |     |     |      |      | 951  |     
|                                                              | Retirement of long-term debt                                                                |                                                                                 |                                                                         | (182 | )   |      |      | (963 | )   
|                                                              | Retirement of long-term debt to financing
    affiliates                                    |                                                                                 |                                                                         | (181 | )   |      |      |     |     
|                                                              | Change in short-term debt                                                                   |                                                                                 |                                                                         | (10  | )   |      |      | 219  |     
|                                                              | Issuance of mandatorily redeemable preferred
    securities                                 |                                                                                 |                                                                         |     |     |      |      | 200  |     
|                                                              | Retirement of mandatorily redeemable preferred
    securities                               |                                                                                 |                                                                         |     |     |      |      | (200 | )   
|                                                              | Payment on acquisition note payable to Sithe
    Energies, Inc.                             |                                                                                 |                                                                         | (27  | )   |      |      |     |     
|                                                              | Dividends paid on common stock                                                              |                                                                                 |                                                                         | (181 | )   |      |      | (145 | )   
|                                                              | Proceeds from employee stock plans                                                          |                                                                                 |                                                                         | 106  |     |      |      | 31   |     
|                                                              | Other financing activities                                                                  |                                                                                 |                                                                         | 3    |     |      |      | (59  | )   
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows (used in) provided by financing
    activities |                                                                                             |                                                                                 | (472                                                                    | )    |     |      | 34   |     
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Increase in cash and cash
    equivalents                     |                                                                                             |                                                                                 | 6                                                                       |      |     |      | 34   |     
|Cash and cash equivalents at beginning of
    period          |                                                                                             |                                                                                 | 493                                                                     |      |     |      | 469  |     
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash and cash equivalents at end of
    period                |                                                                                             | $                                                                               | 499                                                                     |      |     | $    | 503  |     
|                                                              |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     

See Condensed Combined Notes to Consolidated
Financial Statements

7



---



##### Table of Contents






EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                               |                                        |        |              |        |   |        |       |        | 
|---------------------------------- | --------------------------------------------- | -------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                   |                                               | March 31,                              |        | December 31,
|                                   |                                               | 2004                                   |        | 2003        
|(In millions)                      |                                               |                                        |        |             
|ASSETS                            
|Current assets                     |                                               |                                        |        |              |        |   |        |      
|                                   | Cash and cash equivalents                     |                                        | $      | 499          |        |   | $      | 493   |       
|                                   | Restricted cash and investments               |                                        |        | 149          |        |   |        | 97    |       
|                                   | Accounts receivable, net                      |                                        |        |              |        |   |        |       |       
|                                   |                                               | Customer                               |        |              | 1,601  |   |        |       | 1,567  | 
|                                   |                                               | Other                                  |        |              | 333    |   |        |       | 343    | 
|                                   | Mark-to-market derivative assets 
    energy |                                        |        | 399          |        |   |        | 337   |       
|                                   | Inventories, at average cost                  |                                        |        |              |        |   |        |       |       
|                                   |                                               | Fossil fuel                            |        |              | 120    |   |        |       | 212    | 
|                                   |                                               | Materials and supplies                 |        |              | 306    |   |        |       | 310    | 
|                                   | Notes receivable from affiliate               |                                        |        |             |        |   |        | 92    |       
|                                   | Deferred income taxes                         |                                        |        | 650          |        |   |        | 567   |       
|                                   | Assets held for sale                          |                                        |        | 1,309        |        |   |        | 242   |       
|                                   | Other                                         |                                        |        | 614          |        |   |        | 413   |       
|                                   |                                               |                                        |        |              |        |   |        |      
|                                   |                                               | Total current assets                   |        |              | 5,980  |   |        |       | 4,673  | 
|                                   |                                               |                                        |        |              |        |   |        |      
|Property, plant and equipment, net |                                               |                                        | 20,133 |              |        |   | 20,630 |      
|Deferred debits and other assets   |                                               |                                        |        |              |        |   |        |      
|                                   | Regulatory assets                             |                                        |        | 5,118        |        |   |        | 5,226 |       
|                                   | Nuclear decommissioning trust funds           |                                        |        | 4,890        |        |   |        | 4,721 |       
|                                   | Investments                                   |                                        |        | 964          |        |   |        | 941   |       
|                                   | Goodwill                                      |                                        |        | 4,714        |        |   |        | 4,719 |       
|                                   | Mark-to-market derivative assets 
    energy |                                        |        | 375          |        |   |        | 100   |       
|                                   | Other                                         |                                        |        | 1,385        |        |   |        | 1,024 |       
|                                   |                                               |                                        |        |              |        |   |        |      
|                                   |                                               | Total deferred debits and other assets |        |              | 17,446 |   |        |       | 16,731 | 
|                                   |                                               |                                        |        |              |        |   |        |      
|Total assets                       |                                               | $                                      | 43,559 |              |        | $ | 42,034 |      
|                                   |                                               |                                        |        |              |        |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

8



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |        |        | 
|--------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ------ | ------ | 
|                                                                                        |                                                                                                             | March 31,                                    |        | December 31,
|                                                                                        |                                                                                                             | 2004                                         |        | 2003        
|(In millions)                                                                           |                                                                                                             |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                               
|Current liabilities                                                                     |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Commercial paper                                                                                            |                                              | $      | 316          |        |   | $      | 326    |       
|                                                                                        | Note payable to Sithe
    Energies, Inc.                                                                    |                                              |        |             |        |   |        | 90     |       
|                                                                                        | Long-term debt due within one year                                                                          |                                              |        | 215          |        |   |        | 1,385  |       
|                                                                                        | Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust due within one year |                                              |        | 561          |        |   |        | 470    |       
|                                                                                        | Accounts payable                                                                                            |                                              |        | 1,125        |        |   |        | 1,314  |       
|                                                                                        | Mark-to-market derivative liabilities 
    energy                                                          |                                              |        | 811          |        |   |        | 508    |       
|                                                                                        | Accrued expenses                                                                                            |                                              |        | 1,244        |        |   |        | 1,228  |       
|                                                                                        | Liabilities held for sale                                                                                   |                                              |        | 1,356        |        |   |        | 61     |       
|                                                                                        | Other                                                                                                       |                                              |        | 288          |        |   |        | 306    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total current liabilities                    |        |              | 5,916  |   |        |        | 5,688  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Long-term debt                                                                          |                                                                                                             |                                              | 8,696  |              |        |   | 7,889  |       
|Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust |                                                                                                             |                                              | 4,783  |              |        |   | 5,055  |       
|Long-term debt to other financing
    trusts                                            |                                                                                                             |                                              | 545    |              |        |   | 545    |       
|Deferred credits and other
    liabilities                                              |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Deferred income taxes                                                                                       |                                              |        | 4,701        |        |   |        | 4,450  |       
|                                                                                        | Unamortized investment tax credits                                                                          |                                              |        | 284          |        |   |        | 288    |       
|                                                                                        | Asset retirement obligation                                                                                 |                                              |        | 3,050        |        |   |        | 2,997  |       
|                                                                                        | Pension obligations                                                                                         |                                              |        | 1,556        |        |   |        | 1,668  |       
|                                                                                        | Non-pension postretirement benefits obligations                                                             |                                              |        | 1,080        |        |   |        | 1,053  |       
|                                                                                        | Spent nuclear fuel obligation                                                                               |                                              |        | 869          |        |   |        | 867    |       
|                                                                                        | Regulatory liabilities                                                                                      |                                              |        | 1,960        |        |   |        | 1,891  |       
|                                                                                        | Mark-to-market derivative liabilities 
    energy                                                          |                                              |        | 390          |        |   |        | 141    |       
|                                                                                        | Other                                                                                                       |                                              |        | 886          |        |   |        | 912    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total deferred credits and other liabilities |        |              | 14,776 |   |        |        | 14,267 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total liabilities                            |        |              | 34,716 |   |        |        | 33,444 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Commitments and contingencies  see
    Note 13                                         |                                                                                                             |                                              |        |              |        |   |        |       
|Minority interest of consolidated
    subsidiaries                                      |                                                                                                             |                                              | 57     |              |        |   |       |       
|Preferred securities of subsidiaries                                                    |                                                                                                             |                                              | 87     |              |        |   | 87     |       
|Shareholders equity                                                                    |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Common stock                                                                                                |                                              |        | 7,421        |        |   |        | 7,292  |       
|                                                                                        | Retained earnings                                                                                           |                                              |        | 2,544        |        |   |        | 2,320  |       
|                                                                                        | Accumulated other comprehensive income (loss)                                                               |                                              |        | (1,266       | )      |   |        | (1,109 | )     
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total shareholders equity                   |        |              | 8,699  |   |        |        | 8,503  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Total liabilities and shareholders
    equity                                          |                                                                                                             | $                                            | 43,559 |              |        | $ | 42,034 |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       

See Condensed Combined Notes to Consolidated
Financial Statements

9



---



##### Table of Contents






COMMONWEALTH EDISON COMPANY



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                         |                                                                  |                                   |     |       |       |   |     |       |       |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | --- | ----- | ----- | - | --- | ----- | ----- | -
|                                                                                         |                                                                  |                                  
|                                                                                         |                                                                  | Three Months                     
|                                                                                         |                                                                  | Ended March 31,                  
|                                                                                         |                                                                  |                                  
|                                                                                         |                                                                  | 2004                              |     | 2003 
|(In millions)                                                                            |                                                                  |                                   |     |      
|Operating revenues                                                                       |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         | Operating revenues                                               |                                   | $   | 1,325 |       |   | $   | 1,411 |      
|                                                                                         | Operating revenues from affiliates                               |                                   |     | 11    |       |   |     | 13    |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total operating revenues          |     |       | 1,336 |   |     |       | 1,424 |  
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Operating expenses                                                                       |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         | Purchased power                                                  |                                   |     | 3     |       |   |     | 6     |      
|                                                                                         | Purchased power from affiliate                                   |                                   |     | 530   |       |   |     | 572   |      
|                                                                                         | Operating and maintenance                                        |                                   |     | 169   |       |   |     | 231   |      
|                                                                                         | Operating and maintenance from affiliates                        |                                   |     | 48    |       |   |     | 30    |      
|                                                                                         | Depreciation and amortization                                    |                                   |     | 102   |       |   |     | 94    |      
|                                                                                         | Taxes other than income                                          |                                   |     | 79    |       |   |     | 80    |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total operating expenses          |     |       | 931   |   |     |       | 1,013 |  
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Operating income                                                                         |                                                                  |                                   | 405 |       |       |   | 411 |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Other income and deductions                                                              |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         | Interest expense                                                 |                                   |     | (76   | )     |   |     | (110  | )    
|                                                                                         | Interest expense to affiliates                                   |                                   |     | (30   | )     |   |     |      |      
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                   |     |      |       |   |     | (7    | )    
|                                                                                         | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |     | (3    | )     |   |     |      |      
|                                                                                         | Interest income from affiliates                                  |                                   |     | 6     |       |   |     | 7     |      
|                                                                                         | Other, net                                                       |                                   |     | 3     |       |   |     | 15    |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total other income and deductions |     |       | (100  | ) |     |       | (95   | )
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                   | 305 |       |       |   | 316 |      
|Income taxes                                                                             |                                                                  |                                   | 123 |       |       |   | 126 |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Income before cumulative effect of a change in
    accounting principle                  |                                                                  |                                   | 182 |       |       |   | 190 |      
|Cumulative effect of a change in accounting
    principle (net of income taxes of $0)    |                                                                  |                                   |    |       |       |   | 5   |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Net income                                                                               |                                                                  |                                   | 182 |       |       |   | 195 |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Other comprehensive income (net of income
    taxes)                                     |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         | Cash-flow hedge adjustment                                       |                                   |     |      |       |   |     | 31    |      
|                                                                                         | Foreign currency translation adjustment                          |                                   |     |      |       |   |     | 1     |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total other comprehensive income  |     |       |      |   |     |       | 32    |  
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      
|Total comprehensive income                                                               |                                                                  | $                                 | 182 |       |       | $ | 227 |      
|                                                                                         |                                                                  |                                   |     |       |       |   |     |      

See Condensed Combined Notes to Consolidated
Financial Statements

10



---



##### Table of Contents






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |      |    |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | --- | ---- | ---- | -- | ---- | -
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | Three Months                                                                   
|                                                              |                                                                                             | Ended March 31,                                                                
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | 2004                                                                            |                                                                      | 2003
|(In millions)                                                 |                                                                                             |                                                                                 |                                                                      |     
|Cash flows from operating activities                          |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|                                                              | Net income                                                                                  |                                                                                 | $                                                                    | 182  |     |     | $    | 195  |   
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                                 |                                                                      |      |     |     |      |      |   
|                                                              |                                                                                             | Depreciation and amortization                                                   |                                                                      |      | 102 |     |      |      | 94 |     
|                                                              |                                                                                             | Cumulative effect of a change in accounting
    principle (net of income taxes) |                                                                      |      |    |     |      |      | (5 | )   
|                                                              |                                                                                             | Deferred income taxes and amortization of
    investment tax credits            |                                                                      |      | 27  |     |      |      | 63 |     
|                                                              |                                                                                             | Provision for uncollectible accounts                                            |                                                                      |      | 10  |     |      |      | 12 |     
|                                                              |                                                                                             | Equity in (earnings) losses of
    unconsolidated affiliates                    |                                                                      |      | 3   |     |      |      |   |     
|                                                              |                                                                                             | Other operating activities                                                      |                                                                      |      | 8   |     |      |      | (3 | )   
|                                                              |                                                                                             | Changes in assets and liabilities:                                              |                                                                      |      |     |     |      |      |    |     
|                                                              |                                                                                             |                                                                                 | Accounts receivable                                                  |      |     | 33  |      |      |    | (5   | )
|                                                              |                                                                                             |                                                                                 | Inventories                                                          |      |     | (1  | )    |      |    | (1   | )
|                                                              |                                                                                             |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities |      |     | 6   |      |      |    | (143 | )
|                                                              |                                                                                             |                                                                                 | Changes in receivables and payables to affiliates                    |      |     | (14 | )    |      |    | (177 | )
|                                                              |                                                                                             |                                                                                 | Other current assets                                                 |      |     | 5   |      |      |    |     |  
|                                                              |                                                                                             |                                                                                 | Pension and non-pension postretirement benefits
    obligations      |      |     | (46 | )    |      |    | (36  | )
|                                                              |                                                                                             |                                                                                 | Other noncurrent assets and liabilities                              |      |     | (16 | )    |      |    | 42   |  
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Net cash flows provided by operating activities               |                                                                                             |                                                                                 | 299                                                                  |      |     |     | 36   |     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Cash flows from investing activities                          |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|                                                              | Capital expenditures                                                                        |                                                                                 |                                                                      | (178 | )   |     |      | (174 | ) 
|                                                              | Proceeds from Exelon intercompany money pool                                                |                                                                                 |                                                                      | 179  |     |     |      |     |   
|                                                              | Change in restricted cash                                                                   |                                                                                 |                                                                      | 17   |     |     |      | (5   | ) 
|                                                              | Other investing activities                                                                  |                                                                                 |                                                                      | 6    |     |     |      | 10   |   
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Net cash flows provided by (used in) investing
    activities |                                                                                             |                                                                                 | 24                                                                   |      |     |     | (169 | )   
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Cash flows from financing activities                          |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|                                                              | Issuance of long-term debt                                                                  |                                                                                 |                                                                      |     |     |     |      | 700  |   
|                                                              | Retirement of long-term debt                                                                |                                                                                 |                                                                      | (176 | )   |     |      | (377 | ) 
|                                                              | Payment of long-term debt to ComEd Transitional
    Funding Trust                           |                                                                                 |                                                                      | (93  | )   |     |      |     |   
|                                                              | Issuance of mandatorily redeemable preferred
    securities                                 |                                                                                 |                                                                      |     |     |     |      | 200  |   
|                                                              | Retirement of mandatorily redeemable preferred
    securities                               |                                                                                 |                                                                      |     |     |     |      | (200 | ) 
|                                                              | Change in short-term debt                                                                   |                                                                                 |                                                                      |     |     |     |      | (26  | ) 
|                                                              | Dividends paid on common stock                                                              |                                                                                 |                                                                      | (103 | )   |     |      | (120 | ) 
|                                                              | Contributions from parent                                                                   |                                                                                 |                                                                      | 31   |     |     |      | 31   |   
|                                                              | Settlement of cash-flow hedges                                                              |                                                                                 |                                                                      |     |     |     |      | (43  | ) 
|                                                              | Other financing activities                                                                  |                                                                                 |                                                                      |     |     |     |      | (16  | ) 
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Net cash flows (used in) provided by financing
    activities |                                                                                             |                                                                                 | (341                                                                 | )    |     |     | 149  |     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|(Decrease) increase in cash and cash
    equivalents          |                                                                                             |                                                                                 | (18                                                                  | )    |     |     | 16   |     
|Cash and cash equivalents at beginning of
    period          |                                                                                             |                                                                                 | 34                                                                   |      |     |     | 16   |     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Cash and cash equivalents at end of
    period                |                                                                                             | $                                                                               | 16                                                                   |      |     | $   | 32   |     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Supplemental cash flow information                            |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|Noncash investing and financing activities:                   |                                                                                             |                                                                                 |                                                                      |      |     |     |      |     
|                                                              | Adoption of SFAS No. 143 
    adjustment to other paid in capital and goodwill             |                                                                                 | $                                                                    |     |     |     | $    | 210  |   

See Condensed Combined Notes to Consolidated
Financial Statements

11



---



##### Table of Contents






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | -------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                              | March 31,                              |        | December 31,
|                                   |                                              | 2004                                   |        | 2003        
|(In millions)                      |                                              |                                        |        |             
|ASSETS                            
|Current assets                     |                                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                    |                                        | $      | 16           |       |   | $      | 34    |      
|                                   | Restricted cash                              |                                        |        | 3            |       |   |        | 20    |      
|                                   | Accounts receivable, net                     |                                        |        |              |       |   |        |       |      
|                                   |                                              | Customer                               |        |              | 660   |   |        |       | 683   | 
|                                   |                                              | Other                                  |        |              | 48    |   |        |       | 68    | 
|                                   | Inventories, at average cost                 |                                        |        | 44           |       |   |        | 43    |      
|                                   | Deferred income taxes                        |                                        |        | 5            |       |   |        | 6     |      
|                                   | Receivables from affiliates                  |                                        |        | 23           |       |   |        | 23    |      
|                                   | Investment in Exelon intercompany money pool |                                        |        | 226          |       |   |        | 405   |      
|                                   | Other                                        |                                        |        | 26           |       |   |        | 31    |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total current assets                   |        |              | 1,051 |   |        |       | 1,313 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                              |                                        | 9,188  |              |       |   | 9,096  |      
|Deferred debits and other assets   |                                              |                                        |        |              |       |   |        |      
|                                   | Investments                                  |                                        |        | 37           |       |   |        | 36    |      
|                                   | Investment in affiliates                     |                                        |        | 56           |       |   |        | 59    |      
|                                   | Goodwill                                     |                                        |        | 4,714        |       |   |        | 4,719 |      
|                                   | Receivables from affiliates                  |                                        |        | 2,310        |       |   |        | 2,271 |      
|                                   | Pension asset                                |                                        |        | 62           |       |   |        | 4     |      
|                                   | Other                                        |                                        |        | 442          |       |   |        | 453   |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total deferred debits and other assets |        |              | 7,621 |   |        |       | 7,542 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Total assets                       |                                              | $                                      | 17,860 |              |       | $ | 17,951 |      
|                                   |                                              |                                        |        |              |       |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

12



---



##### Table of Contents



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                       |                                                                            |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------------ | -------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                       |                                                                            | March 31,                                    |        | December 31,
|                                                       |                                                                            | 2004                                         |        | 2003        
|(In millions)                                          |                                                                            |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY              
|Current liabilities                                    |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Long-term debt due within one year                                         |                                              | $      | 60           |        |   | $      | 236   |       
|                                                       | Long-term debt to ComEd Transitional Funding
    Trust due within one year |                                              |        | 312          |        |   |        | 317   |       
|                                                       | Accounts payable                                                           |                                              |        | 194          |        |   |        | 170   |       
|                                                       | Accrued expenses                                                           |                                              |        | 511          |        |   |        | 540   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 188          |        |   |        | 207   |       
|                                                       | Customer deposits                                                          |                                              |        | 79           |        |   |        | 78    |       
|                                                       | Other                                                                      |                                              |        | 12           |        |   |        | 9     |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total current liabilities                    |        |              | 1,356  |   |        |       | 1,557  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Long-term debt                                         |                                                                            |                                              | 4,171  |              |        |   | 4,167  |      
|Long-term debt to ComEd Transitional Funding
    Trust |                                                                            |                                              | 1,271  |              |        |   | 1,359  |      
|Long-term debt to other affiliates                     |                                                                            |                                              | 361    |              |        |   | 361    |      
|Deferred credits and other
    liabilities             |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Deferred income taxes                                                      |                                              |        | 1,702        |        |   |        | 1,672 |       
|                                                       | Unamortized investment tax credits                                         |                                              |        | 47           |        |   |        | 48    |       
|                                                       | Non-pension postretirement benefits obligation                             |                                              |        | 202          |        |   |        | 190   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 28           |        |   |        | 28    |       
|                                                       | Regulatory liabilities                                                     |                                              |        | 1,960        |        |   |        | 1,891 |       
|                                                       | Other                                                                      |                                              |        | 310          |        |   |        | 336   |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total deferred credits and other liabilities |        |              | 4,249  |   |        |       | 4,165  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total liabilities                            |        |              | 11,408 |   |        |       | 11,609 | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Commitments and contingencies  see
    Note 13        |                                                                            |                                              |        |              |        |   |        |      
|Shareholders equity                                   |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Common stock                                                               |                                              |        | 1,588        |        |   |        | 1,588 |       
|                                                       | Preference stock                                                           |                                              |        | 7            |        |   |        | 7     |       
|                                                       | Other paid in capital                                                      |                                              |        | 4,115        |        |   |        | 4,115 |       
|                                                       | Receivable from parent                                                     |                                              |        | (219         | )      |   |        | (250  | )     
|                                                       | Retained earnings                                                          |                                              |        | 962          |        |   |        | 883   |       
|                                                       | Accumulated other comprehensive income (loss)                              |                                              |        | (1           | )      |   |        | (1    | )     
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total shareholders equity                   |        |              | 6,452  |   |        |       | 6,342  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Total liabilities and shareholders
    equity         |                                                                            | $                                            | 17,860 |              |        | $ | 17,951 |      
|                                                       |                                                                            |                                              |        |              |        |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

13



---



##### Table of Contents






PECO ENERGY COMPANY



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                     |                                                                  |                                          |                                   |       |   |       |     |       |   |       |  
|---------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------- | --------------------------------- | ----- | - | ----- | --- | ----- | - | ----- | -
|                                                     |                                                                  |                                         
|                                                     |                                                                  | Three Months                            
|                                                     |                                                                  | Ended March 31,                         
|                                                     |                                                                  |                                         
|                                                     |                                                                  | 2004                                     |                                   | 2003 
|(In millions)                                        |                                                                  |                                          |                                   |      
|Operating revenues                                   |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     | Operating revenues                                               |                                          | $                                 | 1,235 |   |       | $   | 1,214 |  
|                                                     | Operating revenues from affiliates                               |                                          |                                   | 4     |   |       |     | 3     |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     |                                                                  |                                          | Total operating revenues          |       |   | 1,239 |     |       |   | 1,217 |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Operating expenses                                   |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     | Purchased power                                                  |                                          |                                   | 47    |   |       |     | 65    |  
|                                                     | Purchased power from affiliate                                   |                                          |                                   | 349   |   |       |     | 357   |  
|                                                     | Fuel                                                             |                                          |                                   | 250   |   |       |     | 191   |  
|                                                     | Operating and maintenance                                        |                                          |                                   | 112   |   |       |     | 127   |  
|                                                     | Operating and maintenance from affiliates                        |                                          |                                   | 23    |   |       |     | 12    |  
|                                                     | Depreciation and amortization                                    |                                          |                                   | 125   |   |       |     | 120   |  
|                                                     | Taxes other than income                                          |                                          |                                   | 58    |   |       |     | 63    |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     |                                                                  |                                          | Total operating expenses          |       |   | 964   |     |       |   | 935   |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Operating income                                     |                                                                  |                                          | 275                               |       |   |       | 282 |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Other income and deductions                          |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     | Interest expense                                                 |                                          |                                   | (14   | ) |       |     | (86   | )
|                                                     | Interest expense to affiliates                                   |                                          |                                   | (63   | ) |       |     |      |  
|                                                     | Distributions on mandatorily redeemable preferred
    securities |                                          |                                   |      |   |       |     | (2    | )
|                                                     | Equity in earnings (losses) of unconsolidated
    affiliates     |                                          |                                   | (7    | ) |       |     |      |  
|                                                     | Other, net                                                       |                                          |                                   | 2     |   |       |     | 9     |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     |                                                                  |                                          | Total other income and deductions |       |   | (82   | )   |       |   | (79   | )
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Income before income taxes                           |                                                                  |                                          | 193                               |       |   |       | 203 |      
|Income taxes                                         |                                                                  |                                          | 62                                |       |   |       | 66  |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Net income                                           |                                                                  |                                          | 131                               |       |   |       | 137 |      
|Preferred stock dividends                            |                                                                  |                                          | 1                                 |       |   |       | 2   |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Net income on common stock                           |                                                                  | $                                        | 130                               |       |   | $     | 135 |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Other comprehensive income (net of income
    taxes) |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     | Net income                                                       |                                          | $                                 | 131   |   |       | $   | 137   |  
|                                                     | Other comprehensive income (net of income taxes):                |                                          |                                   |       |   |       |     |       |  
|                                                     |                                                                  | Cash-flow hedge adjustment               |                                   |       | 1 |       |     |       |  |      
|                                                     |                                                                  | Unrealized gain on marketable securities |                                   |       | 1 |       |     |       |  |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|                                                     |                                                                  |                                          | Total other comprehensive income  |       |   | 2     |     |       |   |      |  
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      
|Total comprehensive income                           |                                                                  | $                                        | 133                               |       |   | $     | 137 |      
|                                                     |                                                                  |                                          |                                   |       |   |       |     |      

See Condensed Combined Notes to Consolidated
Financial Statements

14



---



##### Table of Contents






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |      |     |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | ---- | ---- | ---- | --- | ---- | -
|                                                              |                                                                                             |                                                                     
|                                                              |                                                                                             | Three Months                                                        
|                                                              |                                                                                             | Ended March 31,                                                     
|                                                              |                                                                                             |                                                                     
|                                                              |                                                                                             | 2004                                                                 |                                                                      | 2003
|(In millions)                                                 |                                                                                             |                                                                      |                                                                      |     
|Cash flows from operating activities                          |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|                                                              | Net income                                                                                  |                                                                      | $                                                                    | 131  |     |      | $    | 137  |    
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                      |                                                                      |      |     |      |      |      |    
|                                                              |                                                                                             | Depreciation and amortization                                        |                                                                      |      | 125 |      |      |      | 120 |     
|                                                              |                                                                                             | Deferred income taxes and amortization of
    investment tax credits |                                                                      |      | (31 | )    |      |      | (20 | )   
|                                                              |                                                                                             | Provision for uncollectible accounts                                 |                                                                      |      | 10  |      |      |      | 17  |     
|                                                              |                                                                                             | Equity in (earnings) losses of
    unconsolidated affiliates         |                                                                      |      | 7   |      |      |      |    |     
|                                                              |                                                                                             | Other operating activities                                           |                                                                      |      | (4  | )    |      |      | 3   |     
|                                                              |                                                                                             | Changes in assets and liabilities:                                   |                                                                      |      |     |      |      |      |     |     
|                                                              |                                                                                             |                                                                      | Accounts receivable                                                  |      |     | (7   | )    |      |     | (37  | )
|                                                              |                                                                                             |                                                                      | Changes in receivables and payables to affiliates                    |      |     | (6   | )    |      |     | (24  | )
|                                                              |                                                                                             |                                                                      | Inventories                                                          |      |     | 70   |      |      |     | 45   |  
|                                                              |                                                                                             |                                                                      | Accounts payable, accrued expenses and other
    current liabilities |      |     | 42   |      |      |     | 14   |  
|                                                              |                                                                                             |                                                                      | Prepaid taxes                                                        |      |     | (141 | )    |      |     | (131 | )
|                                                              |                                                                                             |                                                                      | Deferred energy costs                                                |      |     | 30   |      |      |     | (28  | )
|                                                              |                                                                                             |                                                                      | Other current assets                                                 |      |     | (3   | )    |      |     |     |  
|                                                              |                                                                                             |                                                                      | Pension and non-pension postretirement benefits
    obligations      |      |     | 8    |      |      |     | 8    |  
|                                                              |                                                                                             |                                                                      | Other noncurrent assets and liabilities                              |      |     | (13  | )    |      |     | (8   | )
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Net cash flows provided by operating activities               |                                                                                             |                                                                      | 218                                                                  |      |     |      | 96   |     
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Cash flows from investing activities                          |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|                                                              | Capital expenditures                                                                        |                                                                      |                                                                      | (48  | )   |      |      | (65  | )  
|                                                              | Change in restricted cash                                                                   |                                                                      |                                                                      |     |     |      |      | 136  |    
|                                                              | Other investing activities                                                                  |                                                                      |                                                                      |     |     |      |      | 6    |    
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Net cash flows (used in) provided by investing
    activities |                                                                                             |                                                                      | (48                                                                  | )    |     |      | 77   |     
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Cash flows from financing activities                          |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|                                                              | Issuance of long-term debt                                                                  |                                                                      |                                                                      |     |     |      |      | 250  |    
|                                                              | Retirement of long-term debt                                                                |                                                                      |                                                                      |     |     |      |      | (364 | )  
|                                                              | Retirement of long-term debt to PECO Energy
    Transition Trust                            |                                                                      |                                                                      | (88  | )   |      |      |     |    
|                                                              | Change in short-term debt                                                                   |                                                                      |                                                                      | 35   |     |      |      | 43   |    
|                                                              | Dividends paid on preferred and common stock                                                |                                                                      |                                                                      | (91  | )   |      |      | (91  | )  
|                                                              | Contribution from parent                                                                    |                                                                      |                                                                      | 35   |     |      |      | 30   |    
|                                                              | Other financing activities                                                                  |                                                                      |                                                                      | 2    |     |      |      |     |    
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Net cash flows used in financing activities                   |                                                                                             |                                                                      | (107                                                                 | )    |     |      | (132 | )   
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Increase in cash and cash
    equivalents                     |                                                                                             |                                                                      | 63                                                                   |      |     |      | 41   |     
|Cash and cash equivalents at beginning of
    period          |                                                                                             |                                                                      | 44                                                                   |      |     |      | 63   |     
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     
|Cash and cash equivalents at end of
    period                |                                                                                             | $                                                                    | 107                                                                  |      |     | $    | 104  |     
|                                                              |                                                                                             |                                                                      |                                                                      |      |     |      |      |     

See Condensed Combined Notes to Consolidated
Financial Statements

15



---



##### Table of Contents






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | ---------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                              | March 31,                              |        | December 31,
|                                   |                              | 2004                                   |        | 2003        
|(In millions)                      |                              |                                        |        |             
|ASSETS                            
|Current assets                     |                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents    |                                        | $      | 107          |       |   | $      | 44    |      
|                                   | Accounts receivable, net     |                                        |        |              |       |   |        |       |      
|                                   |                              | Customer                               |        |              | 352   |   |        |       | 363   | 
|                                   |                              | Other                                  |        |              | 35    |   |        |       | 27    | 
|                                   | Inventories, at average cost |                                        |        |              |       |   |        |       |      
|                                   |                              | Gas                                    |        |              | 29    |   |        |       | 99    | 
|                                   |                              | Materials and supplies                 |        |              | 7     |   |        |       | 7     | 
|                                   | Deferred income taxes        |                                        |        | 64           |       |   |        | 64    |      
|                                   | Deferred energy costs        |                                        |        | 51           |       |   |        | 81    |      
|                                   | Prepaid taxes                |                                        |        | 142          |       |   |        | 1     |      
|                                   | Other                        |                                        |        | 13           |       |   |        | 10    |      
|                                   |                              |                                        |        |              |       |   |        |      
|                                   |                              | Total current assets                   |        |              | 800   |   |        |       | 696   | 
|                                   |                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                              |                                        | 4,266  |              |       |   | 4,256  |      
|Deferred debits and other assets   |                              |                                        |        |              |       |   |        |      
|                                   | Regulatory assets            |                                        |        | 5,118        |       |   |        | 5,226 |      
|                                   | Investments                  |                                        |        | 20           |       |   |        | 20    |      
|                                   | Investment in affiliates     |                                        |        | 119          |       |   |        | 123   |      
|                                   | Receivables from affiliates  |                                        |        | 41           |       |   |        | 13    |      
|                                   | Pension asset                |                                        |        | 72           |       |   |        | 68    |      
|                                   | Other                        |                                        |        | 11           |       |   |        | 8     |      
|                                   |                              |                                        |        |              |       |   |        |      
|                                   |                              | Total deferred debits and other assets |        |              | 5,381 |   |        |       | 5,458 | 
|                                   |                              |                                        |        |              |       |   |        |      
|Total assets                       |                              | $                                      | 10,447 |              |       | $ | 10,410 |      
|                                   |                              |                                        |        |              |       |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

16



---



##### Table of Contents



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                   |                                                                        |                                              |        |              |       |   |        |        |       | 
|-------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ----- | - | ------ | ------ | ----- | 
|                                                   |                                                                        | March 31,                                    |        | December 31,
|                                                   |                                                                        | 2004                                         |        | 2003        
|(In millions)                                      |                                                                        |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY          
|Current liabilities                                |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Commercial paper                                                       |                                              | $      | 81           |       |   | $      | 46     |      
|                                                   | Payables to affiliates                                                 |                                              |        | 144          |       |   |        | 150    |      
|                                                   | Long-term debt to PECO Energy Transition Trust
    due within one year |                                              |        | 249          |       |   |        | 153    |      
|                                                   | Accounts payable                                                       |                                              |        | 77           |       |   |        | 92     |      
|                                                   | Accrued expenses                                                       |                                              |        | 290          |       |   |        | 237    |      
|                                                   | Other                                                                  |                                              |        | 39           |       |   |        | 35     |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total current liabilities                    |        |              | 880   |   |        |        | 713   | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Long-term debt                                     |                                                                        |                                              | 1,360  |              |       |   | 1,359  |       
|Long-term debt to PECO Energy Transition
    Trust |                                                                        |                                              | 3,512  |              |       |   | 3,696  |       
|Long-term debt to other affiliates                 |                                                                        |                                              | 184    |              |       |   | 184    |       
|Deferred credits and other
    liabilities         |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Deferred income taxes                                                  |                                              |        | 2,961        |       |   |        | 2,986  |      
|                                                   | Unamortized investment tax credits                                     |                                              |        | 21           |       |   |        | 22     |      
|                                                   | Non-pension postretirement benefits obligation                         |                                              |        | 299          |       |   |        | 287    |      
|                                                   | Other                                                                  |                                              |        | 137          |       |   |        | 147    |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total deferred credits and other liabilities |        |              | 3,418 |   |        |        | 3,442 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total liabilities                            |        |              | 9,354 |   |        |        | 9,394 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Commitments and contingencies  see
    Note 13    |                                                                        |                                              |        |              |       |   |        |       
|Shareholders equity                               |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Common stock                                                           |                                              |        | 1,999        |       |   |        | 1,999  |      
|                                                   | Receivable from parent                                                 |                                              |        | (1,588       | )     |   |        | (1,623 | )    
|                                                   | Preferred stock                                                        |                                              |        | 87           |       |   |        | 87     |      
|                                                   | Retained earnings                                                      |                                              |        | 586          |       |   |        | 546    |      
|                                                   | Accumulated other comprehensive income                                 |                                              |        | 9            |       |   |        | 7      |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total shareholders equity                   |        |              | 1,093 |   |        |        | 1,016 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Total liabilities and shareholders
    equity     |                                                                        | $                                            | 10,447 |              |       | $ | 10,410 |       
|                                                   |                                                                        |                                              |        |              |       |   |        |       

See Condensed Combined Notes to Consolidated
Financial Statements

17



---



##### Table of Contents






EXELON GENERATION COMPANY, LLC



EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |      |       |     |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------------------------------------------------------------------------------ | ------------------------------ | ----- | ----- | ---- | --- | ---- | ----- | --- | -
|                                                                                                                                                                        |                                                              |                                                                               
|                                                                                                                                                                        |                                                              | Three Months                                                                  
|                                                                                                                                                                        |                                                              | Ended March 31,                                                               
|                                                                                                                                                                        |                                                              |                                                                               
|                                                                                                                                                                        |                                                              | 2004                                                                           |                                | 2003 
|(In millions)                                                                                                                                                           |                                                              |                                                                                |                                |      
|Operating revenues                                                                                                                                                      |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        | Operating revenues                                           |                                                                                | $                              | 1,074 |       |      | $   | 886  |      
|                                                                                                                                                                        | Operating revenues from affiliates                           |                                                                                |                                | 879   |       |      |     | 993  |      
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        |                                                              | Total operating revenues                                                       |                                |       | 1,953 |      |     |      | 1,879 |    
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Operating expenses                                                                                                                                                      |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        | Purchased power                                              |                                                                                |                                | 511   |       |      |     | 761  |      
|                                                                                                                                                                        | Purchased power from affiliates                              |                                                                                |                                | 8     |       |      |     | 80   |      
|                                                                                                                                                                        | Fuel                                                         |                                                                                |                                | 586   |       |      |     | 364  |      
|                                                                                                                                                                        | Operating and maintenance                                    |                                                                                |                                | 587   |       |      |     | 445  |      
|                                                                                                                                                                        | Operating and maintenance from affiliates                    |                                                                                |                                | 65    |       |      |     | 42   |      
|                                                                                                                                                                        | Depreciation and amortization                                |                                                                                |                                | 55    |       |      |     | 45   |      
|                                                                                                                                                                        | Taxes other than income                                      |                                                                                |                                | 47    |       |      |     | 48   |      
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        |                                                              | Total operating expenses                                                       |                                |       | 1,859 |      |     |      | 1,785 |    
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Operating income                                                                                                                                                        |                                                              |                                                                                | 94                             |       |       |      | 94  |     
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Other income and deductions                                                                                                                                             |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        | Interest expense                                             |                                                                                |                                | (25   | )     |      |     | (15  | )    
|                                                                                                                                                                        | Interest expense to affiliates                               |                                                                                |                                | (1    | )     |      |     | (4   | )    
|                                                                                                                                                                        | Equity in earnings (losses) of unconsolidated
    affiliates |                                                                                |                                | (2    | )     |      |     | 19   |      
|                                                                                                                                                                        | Other, net                                                   |                                                                                |                                | 47    |       |      |     | (167 | )    
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        |                                                              | Total other income and deductions                                              |                                |       | 19    |      |     |      | (167  | )  
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Income (loss) before income taxes and
    cumulative effect of changes in accounting principles                                                                         |                                                              |                                                                                | 113                            |       |       |      | (73 | )   
|Income tax expense (benefit)                                                                                                                                            |                                                              |                                                                                | 46                             |       |       |      | (21 | )   
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Income (loss) before cumulative effect of
    changes in accounting principles                                                                                          |                                                              |                                                                                | 67                             |       |       |      | (52 | )   
|Cumulative effect of changes in accounting
    principles (net of income taxes of $22 and $70 for the three
    months ended March 31, 2004 and 2003,
    respectively) |                                                              |                                                                                | 32                             |       |       |      | 108 |     
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Net income                                                                                                                                                              |                                                              |                                                                                | 99                             |       |       |      | 56  |     
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        | Other comprehensive income (loss) (net of
    income taxes)  |                                                                                |                                |       |       |      |     |      |      
|                                                                                                                                                                        |                                                              | Cash-flow hedge adjustment                                                     |                                |       | (195  | )    |     |      | (180  | )  
|                                                                                                                                                                        |                                                              | Unrealized gain (loss) on marketable securities                                |                                |       | 39    |      |     |      | (5    | )  
|                                                                                                                                                                        |                                                              | SFAS No. 143 transition adjustment                                             |                                |       |      |      |     |      | 168   |    
|                                                                                                                                                                        |                                                              | Interest in other comprehensive income (loss) of
    unconsolidated affiliates |                                |       | 2     |      |     |      | (9    | )  
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|                                                                                                                                                                        |                                                              |                                                                                | Total other comprehensive loss |       |       | (154 | )   |      |       | (26 | )
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     
|Total comprehensive income (loss)                                                                                                                                       |                                                              | $                                                                              | (55                            | )     |       | $    | 30  |     
|                                                                                                                                                                        |                                                              |                                                                                |                                |       |       |      |     |     

See Condensed Combined Notes to Consolidated
Financial Statements

18



---



##### Table of Contents






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |      |      |      |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---- | --- | ---- | ---- | ---- | ---- | ---- | -
|                                                     |                                                                                             |                                                                                
|                                                     |                                                                                             | Three Months                                                                   
|                                                     |                                                                                             | Ended March 31,                                                                
|                                                     |                                                                                             |                                                                                
|                                                     |                                                                                             | 2004                                                                            |                                                                         | 2003
|(In millions)                                        |                                                                                             |                                                                                 |                                                                         |     
|Cash flows from operating activities                 |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                     | Net income                                                                                  |                                                                                 | $                                                                       | 99   |     |      | $    | 56   |     
|                                                     | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                                 |                                                                         |      |     |      |      |      |     
|                                                     |                                                                                             | Depreciation, amortization and accretion,
    including nuclear fuel            |                                                                         |      | 211 |      |      |      | 195  |     
|                                                     |                                                                                             | Cumulative effect of changes in accounting
    principles (net of income taxes) |                                                                         |      | (32 | )    |      |      | (108 | )   
|                                                     |                                                                                             | Impairment of investments                                                       |                                                                         |      |    |      |      |      | 200  |     
|                                                     |                                                                                             | Deferred income taxes and amortization of
    investment tax credits            |                                                                         |      | 206 |      |      |      | (106 | )   
|                                                     |                                                                                             | Equity in (earnings) losses of
    unconsolidated affiliates                    |                                                                         |      | 2   |      |      |      | (19  | )   
|                                                     |                                                                                             | Net realized gains on nuclear decommissioning
    trust funds                   |                                                                         |      | (3  | )    |      |      | (6   | )   
|                                                     |                                                                                             | Other operating activities                                                      |                                                                         |      | (8  | )    |      |      | 5    |     
|                                                     |                                                                                             | Changes in assets and liabilities:                                              |                                                                         |      |     |      |      |      |      |     
|                                                     |                                                                                             |                                                                                 | Accounts receivable                                                     |      |     | (195 | )    |      |      | 4    |  
|                                                     |                                                                                             |                                                                                 | Changes in receivables and payables to
    affiliates, net              |      |     | 46   |      |      |      | 244  |  
|                                                     |                                                                                             |                                                                                 | Inventories                                                             |      |     |     |      |      |      | (10  | )
|                                                     |                                                                                             |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities    |      |     | (144 | )    |      |      | (59  | )
|                                                     |                                                                                             |                                                                                 | Other current assets                                                    |      |     | 21   |      |      |      | (119 | )
|                                                     |                                                                                             |                                                                                 | Net realized and unrealized mark-to-market and
    hedging transactions |      |     | 28   |      |      |      | 25   |  
|                                                     |                                                                                             |                                                                                 | Pension and non-pension postretirement benefits
    obligations         |      |     | (26  | )    |      |      | (32  | )
|                                                     |                                                                                             |                                                                                 | Other noncurrent assets and liabilities                                 |      |     | (3   | )    |      |      | 8    |  
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows provided by operating activities      |                                                                                             |                                                                                 | 202                                                                     |      |     |      | 278  |     
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash flows from investing activities                 |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                     | Capital expenditures                                                                        |                                                                                 |                                                                         | (213 | )   |      |      | (175 | )   
|                                                     | Proceeds from nuclear decommissioning trust fund
    sales                                  |                                                                                 |                                                                         | 307  |     |      |      | 572  |     
|                                                     | Investment in nuclear decommissioning trust funds                                           |                                                                                 |                                                                         | (378 | )   |      |      | (622 | )   
|                                                     | Net cash increase from consolidation of Sithe
    Energies, Inc. and Exelon Energy Company  |                                                                                 |                                                                         | 24   |     |      |      |     |     
|                                                     | Change in restricted cash                                                                   |                                                                                 |                                                                         | 53   |     |      |      | (56  | )   
|                                                     | Other investing activities                                                                  |                                                                                 |                                                                         | 55   |     |      |      | 9    |     
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows used in investing activities          |                                                                                             |                                                                                 | (152                                                                    | )    |     |      | (272 | )   
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash flows from financing activities                 |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|                                                     | Change in short-term debt                                                                   |                                                                                 |                                                                         | 165  |     |      |      |     |     
|                                                     | Payment on acquisition note payable to Sithe
    Energies, Inc.                             |                                                                                 |                                                                         | (27  | )   |      |      |     |     
|                                                     | Repayment of affiliate money pool funds                                                     |                                                                                 |                                                                         | (190 | )   |      |      | (6   | )   
|                                                     | Distribution to member                                                                      |                                                                                 |                                                                         | (54  | )   |      |      |     |     
|                                                     | Other financing activities                                                                  |                                                                                 |                                                                         | (2   | )   |      |      | (1   | )   
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Net cash flows used in financing activities          |                                                                                             |                                                                                 | (108                                                                    | )    |     |      | (7   | )   
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Decrease in cash and cash
    equivalents            |                                                                                             |                                                                                 | (58                                                                     | )    |     |      | (1   | )   
|Cash and cash equivalents at beginning of
    period |                                                                                             |                                                                                 | 158                                                                     |      |     |      | 58   |     
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     
|Cash and cash equivalents at end of
    period       |                                                                                             | $                                                                               | 100                                                                     |      |     | $    | 57   |     
|                                                     |                                                                                             |                                                                                 |                                                                         |      |     |      |      |     

See Condensed Combined Notes to Consolidated
Financial Statements

19



---



##### Table of Contents






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                               |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | --------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                               | March 31,                              |        | December 31,
|                                   |                                               | 2004                                   |        | 2003        
|(In millions)                      |                                               |                                        |        |             
|ASSETS                            
|Current assets                     |                                               |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                     |                                        | $      | 100          |       |   | $      | 158   |      
|                                   | Restricted cash                               |                                        |        | 144          |       |   |        | 75    |      
|                                   | Accounts receivable, net                      |                                        |        |              |       |   |        |       |      
|                                   |                                               | Customer                               |        |              | 535   |   |        |       | 389   | 
|                                   |                                               | Other                                  |        |              | 290   |   |        |       | 112   | 
|                                   | Mark-to-market derivative assets 
    energy |                                        |        | 399          |       |   |        | 322   |      
|                                   | Receivables from affiliates                   |                                        |        | 285          |       |   |        | 421   |      
|                                   | Inventories, at average cost                  |                                        |        |              |       |   |        |       |      
|                                   |                                               | Fossil fuel                            |        |              | 91    |   |        |       | 98    | 
|                                   |                                               | Materials and supplies                 |        |              | 256   |   |        |       | 259   | 
|                                   | Notes receivable                              |                                        |        | 25           |       |   |        | 5     |      
|                                   | Deferred income taxes                         |                                        |        | 559          |       |   |        | 445   |      
|                                   | Assets held for sale                          |                                        |        | 1,154        |       |   |        | 36    |      
|                                   | Other                                         |                                        |        | 209          |       |   |        | 233   |      
|                                   |                                               |                                        |        |              |       |   |        |      
|                                   |                                               | Total current assets                   |        |              | 4,047 |   |        |       | 2,553 | 
|                                   |                                               |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                               |                                        | 6,514  |              |       |   | 7,106  |      
|Deferred debits and other assets   |                                               |                                        |        |              |       |   |        |      
|                                   | Nuclear decommissioning trust funds           |                                        |        | 4,890        |       |   |        | 4,721 |      
|                                   | Investments                                   |                                        |        | 97           |       |   |        | 65    |      
|                                   | Receivable from affiliate                     |                                        |        | 22           |       |   |        | 22    |      
|                                   | Pension asset                                 |                                        |        | 125          |       |   |        | 79    |      
|                                   | Mark-to-market derivative asset  energy      |                                        |        | 375          |       |   |        | 100   |      
|                                   | Other                                         |                                        |        | 493          |       |   |        | 118   |      
|                                   |                                               |                                        |        |              |       |   |        |      
|                                   |                                               | Total deferred debits and other assets |        |              | 6,002 |   |        |       | 5,105 | 
|                                   |                                               |                                        |        |              |       |   |        |      
|Total assets                       |                                               | $                                      | 16,563 |              |       | $ | 14,764 |      
|                                   |                                               |                                        |        |              |       |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

20



---



##### Table of Contents



EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                 |                                                    |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------ | -------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                 |                                                    | March 31,                                    |        | December 31,
|                                                 |                                                    | 2004                                         |        | 2003        
|(In millions)                                    |                                                    |                                              |        |             
|Liabilities and members equity                  |                                                    |                                              |        |              |        |   |        |      
|Current liabilities                              |                                                    |                                              |        |              |        |   |        |      
|                                                 | Long-term debt due within one year                 |                                              | $      | 61           |        |   | $      | 1,068 |       
|                                                 | Commercial paper                                   |                                              |        | 165          |        |   |        |      |       
|                                                 | Accounts payable                                   |                                              |        | 784          |        |   |        | 924   |       
|                                                 | Mark-to-market derivative liabilities 
    energy |                                              |        | 811          |        |   |        | 505   |       
|                                                 | Payables to affiliates                             |                                              |        | 62           |        |   |        | 1     |       
|                                                 | Notes payable to affiliates                        |                                              |        | 226          |        |   |        | 506   |       
|                                                 | Accrued expenses                                   |                                              |        | 429          |        |   |        | 434   |       
|                                                 | Liabilities held for sale                          |                                              |        | 1,316        |        |   |        |      |       
|                                                 | Other                                              |                                              |        | 95           |        |   |        | 126   |       
|                                                 |                                                    |                                              |        |              |        |   |        |      
|                                                 |                                                    | Total current liabilities                    |        |              | 3,949  |   |        |       | 3,564  | 
|                                                 |                                                    |                                              |        |              |        |   |        |      
|Long-term debt                                   |                                                    |                                              | 2,467  |              |        |   | 1,649  |      
|Deferred credits and other
    liabilities       |                                                    |                                              |        |              |        |   |        |      
|                                                 | Deferred income taxes                              |                                              |        | 543          |        |   |        | 299   |       
|                                                 | Unamortized investment tax credits                 |                                              |        | 216          |        |   |        | 218   |       
|                                                 | Asset retirement obligation                        |                                              |        | 3,048        |        |   |        | 2,996 |       
|                                                 | Pension obligation                                 |                                              |        | 21           |        |   |        | 21    |       
|                                                 | Non-pension postretirement benefits obligation     |                                              |        | 576          |        |   |        | 555   |       
|                                                 | Spent nuclear fuel obligation                      |                                              |        | 869          |        |   |        | 867   |       
|                                                 | Payable to affiliates                              |                                              |        | 1,267        |        |   |        | 1,195 |       
|                                                 | Mark-to-market derivative liabilities 
    energy |                                              |        | 390          |        |   |        | 133   |       
|                                                 | Other                                              |                                              |        | 316          |        |   |        | 308   |       
|                                                 |                                                    |                                              |        |              |        |   |        |      
|                                                 |                                                    | Total deferred credits and other liabilities |        |              | 7,246  |   |        |       | 6,592  | 
|                                                 |                                                    |                                              |        |              |        |   |        |      
|                                                 |                                                    | Total liabilities                            |        |              | 13,662 |   |        |       | 11,805 | 
|                                                 |                                                    |                                              |        |              |        |   |        |      
|Commitments and contingencies  see
    Note 13  |                                                    |                                              |        |              |        |   |        |      
|Minority interest of consolidated
    subsidiary |                                                    |                                              | 59     |              |        |   | 3      |      
|Members equity                                  |                                                    |                                              |        |              |        |   |        |      
|                                                 | Membership interest                                |                                              |        | 2,489        |        |   |        | 2,490 |       
|                                                 | Undistributed earnings                             |                                              |        | 647          |        |   |        | 602   |       
|                                                 | Accumulated other comprehensive loss               |                                              |        | (294         | )      |   |        | (136  | )     
|                                                 |                                                    |                                              |        |              |        |   |        |      
|                                                 |                                                    | Total members equity                        |        |              | 2,842  |   |        |       | 2,956  | 
|                                                 |                                                    |                                              |        |              |        |   |        |      
|Total liabilities and members
    equity        |                                                    | $                                            | 16,563 |              |        | $ | 14,764 |      
|                                                 |                                                    |                                              |        |              |        |   |        |      

See Condensed Combined Notes to Consolidated
Financial Statements

21



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES




CONDENSED 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 the enterprises businesses
discussed below (see Note 15  Segment
Information). The energy delivery business segment consists of
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 sale of natural gas and
distribution services by PECO in the Pennsylvania counties
surrounding the City of Philadelphia. The generation business
segment consists of the electric generating facilities and
energy marketing operations of Exelon Generation Company, LLC
(Generation) and Generations equity interest in EXRES
SHC, Inc., the holding company of Sithe Energies, Inc.
and its subsidiaries and hereafter referred to as Sithe. The
enterprises business segment consists of the energy and
infrastructure services of Exelon Enterprises Company, LLC
(Enterprises), a communications joint venture and other
investments weighted towards the communications, energy services
and retail services industries. Effective January 1, 2004,
Enterprises competitive retail sales business, Exelon
Energy Company, became part of Generation.

In accordance with Financial Accounting Standards
Board (FASB) Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN
No. 46-R), the consolidated financial statements of each of
Exelon, ComEd, PECO and Generation 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.

Sithe, a 50% owned subsidiary of Generation, is
consolidated in the financial statements of Exelon and
Generation as of March 31, 2004 due to the adoption of FIN
No. 46-R. 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
and 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 on the consolidation of Sithe
and the deconsolidation of these financing entities.

The accompanying consolidated financial
statements as of March 31, 2004 and for the three months
then ended are unaudited, but, in the opinions of the
managements of Exelon, ComEd, PECO and Generation, include all
adjustments that are considered necessary for a fair
presentation of their 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
December 31, 2003 Consolidated Balance Sheets were derived
from audited financial statements but do not include all
disclosures required by GAAP. Certain prior-year amounts have
been reclassified for comparative purposes. These
reclassifications had no effect on net income or
shareholders or members equity. These notes should
be read in conjunction with the Notes to Consolidated Financial
Statements of Exelon, ComEd, 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.

22



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |                                                                   
|-- | ------------------------------------------------------------------
|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 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 a further
discussion of the consolidation of Sithe as of March 31,
2004.

PECO Energy Capital Trust IV (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. 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, 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 of ComEd and PECO,
respectively, pursuant to the provisions of FIN No. 46-R.
Amounts owed to these financing trusts were recorded as debt to
financing trusts or affiliates within the Consolidated Balance
Sheets at March 31, 2004 and December 31, 2003 as
follows:

|       |  |                |       |                   |  |   |       | 
|------ |  | -------------- | ----- | ----------------- |  | - | ----- | 
|       |  | March 31, 2004 |       | December 31, 2003
|       |  |                |       |                  
|Exelon |  | $              | 5,889 |                   |  | $ | 6,070 | 
|ComEd  |  |                | 1,944 |                   |  |   | 2,037 | 
|PECO   |  |                | 3,945 |                   |  |   | 4,033 | 

This change in presentation had no impact on 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. A significant retirement obligation is
Generations obligation to decommission its nuclear plants
at the end of their license lives. See Note 11 
Asset Retirement Obligations for additional information.

After considering interpretations of the
transitional guidance included in SFAS No. 143, Exelon
recorded income of $112 million (net of income taxes) as a
cumulative effect of a change in accounting principle in

23



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

connection with its adoption of this standard 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 impact 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 $213 million of revenue, $206 million of
purchased power and $7 million of fuel expense net within
revenues during the three months ended March 31, 2004.
Prior periods were not reclassified. Had EITF 03-11 been
retroactively applied to 2003, revenues, purchased power expense
and fuel expense would have been $252 million,
$232 million, and $20 million lower for the three
months ended March 31, 2003, respectively. The adoption of
EITF 03-11 had no impact on net income of Exelon or
Generation.



| |              
| | -------------
| | FSP FAS 106-1

Through its postretirement benefit plans, Exelon
provides retirees with prescription drug coverage. On
December 8, 2003, the Medicare Prescription
Drug, Improvement and Modernization Act of 2003
(Prescription Drug Act) was enacted. 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. In
response to the enactment of the Prescription Drug Act, the FASB
issued FASB Staff Position (FSP) FAS 106-1 (FSP
FAS 106-1) in January 2004, which permits 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 has made
the one-time election allowed by FSP FAS 106-1. Thus, any
measures of non-pension postretirement benefit obligations or
net periodic postretirement benefit costs in the financial
statements and included in Note 9  Retirement
Benefits do not reflect the effects of the Prescription Drug Act
on Exelons postretirement plans. Exelon is evaluating what
impact the Prescription Drug Act will have on its postretirement
benefit plans and whether it will be eligible for a Federal
subsidy beginning in 2006. Specific

24



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

authoritative guidance on the accounting for the
Federal subsidy is pending, and that guidance, when issued,
could require Exelon to change previously reported information.



| |           
| | ----------
| | EITF 03-01

In March 2004, the EITF reached a consensus on
and the FASB ratified EITF Issue No. 03-01, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments (EITF 03-01). EITF 03-01
provides guidance for evaluating whether an investment is
other-than-temporarily impaired and will be applied in
other-than-temporary impairment evaluations made by Exelon
beginning in the third quarter of 2004. Exelon adopted the
disclosure requirements 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. For all
other investments within the scope of EITF 03-01 and for
cost method investments, the disclosures will be effective for
Exelon for the year ended December 31, 2004. Comparative
information for periods prior to initial application is not
required. Exelon is still evaluating the potential impacts of
EITF 03-01.



| |           
| | ----------
| | 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 will be
effective for Exelon, ComEd, PECO and Generation during the
third quarter of 2004. Exelon is still evaluating the potential
impact of EITF 03-16.



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



| |                                                         
| | --------------------------------------------------------
| | Sale of Ownership Interest in Boston
    Generating, LLC

Exelon and Generation are in the process of an
orderly transition out of the ownership of their indirect wholly
owned subsidiary Boston Generating, LLC (Boston Generating),
which was formerly owned by Sithe, and Boston Generatings
Mystic 4-7, Mystic 8 and 9 and Fore River generating facilities.
The decision to transition out of the projects was made as a
result of an evaluation of the projects and discussions with the
lenders under Boston Generatings $1.25 billion credit
facility, which was entered into primarily to finance the
development and construction of the Mystic 8 and 9 and Fore
River generating facilities. The Boston Generating Facility is
non-recourse to Exelon and Generation, and an event of default
under the Boston Generating Facility does not constitute an
event of default under any other of Exelons debt
instruments or the debt instruments of Exelons
subsidiaries.

On February 23, 2004, Generation and the
lenders entered into a settlement that (subject to closing
conditions being met) will result in a sale to a special purpose
entity owned by the lenders of the equity interest in Boston
Generating, which owns the companies that own the Mystic 4-7,
Mystic 8 and 9 and Fore River generating facilities, and a
transfer of responsibility for plant operations and power
marketing activities. The sale of Boston Generating will be
substantively a non-cash transaction, with the Boston Generating
credit facility continuing as a liability of Boston Generating
at the time it is sold, without recourse to Exelon or
Generation. Generation affiliates will continue to operate and
market power from the plants pending completion of the second
stage, when Generation affiliates will transfer plant operations
and power marketing

25



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

activities to an entity or entities designated by
the lenders. The agreement for the sale and transfer remains in
full force and effect regardless of the future financial
performance or condition of Boston Generating. Upon reaching
this agreement, Exelon and Generation have classified the assets
and liabilities of Boston Generating as held for sale. See
Assets and Liabilities Held for Sale below for information
regarding the classification of the assets and liabilities of
Boston Generating as held for sale as of March 31, 2004.

Certain aspects of the sale of the ownership
interest in Boston Generating and the transfer of responsibility
for plant operations and power marketing activities require
approval of the Federal Energy Regulatory Commission (FERC). The
parties have filed an application with the FERC for an order
authorizing the sale of ownership of Boston Generating. The
parties anticipate the sale of ownership will be completed
during the second quarter of 2004. Subsequent to the sale of
ownership of Boston Generating, the parties will file an
application with the FERC for an order authorizing the transfer
of responsibility for plant operations and power marketing
activities. Although the parties anticipate the transfer of
responsibility for plant operations and power marketing will be
completed during the third quarter of 2004, Generation has
agreements to market a portion of Boston Generatings power
through 2005.

In connection with the settlement, 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 13 
Commitments and Contingencies for information regarding the
settlement of litigation associated with the projects.

In connection with the decision to transition out
of the ownership of Boston Generating and the generating units,
Generation recorded 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 the
Consolidated Statements of Income and Comprehensive Income
during the third quarter of 2003. Generation does not expect to
incur any additional losses as a result of the consummation of
the sale contemplated by the settlement agreement.



| |                      
| | ---------------------
| | Exelon Energy Company

Effective January 1, 2004, Exelon
contributed its interest in Exelon Energy Company to Generation.
The transaction had no impact 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 was
adjusted to reflect this transfer in
Note 15  Segment Information.

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

|                                              |  |   |     |  
|--------------------------------------------- |  | - | --- | -
|Current assets (including $5 million of cash) |  | $ | 89  |  
|Property, plant and equipment                 |  |   | 2   |  
|Deferred debits and other assets              |  |   | 13  |  
|Current liabilities                           |  |   | (96 | )
|Deferred credits and other liabilities        |  |   | (10 | )
|Accumulated other comprehensive loss          |  |   | (2  | )
|Members equity                               |  |   | 4   |  

26



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                            
| | ---------------------------
| | AmerGen Energy Company, LLC

On December 22, 2003, Generation purchased
British Energy plcs (British Energy) 50% interest in
AmerGen Energy Company, LLC (AmerGen) for $277 million.

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 months
ended March 31, 2003, Generation recorded $64 million
of equity in earnings of unconsolidated affiliates related to
its investment in AmerGen and recorded $67 million of
purchased power from AmerGen. The book value of
Generations investment in AmerGen prior to the purchase
was $311 million. For the first quarter of 2004,
AmerGens assets and liabilities and results of operations
are included in Generations financial statements.

Effective January 1, 2004, Generation
changed its accounting estimates related to the depreciation of
certain AmerGen generating facilities. 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
extension is subject to approval by the Nuclear Regulatory
Commission (NRC) of an extension of the existing NRC
operating licenses. Generation has not applied for license
extensions at these facilities, but anticipates filing 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) in a
timeline consistent and integrated with the other planned
extension filings of the Generation nuclear fleet.



| |                                                
| | -----------------------------------------------
| | Pro Forma Financial Information
    (unaudited)

The following unaudited pro forma financial
information gives effect to the acquisition of the remaining 50%
interest in AmerGen by Generation and the transfer of Exelon
Energy Company to Generation as if the transactions had occurred
on January 1, 2003 and were included in Generations
results from that date.



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

|                                                                        |                                                                         |                    |       |      | 
|----------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------ | ----- | ---- | 
|                                                                        |                                                                         | Three Months Ended
|                                                                        |                                                                         | March 31, 2003    
|                                                                        |                                                                         |                   
|Total operating revenue                                                 |                                                                         | $                  | 4,155 |     
|Operating income                                                        |                                                                         |                    | 771   |     
|Income before cumulative effect of changes in
    accounting principles |                                                                         |                    | 266   |     
|Net income(a)                                                           |                                                                         |                    | 884   |     
|                                                                        |                                                                         |                    |       |     
|Earnings per share:                                                     |                                                                         |                    |       |     
|Pro forma earnings per average common
    share  basic:                |                                                                         |                    |       |     
|                                                                        | Income before cumulative effect of changes in
    accounting principles |                    | $     | 0.82 | 
|                                                                        | Cumulative effect of changes in accounting
    principles               |                    |       | 1.89 | 
|                                                                        |                                                                         |                    |       |     
|Net income                                                              |                                                                         | $                  | 2.71  |     
|                                                                        |                                                                         |                    |       |     
|Pro forma earnings per average common
    share  diluted:              |                                                                         |                    |       |     
|Income before cumulative effect of changes in
    accounting principles |                                                                         | $                  | 0.82  |     
|                                                                        | Cumulative effect of changes in accounting
    principles               |                    |       | 1.89 | 
|                                                                        |                                                                         |                    |       |     
|Net income                                                              |                                                                         | $                  | 2.71  |     
|                                                                        |                                                                         |                    |       |     

27



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



---



|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Exelon did not recognize the full benefit of the
    cumulative effect of change in accounting principle related to
    AmerGens adoption of SFAS No. 143.



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

|                                                                        |  |                    |       |  
|----------------------------------------------------------------------- |  | ------------------ | ----- | -
|                                                                        |  | Three Months Ended
|                                                                        |  | March 31, 2003    
|                                                                        |  |                   
|Total operating revenue                                                 |  | $                  | 2,226 |  
|Operating income                                                        |  |                    | 116   |  
|Income before cumulative effect of changes in
    accounting principles |  |                    | (45   | )
|Net income(a)                                                           |  |                    | 569   |  



---



|    |  |                                                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Generation did not recognize the full benefit of
    the cumulative effect of changes in accounting principle related
    to AmerGens adoption of SFAS No. 143.

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
acquisitions had actually occurred on that date, nor of the
results that may be obtained in the future.



| |                                         
| | ----------------------------------------
| | Assets and Liabilities Held for
    Sale

The major classes of assets and liabilities
classified as held for sale within Exelons Consolidated
Balance Sheets as of March 31, 2004 consisted of the
following:

|                                   |  |            |       |         |  |                 |     |       |  |   |    |  |  |   |       | 
|---------------------------------- |  | ---------- | ----- | ------- |  | --------------- | --- | ----- |  | - | -- |  |  | - | ----- | 
|                                   |  | Generation |       | Thermal |  | Exelon Services |     | Total
|                                   |  |            |       |         |  |                 |     |      
|Cash                               |  | $          |      |         |  | $               | 10  |       |  | $ | 1  |  |  | $ | 11    | 
|Accounts receivable, net           |  |            | 9     |         |  |                 | 13  |       |  |   | 19 |  |  |   | 41    | 
|Other current assets               |  |            | 66    |         |  |                 |    |       |  |   | 5  |  |  |   | 71    | 
|Property, plant and equipment, net |  |            | 1,063 |         |  |                 | 86  |       |  |   | 1  |  |  |   | 1,150 | 
|Other long-term assets             |  |            | 16    |         |  |                 | 11  |       |  |   | 9  |  |  |   | 36    | 
|                                   |  |            |       |         |  |                 |     |       |  |   |    |  |  |   |       | 
|Assets classified as held for sale |  | $          | 1,154 |         |  | $               | 120 |       |  | $ | 35 |  |  | $ | 1,309 | 
|                                   |  |            |       |         |  |                 |     |       |  |   |    |  |  |   |       | 

|                                                                     |  |            |       |         |  |                 |    |       |  |   |    |  |  |   |       | 
|-------------------------------------------------------------------- |  | ---------- | ----- | ------- |  | --------------- | -- | ----- |  | - | -- |  |  | - | ----- | 
|                                                                     |  | Generation |       | Thermal |  | Exelon Services |    | Total
|                                                                     |  |            |       |         |  |                 |    |      
|Accounts payable, accrued expenses and other
    current liabilities |  | $          | 146   |         |  | $               | 4  |       |  | $ | 19 |  |  | $ | 169   | 
|Debt                                                                 |  |            | 1,136 |         |  |                 | 1  |       |  |   |   |  |  |   | 1,137 | 
|Asset retirement obligation                                          |  |            |      |         |  |                 | 3  |       |  |   |   |  |  |   | 3     | 
|Other long-term liabilities                                          |  |            | 34    |         |  |                 | 11 |       |  |   | 2  |  |  |   | 47    | 
|                                                                     |  |            |       |         |  |                 |    |       |  |   |    |  |  |   |       | 
|Liabilities classified as held for sale                              |  | $          | 1,316 |         |  | $               | 19 |       |  | $ | 21 |  |  | $ | 1,356 | 
|                                                                     |  |            |       |         |  |                 |    |       |  |   |    |  |  |   |       | 

Generation.Generation classified the assets and liabilities of Boston
Generating with net liabilities of $179 million as held for
sale as of March 31, 2004. The net liabilities held for
sale for Boston Generating exclude receivables from Generation
that eliminate in consolidation. See Sale of
Ownership Interest in Boston Generating, LLC above for
further information regarding a settlement with the lenders
under the Boston

28



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Generating Facility. Additionally,
$17 million of the net assets of Sithe that were
consolidated at March 31, 2004 under the provisions of FIN
No. 46-R were classified as assets and liabilities held for
sale.

Exelon Thermal Holdings
Inc.In December 2003, Enterprises
signed an agreement to sell its Chicago business of Exelon
Thermal Holdings, Inc. (Thermal) for approximately
$135 million, subject to working capital adjustments. The
agreement to sell the Chicago thermal operations is subject to
customary closing conditions and approval from the City of
Chicago (Chicago) under Thermals Chicago franchise
agreement and is expected to close during the second quarter of
2004. The debt of the Chicago thermal operations is required to
be repaid by Enterprises prior to closing, which, in the absence
of relief from the debt holders, will result in prepayment
penalties. The total debt outstanding of the Chicago thermal
operations as of March 31, 2004 was $37 million. The
assets and liabilities of certain entities of Exelon Thermal
were classified as held for sale as of March 31, 2004.

Exelon Services Inc.Exelon classified the assets and liabilities of certain Exelon
Services, Inc. (Exelon Services) entities as held for sale
as of March 31, 2004 due to ongoing efforts to dispose of
these businesses. These entities are expected to be sold in 2004.

Synthetic
Fuel-Producing Facilities

In November 2003, Exelon purchased interests in
two synthetic fuel-producing facilities. Synthetic fuel
facilities chemically change coal, including waste and marginal
coal, into a fuel used at power plants. 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.



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

Sithe is primarily engaged in the development,
construction, ownership and operation of electric wholesale
generating facilities in North America. At March 31, 2004,
excluding assets held for sale, Sithe operated nine power plants
representing an aggregate average net capacity of 1,323
megawatts (MW). Sithe also has interests in two 230 MW
projects in Mexico which are expected to commence commercial
operations during the second quarter of 2004.

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). Generations intent
is to fully divest of Sithe. See the 2003 Form 10-K for
further details regarding these transactions.

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 and Accounting Changes for a discussion of
Sithe in relation to FIN No. 46-R.

As a result of the series of transactions
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 will be included
in Exelons 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 that commenced on July 1, 2001 and run
through 2014. Additionally, Sithe has entered into an Energy
Purchase Agreement (EPA) with Consolidated Edison Company,
which continues through 2014. As a result of the acquisition
accounting described above, values were assigned to the Tolling
Agreement and EPA on March 31, 2004 of approximately
$91 million and $282 million, respectively, which

29



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

have been recorded as intangible assets on
Exelons and Generations Consolidated Balance Sheets
in deferred debits and other assets. The Tolling Agreement and
EPA will be amortized using a method that reflects the pattern
in which the economic benefits of the intangible assets are
consumed or used up in accordance with the provisions of
SFAS No. 142, Goodwill and Other Intangible
Assets, not to exceed the terms of the contract. The
allocation of fair value related to the valuation of long-lived
assets is preliminary, and will be finalized in the second
quarter of 2004. In connection with the consolidation of Sithe,
certain indemnification guarantees, which were recorded in
accordance with the provisions of FASB Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtness of Others at Generation on November 25,
2003 pursuant to the series of transactions referred to above,
were reversed 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 income
taxes) as a cumulative effect of a change in accounting
principle. The following condensed consolidating financial
information presents the financial position of Exelon,
Generation and Sithe, as well as consolidating entries related
primarily to acquisition notes payables and receivables between
Generation and Sithe.



| |                                                                   
| | ------------------------------------------------------------------
| | Exelon Condensed Consolidating Balance
    Sheet at March 31, 2004

|                                           |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|------------------------------------------ |  | ------ | ------ | ----- |  | ----------- | ----- | ------------ |  | - | ---- | - |  | - | ------ | 
|                                           |  |        |        |       |  | Eliminating |       | Exelon      
|                                           |  | Exelon |        | Sithe |  | Entries     |       | Consolidated
|                                           |  |        |        |       |  |             |       |             
|Assets                                     |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Current assets                             |  | $      | 4,500  |       |  | $           | 326   |              |  | $ | (155 | ) |  | $ | 4,671  | 
|Assets held for sale                       |  |        | 1,149  |       |  |             | 160   |              |  |   |     |   |  |   | 1,309  | 
|Property, plant and equipment, net         |  |        | 19,855 |       |  |             | 278   |              |  |   |     |   |  |   | 20,133 | 
|Other noncurrent assets                    |  |        | 16,756 |       |  |             | 739   |              |  |   | (49  | ) |  |   | 17,446 | 
|                                           |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Total assets                               |  | $      | 42,260 |       |  | $           | 1,503 |              |  | $ | (204 | ) |  | $ | 43,559 | 
|                                           |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|                                          
|Liabilities and stockholders
    equity   |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Current liabilities                        |  | $      | 4,488  |       |  | $           | 227   |              |  | $ | (155 | ) |  | $ | 4,560  | 
|Liabilities held for sale                  |  |        | 1,213  |       |  |             | 143   |              |  |   |     |   |  |   | 1,356  | 
|Long-term debt                             |  |        | 13,207 |       |  |             | 817   |              |  |   |     |   |  |   | 14,024 | 
|Other liabilities(a)                       |  |        | 14,566 |       |  |             | 212   |              |  |   | 55   |   |  |   | 14,833 | 
|Stockholders equity(b)                    |  |        | 8,786  |       |  |             | 104   |              |  |   | (104 | ) |  |   | 8,786  | 
|                                           |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Total liabilities and stockholders equity |  | $      | 42,260 |       |  | $           | 1,503 |              |  | $ | (204 | ) |  | $ | 43,559 | 
|                                           |  |        |        |       |  |             |       |              |  |   |      |   |  |   |        | 



---



|    |  |                                                             
|--- |  | ------------------------------------------------------------
|(a) |  | Includes minority interest of consolidated
    subsidiaries.
|   
|(b) |  | Includes preferred securities of subsidiaries.              

30



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)





| |                                                                       
| | ----------------------------------------------------------------------
| | Generation Condensed Consolidating Balance
    Sheet at March 31, 2004

|                                      |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|------------------------------------- |  | ---------- | ------ | ----- |  | ----------- | ----- | ------------ |  | - | ---- | - |  | - | ------ | 
|                                      |  |            |        |       |  | Eliminating |       | Generation  
|                                      |  | Generation |        | Sithe |  | Entries     |       | Consolidated
|                                      |  |            |        |       |  |             |       |             
|Assets                                |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Current assets                        |  | $          | 2,722  |       |  | $           | 326   |              |  | $ | (155 | ) |  | $ | 2,893  | 
|Assets held for sale                  |  |            | 994    |       |  |             | 160   |              |  |   |     |   |  |   | 1,154  | 
|Property, plant and equipment, net    |  |            | 6,236  |       |  |             | 278   |              |  |   |     |   |  |   | 6,514  | 
|Other noncurrent assets               |  |            | 5,312  |       |  |             | 739   |              |  |   | (49  | ) |  |   | 6,002  | 
|                                      |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Total assets                          |  | $          | 15,264 |       |  | $           | 1,503 |              |  | $ | (204 | ) |  | $ | 16,563 | 
|                                      |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|                                     
|Liabilities and members equity       |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Current liabilities                   |  | $          | 2,561  |       |  | $           | 227   |              |  | $ | (155 | ) |  | $ | 2,633  | 
|Liabilities held for sale             |  |            | 1,173  |       |  |             | 143   |              |  |   |     |   |  |   | 1,316  | 
|Long-term debt                        |  |            | 1,650  |       |  |             | 817   |              |  |   |     |   |  |   | 2,467  | 
|Other liabilities(a)                  |  |            | 7,038  |       |  |             | 212   |              |  |   | 55   |   |  |   | 7,305  | 
|Members equity                       |  |            | 2,842  |       |  |             | 104   |              |  |   | (104 | ) |  |   | 2,842  | 
|                                      |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 
|Total liabilities and members equity |  | $          | 15,264 |       |  | $           | 1,503 |              |  | $ | (204 | ) |  | $ | 16,563 | 
|                                      |  |            |        |       |  |             |       |              |  |   |      |   |  |   |        | 



---



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

The book value of Generations investment in
Sithe immediately prior to its consolidation on March 31,
2004 was $49 million. Generation recorded $2 million
of equity method losses and $2 million of equity method
income for its investment in Sithe during the three months ended
March 31, 2004 and 2003, respectively.

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
under which Exelon would obtain letters of credit to support
contractual obligations of Sithe and its subsidiaries. As of
March 31, 2004, Exelon has obtained $66 million of
letters of credit in support of Sithes obligations. With
the exception of the issuance of letters of credit, the
creditors of Sithe have no recourse against the general credit
of Exelon or Generation.



|   |                                                                  
|-- | -----------------------------------------------------------------
|5. | Stock-Based Compensation (Exelon, ComEd, PECO
    and Generation)

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure 
an amendment of FASB Statement No. 123
(SFAS No. 148). Exelon adopted the additional
disclosure requirements of SFAS No. 148 in 2003 but
continues to account for its stock-based compensation plans
under the disclosure only provision of SFAS No. 123,
Accounting for Stock-Based Compensation
(SFAS No. 123). The tables below show the effect on
net income and earnings per share for Exelon and the effect on
net income for ComEd, PECO and Generation had Exelon elected to
account for

31



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

stock-based compensation plans using the
fair-value method under SFAS No. 123 for the three
months ended March 31, 2004 and 2003:



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

|                                                                                                                              |                       |                 |     |      |  |   |     |      | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | --------------- | --- | ---- |  | - | --- | ---- | 
|                                                                                                                              |                       |                
|                                                                                                                              |                       | Three Months   
|                                                                                                                              |                       | Ended March 31,
|                                                                                                                              |                       |                
|                                                                                                                              |                       | 2004            |     | 2003
|                                                                                                                              |                       |                 |     |     
|Net income  as reported                                                                                                      |                       | $               | 406 |      |  | $ | 361 |     
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |                       |                 | (5  | )    |  |   | (5  | )   
|                                                                                                                              |                       |                 |     |      |  |   |     |     
|Pro forma net income                                                                                                          |                       | $               | 401 |      |  | $ | 356 |     
|                                                                                                                              |                       |                 |     |      |  |   |     |     
|Earnings per share:                                                                                                           |                       |                 |     |      |  |   |     |     
|                                                                                                                              | Basic  as reported   |                 | $   | 1.23 |  |   | $   | 1.11 | 
|                                                                                                                              | Basic  pro forma     |                 | $   | 1.22 |  |   | $   | 1.10 | 
|                                                                                                                              | Diluted  as reported |                 | $   | 1.22 |  |   | $   | 1.11 | 
|                                                                                                                              | Diluted  pro forma   |                 | $   | 1.21 |  |   | $   | 1.09 | 



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

|                                                                                                                              |  |                 |     |      |  |   |     |  
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- | ---- |  | - | --- | -
|                                                                                                                              |  |                
|                                                                                                                              |  | Three Months   
|                                                                                                                              |  | Ended March 31,
|                                                                                                                              |  |                
|                                                                                                                              |  | 2004            |     | 2003
|                                                                                                                              |  |                 |     |     
|Net income  as reported                                                                                                      |  | $               | 182 |      |  | $ | 195 |  
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |  |                 | (1  | )    |  |   | (1  | )
|                                                                                                                              |  |                 |     |      |  |   |     |  
|Pro forma net income                                                                                                          |  | $               | 181 |      |  | $ | 194 |  
|                                                                                                                              |  |                 |     |      |  |   |     |  



| |     
| | ----
| | PECO

|                                                                                                                              |  |                 |     |      |  |   |     |  
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- | ---- |  | - | --- | -
|                                                                                                                              |  |                
|                                                                                                                              |  | Three Months   
|                                                                                                                              |  | Ended March 31,
|                                                                                                                              |  |                
|                                                                                                                              |  | 2004            |     | 2003
|                                                                                                                              |  |                 |     |     
|Net income on common stock  as reported                                                                                      |  | $               | 130 |      |  | $ | 135 |  
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |  |                 | (1  | )    |  |   | (1  | )
|                                                                                                                              |  |                 |     |      |  |   |     |  
|Pro forma net income on common stock                                                                                          |  | $               | 129 |      |  | $ | 134 |  
|                                                                                                                              |  |                 |     |      |  |   |     |  

32



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



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

|                                                                                                                              |  |                 |    |      |  |   |    |  
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -- | ---- |  | - | -- | -
|                                                                                                                              |  |                
|                                                                                                                              |  | Three Months   
|                                                                                                                              |  | Ended March 31,
|                                                                                                                              |  |                
|                                                                                                                              |  | 2004            |    | 2003
|                                                                                                                              |  |                 |    |     
|Net income  as reported                                                                                                      |  | $               | 99 |      |  | $ | 56 |  
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |  |                 | (3 | )    |  |   | (1 | )
|                                                                                                                              |  |                 |    |      |  |   |    |  
|Pro forma net income                                                                                                          |  | $               | 96 |      |  | $ | 55 |  
|                                                                                                                              |  |                 |    |      |  |   |    |  



|   |                                     
|-- | ------------------------------------
|6. | Regulatory Issues (Exelon and ComEd)

PJM Integration.On
April 1, 2003, ComEd received approval from the FERC to
transfer control of its transmission assets to the PJM
Interconnection (PJM). The FERC also accepted for filing
the amended PJM Tariff to reflect the inclusion the transmission
assets of ComEd and other new members, subject to a compliance
filing and to hearing on certain issues. 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. Although full integration
of ComEds transmission assets into PJMs energy
market structures was scheduled to occur in November 2003, the
integration was delayed due to the August 14, 2003 power
blackout in the Northeast United States and Canada and the
analysis of the impacts of that event. On March 18, 2004,
the FERC approved ComEds plan to complete its integration
into PJM, subject to the North American Electric Reliability
Council (NERC) approval of the PJM and Midwest ISO
reliability plans to assure no adverse impacts. The NERC granted
the required approval on April 2, 2004. On April 27,
2004, the FERC issued its order approving ComEds
application to fully integrate into PJM on May 1, 2004.
ComEd intends to accept the conditions in the FERC order and
expects full integration to occur on that date.

Delivery Service
Rates.On March 3, 2003, ComEd
entered into, and the Illinois Commerce Commission
(ICC) subsequently entered orders 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 purchased power
agreement (PPA) with Generation. A non-party to the
Agreement appealed one of the ICCs orders which appeal, if
ultimately successful, would have affected the Agreement on a
prospective basis. Appeals were taken from the ICCs orders
on the competitive declaration and hourly pricing. On
March 24, 2004, the Appellate Court issued an opinion
affirming the ICCs orders.

Open Access Transmission
Tariff.On November 10, 2003, the
FERC issued an order allowing ComEd to put into effect beginning
April 12, 2004, subject to refund and rehearing, new
transmission rates designed to reflect nearly $500 million
of infrastructure investments made since 1998. However, because
of the Illinois retail rate freeze and the method for
calculating competitive transition charges (CTC), the increase
is not expected to have a significant effect on operating
revenues until after December 31, 2006. ComEd has made a
filing with the FERC indicating that it will not begin charging
the new rates before May 1, 2004. ComEd is unable to
predict the ultimate outcome of the associated rehearing or
settlement negotiations.



|   |                                                        
|-- | -------------------------------------------------------
|7. | Long-Term Debt (Exelon, ComEd, PECO and
    Generation)



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

Approximately $1.0 billion of debt was
outstanding under the non-recourse Boston Generating Facility at
December 31, 2003, all of which was reflected in the
Consolidated Balance Sheets of Exelon and Generation

33



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

as a current liability due to certain events of
default. The Boston Generating Facility required that the Mystic
8 and 9 and Fore River generating facilities achieve
Project Completion as defined in the Boston
Generating Facility (Project Completion) by July 12, 2003.
Project Completion was not achieved by July 12, 2003,
resulting in an event of default under the Boston Generating
Facility.

At March 31, 2004, the $1.0 billion of
debt then outstanding under the Boston Generating Facility was
reclassified from the current portion of long-term debt to
liabilities held for sale on the Consolidated Balance Sheets of
Exelon and Generation. The outstanding debt under the Boston
Generating Facility will be eliminated from the financial
statements of Exelon and Generation upon the sale of
Generations ownership interest in Boston Generating. See
Note 3  Acquisitions and Dispositions for
additional information regarding the sale of Generations
ownership interest in Boston Generating.



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

During the three months ended March 31,
2004, the following long-term debt was retired or redeemed:

|                                  |       |      |     |                                 |  |          |        |        |  |  |                  |  |  |   |     | 
|--------------------------------- | ----- | ---- | --- | ------------------------------- |  | -------- | ------ | ------ |  |  | ---------------- |  |  | - | --- | 
|                                  |       |      |     | Interest                        |  |          |        |       
|Company                           |       | Type |     | Rate                            |  | Maturity |        | Amount
|                                  |       |      |     |                                 |  |          |        |       
|                                  | ComEd |      |     | Note                            |  |          | 7.375% |        |  |  | January 15, 2004 |  |  | $ | 150 | 
|                                  | ComEd |      |     | Pollution Control Revenue Bonds |  |          | 5.30%  |        |  |  | January 15, 2004 |  |  |   | 26  | 
|                                  |       |      |     |                                 |  |          |        |        |  |  |                  |  |  |   |     | 
|Total retirements and redemptions |       | $    | 176 |                                
|                                  |       |      |     |                                

During the three months ended March 31,
2004, ComEd made payments of $93 million related to its
obligation to the ComEd Transitional Funding Trust, and PECO
made payments of $88 million related to its obligation to
the PETT.

Sithe Long-Term
Debt.At March 31, 2004, the
following long-term debt was consolidated in Exelon 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.

|                                                        |                                                                                   |                                                                               |  |          |       |        |  |      |      |   |     |     |     | 
|------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- |  | -------- | ----- | ------ |  | ---- | ---- | - | --- | --- | --- | 
|                                                        |                                                                                   | Interest                                                                      |  |          |       |       
|                                                        |                                                                                   | Rate                                                                          |  | Maturity |       | Amount
|                                                        |                                                                                   |                                                                               |  |          |       |       
|Non-recourse project debt:                              |                                                                                   |                                                                               |  |          |       |        |  |      |      |   |     |    
|                                                        | Independence notes and bonds:                                                     |                                                                               |  |          |       |        |  |      |      |   |     |     |    
|                                                        |                                                                                   | Secured bonds payable in semiannual installments
    commencing June 2003     |  |          | 8.50  | %      |  |      | 2007 |   |     | $   | 127 | 
|                                                        |                                                                                   | Secured bonds payable in semiannual installments
    commencing December 2007 |  |          | 9.00  | %      |  |      | 2013 |   |     |     | 439 | 
|                                                        | Term loan repayable primarily in quarterly
    installments:                      |                                                                               |  |          |       |        |  |      |      |   |     |     |    
|                                                        |                                                                                   | Batavia                                                                       |  |          | 18.00 | %      |  |      | 2007 |   |     |     | 1   | 
|Subordinated debt:                                      |                                                                                   |                                                                               |  |          |       |        |  |      |      |   |     |    
|                                                        | Tracking account loan payable in semiannual
    installments commencing June 2015 |                                                                               |  | 8.68     | %     |        |  | 2035 |      |   |     | 283 |    
|                                                        |                                                                                   |                                                                               |  |          |       |        |  |      |      |   |     |    
|Total long-term debt (including current
    maturities) |                                                                                   |                                                                               |  |          |       |        |  |      |      | $ | 850 |    
|                                                        |                                                                                   |                                                                               |  |          |       |        |  |      |      |   |     |    

Additionally, long-term debt of Sithe classified
as liabilities held for sale of $99 million was
consolidated at March 31, 2004 as a result of the adoption
of FIN No. 46-R.

34



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Maturities of Sithe Long-Term
Debt.Aggregate maturities of
Sithes long-term debt from continuing operations during
the next five years are estimated as follows:

|                                                          |  |   |      |  
|--------------------------------------------------------- |  | - | ---- | -
|2004                                                      |  | $ | 32   |  
|2005                                                      |  |   | 34   |  
|2006                                                      |  |   | 37   |  
|2007                                                      |  |   | 40   |  
|2008                                                      |  |   | 44   |  
|2009 and thereafter                                       |  |   | 764  |  
|                                                          |  |   |      |  
|Total minimum payments                                    |  |   | 951  |  
|Net debt discount to be amortized to interest
    expense |  |   | (101 | )
|                                                          |  |   |      |  
|Present value of minimum payments                         |  | $ | 850  |  
|                                                          |  |   |      |  



|   |                                                            
|-- | -----------------------------------------------------------
|8. | 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.

The following table details, by segment,
Exelons total salary continuance severance costs for the
three months ended March 31, 2004. There were no
significant salary continuance severance costs recorded during
the three months ended March 31, 2003.

|                                                                      |  |          |   |            |  |             |    |           |  |              |   |  |  |   |   |  |  |   |   | 
|--------------------------------------------------------------------- |  | -------- | - | ---------- |  | ----------- | -- | --------- |  | ------------ | - |  |  | - | - |  |  | - | - | 
|                                                                      |  | Energy   |   |            |  |             |    |           |  | Exelon      
|Salary continuance severance                                          |  | Delivery |   | Generation |  | Enterprises |    | Corporate |  | Consolidated
|                                                                      |  |          |   |            |  |             |    |           |  |             
|Expense (income) recorded in three months ended
    March 31, 2004(a) |  | $        | 5 |            |  | $           | (6 | )         |  | $            | 1 |  |  | $ | 1 |  |  | $ | 1 | 



---



|    |  |                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2004, Generation recorded a charge of
    $1 million for new positions identified and reversed
    $7 million for accruals in excess of the reserve for
    individuals previously identified under The Exelon Way, a
    company-wide effort to define how Exelon will conduct business
    in years to come.

The following table provides total salary
continuance severance costs for ComEd, PECO and Generation for
the three months ended March 31, 2004. There were no
significant salary continuance severance costs recorded during
the three months ended March 31, 2003.

|                                                                      |  |       |   |      |  |            |   |  |  |   |    |  
|--------------------------------------------------------------------- |  | ----- | - | ---- |  | ---------- | - |  |  | - | -- | -
|Salary continuance severance                                          |  | ComEd |   | PECO |  | Generation
|                                                                      |  |       |   |      |  |           
|Expense (income) recorded in three months ended
    March 31, 2004(a) |  | $     |  |      |  | $          | 5 |  |  | $ | (6 | )



---



|    |  |                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2004, Generation recorded a charge of
    $1 million for new positions identified and reversed
    $7 million for accruals in excess of the reserve for
    individuals previously identified under The Exelon Way.

35



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following tables provide a roll forward of
the salary continuance severance obligations from
January 1, 2003 through March 31, 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 (Reductions)(a)      |  |              | 1   |       |  |      |    |            |  |   | 5  |   |  |   | (6 | )
|Payments                       |  |              | (22 | )     |  |      | (7  | )          |  |   | (1 | ) |  |   | (8 | )
|Other adjustments(b)           |  |              | (5  | )     |  |      |    |            |  |   |   |   |  |   | (2 | )
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |    |  
|Balance at March 31, 2004      |  | $            | 113 |       |  | $    | 48  |            |  | $ | 18 |   |  | $ | 27 |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |    |  



---



|    |  |                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2004, Generation recorded a charge of
    $1 million for new positions identified and reversed
    $7 million for accruals in excess of the reserve for
    individuals previously identified under The Exelon Way.                                                               
|   
|(b) |  | In 2004, Generation increased the reserve for
    liabilities acquired upon consolidation of Exelon Energy Company
    and reduced the reserve for liabilities associated with Boston
    Generating which have been reclassified to liabilities held for
    sale at March 31, 2004.



|   |                                                             
|-- | ------------------------------------------------------------
|9. | 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.

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, respectively. 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
impact of changes in these factors on pension and other
postretirement welfare benefit obligations is 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.

The following table provides the components of
the net periodic benefit costs recognized for the three months
ended March 31, 2004 and 2003, including the net periodic
benefit costs of AmerGens pension and postretirement plans
for 2004. The expected long-term rates of return on plan assets
used to estimate 2004

36



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

pension and other postretirement benefit costs
are 9.00% and 8.33%, respectively. A portion of the net periodic
benefit cost is capitalized within the Consolidated Balance
Sheets.

|                          |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |     |  
|------------------------- | ----------------------------- | ---------------- | ---- | -------------- | - | ----- | ---- | ---- | - | - | --- | --- | - | - | --- | --- | -
|                          |                               |                  |      |                |   |      
|                          |                               |                  |      |                |   | Other
|                          |                               |                  |      | Postretirement
|                          |                               | Pension Benefits |      | Benefits Three
|                          |                               | Three Months     |      | Months Ended  
|                          |                               | Ended March 31,  |      | March 31,     
|                          |                               |                  |      |               
|                          |                               | 2004             |      | 2003           |   | 2004  |      | 2003
|                          |                               |                  |      |                |   |       |      |     
|Service cost              |                               | $                | 33   |                |   | $     | 27   |      |   | $ | 22  |     |   | $ | 17  |    
|Interest cost             |                               |                  | 134  |                |   |       | 130  |      |   |   | 47  |     |   |   | 42  |    
|Expected return on assets |                               |                  | (154 | )              |   |       | (146 | )    |   |   | (23 | )   |   |   | (19 | )  
|Amortization of:          |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|                          | Transition obligation (asset) |                  |      | (1             | ) |       |      | (1   | ) |   |     | 2   |   |   |     | 2   |  
|                          | Prior service cost            |                  |      | 4              |   |       |      | 4    |   |   |     | (19 | ) |   |     | (13 | )
|                          | Actuarial (gain) loss         |                  |      | 15             |   |       |      | 6    |   |   |     | 19  |   |   |     | 12  |  
|                          |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|Net periodic benefit cost |                               | $                | 31   |                |   | $     | 20   |      |   | $ | 48  |     |   | $ | 41  |    
|                          |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    

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 details, by registrant, the
matching contribution to the savings plans during the three
months ended March 31, 2004 and 2003:

|                                    |  |                 |    |      |  |   |    | 
|----------------------------------- |  | --------------- | -- | ---- |  | - | -- | 
|                                    |  |                
|                                    |  | Three Months   
|                                    |  | Ended March 31,
|                                    |  |                
|Savings plan matching contributions |  | 2004            |    | 2003
|                                    |  |                 |    |     
|Exelon                              |  | $               | 14 |      |  | $ | 12 | 
|ComEd                               |  |                 | 4  |      |  |   | 4  | 
|PECO                                |  |                 | 2  |      |  |   | 2  | 
|Generation                          |  |                 | 7  |      |  |   | 6  | 



|    |                                     
|--- | ------------------------------------
|10. | Income Taxes (Exelon and Generation)

Exelon

Exelons effective income tax rate decreased
from 37% for the three months ended March 31, 2003 to 28%
for the same period in 2004, primarily due to investments in the
synthetic fuel-producing facilities. See Note 3 
Acquisitions and Dispositions for further information regarding
these investments.

Generation

Generations effective tax rate increased
from 29% for the three months ended March 31, 2003 to 41%
for the same period in 2004. This increase was primarily
attributable to impairment charges recorded in 2003 related to
Generations investment in Sithe which resulted in a
pre-tax loss. In addition, tax exempt interest income and
nuclear decommissioning investment income were higher in 2004 as
compared to 2003, as a result of owning 100% of AmerGen as
compared to owning 50% in the first quarter of 2003.

37



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|    |                                                         
|--- | --------------------------------------------------------
|11. | Asset Retirement Obligations (Exelon and
    Generation)

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.
SFAS No. 143 asset retirement obligations have been
established 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 its nuclear
generating stations, excluding the AmerGen plants, through
regulated rates. The amounts recovered from customers are
deposited in trust accounts and invested for funding the future
decommissioning costs of nuclear generating stations.

Generation had decommissioning assets in trust
accounts of $4,890 million and $4,721 million as of
March 31, 2004 and December 31, 2003, respectively,
included as nuclear decommissioning trust funds on
Generations Consolidated Balance Sheets. Generation
anticipates that all trust fund assets will ultimately be used
to decommission Generations nuclear plants.

The following table provides a reconciliation of
the ARO reflected on the Exelon and Generation Consolidated
Balance Sheets at December 31, 2003 and March 31, 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                |  |            |      |        |  |   | (3    | )
|                                                                |  |            |       |        |  |   |       |  
|Asset retirement obligation at December 31,
    2003            |  |            | 2,996 |        |  |   | 2,997 |  
|Accretion expense for the three months ended
    March 31, 2004 |  |            | 50    |        |  |   | 51    |  
|Additional liabilities incurred(a)                              |  |            | 5     |        |  |   | 5     |  
|Expenditures on currently retired units                         |  |            | (3    | )      |  |   | (3    | )
|                                                                |  |            |       |        |  |   |       |  
|Asset retirement obligation at March 31, 2004                   |  | $          | 3,048 |        |  | $ | 3,050 |  
|                                                                |  |            |       |        |  |   |       |  



---



|    |  |                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------
|(a) |  | Additional liabilities incurred are primarily due
    to the consolidation of Sithe, as required by FIN No. 46-R.



|    |                                                
|--- | -----------------------------------------------
|12. | Earnings Per Share and Stock Split
    (Exelon)



| |                   
| | ------------------
| | 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 shows the

38



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

effect of these stock options on the weighted
average number of shares outstanding used in calculating diluted
earnings per share:

|                                           |  |                 |     |      |  |  |     | 
|------------------------------------------ |  | --------------- | --- | ---- |  |  | --- | 
|                                           |  |                
|                                           |  | Three Months   
|                                           |  | Ended March 31,
|                                           |  |                
|                                           |  | 2004            |     | 2003
|                                           |  |                 |     |     
|Average common shares outstanding          |  |                 | 330 |      |  |  | 324 | 
|Assumed exercise of stock options          |  |                 | 3   |      |  |  | 2   | 
|                                           |  |                 |     |      |  |  |     | 
|Average dilutive common shares outstanding |  |                 | 333 |      |  |  | 326 | 
|                                           |  |                 |     |      |  |  |     | 

The number of stock options not included in the
calculation of diluted common shares outstanding due to their
antidilutive effect was 1 million and 5 million for
three months ended March 31, 2004 and 2003, respectively.



| |            
| | -----------
| | 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 record date for the stock split is April 19,
2004 and the distribution date will be May 5, 2004. The
share and per-share amounts included in Exelons
consolidated financial statements do not reflect the stock
split. At the distribution date, the share and per-share amounts
included in Exelons consolidated financial statements will
be adjusted to reflect the stock split.

The following table presents average shares of
common stock outstanding (basic and diluted), earnings per
average common share (basic and diluted) and dividends per
common share for the three months ended March 31, 2004 and
2003 on a pro forma basis as if the stock split had been
reflected in the accompanying consolidated financial statements.

|                                                           |                                                                         |                 |      |      |  |   |      |      | 
|---------------------------------------------------------- | ----------------------------------------------------------------------- | --------------- | ---- | ---- |  | - | ---- | ---- | 
|                                                           |                                                                         |                
|                                                           |                                                                         | Three Months   
|                                                           |                                                                         | Ended March 31,
|                                                           |                                                                         |                
|                                                           |                                                                         | 2004            |      | 2003
|                                                           |                                                                         |                 |      |     
|Pro forma average shares of common stock
    outstanding   |                                                                         |                 |      |      |  |   |      |     
|                                                           | Basic                                                                   |                 |      | 659  |  |   |      | 648  | 
|                                                           | Diluted                                                                 |                 |      | 665  |  |   |      | 652  | 
|                                                           |                                                                         |                 |      |      |  |   |      |     
|Pro forma earnings per average common
    share  basic:   |                                                                         |                 |      |      |  |   |      |     
|                                                           | Income before cumulative effect of changes in
    accounting principles |                 | $    | 0.57 |  |   | $    | 0.39 | 
|                                                           | Cumulative effect of changes in accounting
    principles               |                 |      | 0.05 |  |   |      | 0.17 | 
|                                                           |                                                                         |                 |      |      |  |   |      |     
|Net income                                                 |                                                                         | $               | 0.62 |      |  | $ | 0.56 |     
|                                                           |                                                                         |                 |      |      |  |   |      |     
|Pro forma earnings per average common
    share  diluted: |                                                                         |                 |      |      |  |   |      |     
|                                                           | Income before cumulative effect of changes in
    accounting principles |                 | $    | 0.56 |  |   | $    | 0.38 | 
|                                                           | Cumulative effect of changes in accounting
    principles               |                 |      | 0.05 |  |   |      | 0.17 | 
|                                                           |                                                                         |                 |      |      |  |   |      |     
|Net income                                                 |                                                                         | $               | 0.61 |      |  | $ | 0.55 |     
|                                                           |                                                                         |                 |      |      |  |   |      |     
|Pro forma dividends per common share                       |                                                                         | $               | 0.27 |      |  | $ | 0.23 |     
|                                                           |                                                                         |                 |      |      |  |   |      |     

39



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

13. Commitments and Contingencies
(Exelon, ComEd, PECO and Generation)

For information regarding capital commitments,
nuclear decommissioning and spent fuel storage, 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 March 31, 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 as set forth in the 2003
Form 10-K, except as discussed below:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the normal course of business, Generation
    entered into commitments for new capacity purchases and
    power-only sales.                          
|
| |  | Sithe has power-only sales commitments of
    $75 million, transmission rights of $36 million and
    minimum fuel purchase commitments of $109 million.



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

Exelon, ComEd, PECO and Generations
commercial commitments as of March 31, 2004, representing
commitments not recorded on the balance sheet but potentially
triggered by future events, including obligations to make
payment on behalf of other parties and financing arrangements to
secure obligations, were materially unchanged 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. This transfer had no effect on the guarantees of
    Exelon.                                                                                                                                                          
|
| |  | In connection with the consolidation of Sithe
    pursuant to FIN No. 46-R, Generation maintains a
    $50 million non-debt letter of credit under its credit
    agreement. See Exelons Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations  Liquidity and Capital
    Resources  Credit Issues below for further
    discussion of Exelons credit agreement.



| |                          
| | -------------------------
| | 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 3 sites and the Pennsylvania Department of
Environmental Protection has approved the clean-up of 7 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 14  Supplemental Financial
Information). As of

40



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

March 31, 2004 and December 31, 2003,
Exelon, ComEd, PECO and Generation have accrued the following
amounts for environmental liabilities:

|               |  |                     |     |                          |  |   |     |    
|-------------- |  | ------------------- | --- | ------------------------ |  | - | --- | ---
|               |  | Total environmental |     | Portion of total related
|               |  | investigation and   |     | to MGP investigation    
|March 31, 2004 |  | remediation reserve |     | and remediation         
|               |  |                     |     |                         
|Exelon         |  | $                   | 126 |                          |  | $ | 104 | (a)
|ComEd          |  |                     | 68  |                          |  |   | 63  | (a)
|PECO           |  |                     | 50  |                          |  |   | 41  | (a)
|Generation     |  |                     | 8   |                          |  |   |    |    



---



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

|                  |  |                     |     |                          |  |   |     |    
|----------------- |  | ------------------- | --- | ------------------------ |  | - | --- | ---
|                  |  | Total environmental |     | Portion of total related
|                  |  | investigation and   |     | to MGP investigation    
|December 31, 2003 |  | remediation reserve |     | and remediation         
|                  |  |                     |     |                         
|Exelon            |  | $                   | 129 |                          |  | $ | 105 | (a)
|ComEd             |  |                     | 69  |                          |  |   | 64  | (a)
|PECO              |  |                     | 50  |                          |  |   | 41  | (a)
|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.



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



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

Retail Rate Law.In
1996, several developers of non-utility generating facilities
filed litigation against various Illinois officials claiming
that the enforcement against those facilities of an amendment to
Illinois law removing the entitlement of those facilities to
state-subsidized payments for electricity sold to ComEd after
March 15, 1996 violated their rights under the Federal and
state constitutions. The developers also filed suit against
ComEd for a declaratory judgment that their rights under their
contracts with ComEd were not affected by the amendment 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. Plaintiffs have sought review of the
Appellate Courts decision by the Illinois Supreme Court.
There is no set date by which the Court must decide if it will
hear the case. While it cannot currently predict the ultimate
outcome of this action, ComEd does not believe that it will have
a material adverse impact on its results of operations or its
cash flows.

41



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



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

Real Estate Tax
Appeals.PECO and Generation are each
challenging real estate taxes assessed on nuclear plants since
1997. 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 2003, 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).

While PECO and Generation believe their reserve
balances for exposures associated with the real estate taxes as
of March 31, 2004 reflect the most likely probable expected
outcome of the litigation and appeals proceedings in accordance
with SFAS No. 5, Accounting for
Contingencies, the ultimate outcome of such matters 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. No date has been set for a new
trial.

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. Generation cannot predict the ultimate outcome of
the cases.

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. The estimated costs of remediation for the site range
from $0 to $87 million. Once a remedy is selected, it is
expected that the PRPs will agree on an allocation of
responsibility for the costs. Until an agreement is reached,
Generation cannot predict its share of the costs.

Raytheon and Mitsubishi
Litigation.Since 2002, Raytheon
Corporation (Raytheon), Fore River Development, LLC, Mystic
Development, LLC, Mitsubishi Heavy Industries, LTD
(MHI) and Mitsubishi Heavy Industries of America (MHIA)
have been in litigation over various matters in connection with
the construction of the Mystic 8 and 9 and Fore River generating
facilities in Massachusetts. In connection with

42



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

the settlement among Exelon, Generation and the
lenders under the Boston Generating credit facility more fully
described in Note 3  Acquisitions and
Dispositions, Exelon, Generation, the lenders and 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. Under the global settlement,
Generation agreed to pay approximately $31.1 million to
Raytheon and approximately $1.4 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 MHI and
MHIA claims relating to work performed on the projects prior to
the settlement, and has 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, including the proceedings before the New York
Supreme Court and the International Chamber of Commerce Court of
Arbitration. Raytheon has also ceased all construction
activities related to the Mystic 8 and 9 and Fore River
generating facilities, assigned subcontracts to the project
companies and will cooperate with the transition of construction
to a new contractor. In the event that the sale of ownership of
Boston Generating and the transfer of plant operations and power
marketing activities are not completed by August 1, 2004,
under the settlement documents among Exelon and the lenders,
Generation will be reimbursed for the $32.5 million paid in
connection with the settlement through a first claim against any
payments otherwise payable to the lenders on account of their
interests in the projects.

Clean Air Act.On
June 1, 2001, the EPA issued to a subsidiary of Generation
a Notice of Violation (NOV) and Reporting Requirement
pursuant to Sections 113 and 114 of the Clean Air Act. The
NOV alleges numerous exceedances of opacity limits and
violations of opacity-related monitoring, recording and
reporting requirements at Mystic Units 4-7 in Everett,
Massachusetts. In March 2002, the EPA issued and Mystic I,
LLC, doing business as Mystic Generating (formerly known as
Exelon Mystic, LLC) (Mystic), a wholly owned subsidiary of
Generation, voluntarily entered a Compliance Order and Reporting
Requirement (Order) regarding Mystic Station. Under the Order,
Mystic Station installed new ignition equipment on three of the
four units. Mystic Station also undertook an extensive opacity
monitoring and testing program for all four units to help
determine if additional compliance measures are needed. Pursuant
to the requirements of the Order, the subsidiary switched three
of the four units to a lower sulfur fuel oil by
September 1, 2002. Mystic has also entered into a consent
decree with the EPA and the Department of Justice for the
payment of civil penalties, the net discounted cost of which is
approximately $4 million. In March 2004, the consent decree
was approved by the United States District Court of the District
of Massachusetts. The consent decree resolves the civil penalty
case.

Oyster Creek.On
April 7, 2004, AmerGen entered into a settlement 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. On April 7, 2004, AmerGen entered into two separate
agreements with the State of New Jersey to settle all claims
without any admission of liability. The first settlement
resolved claims by the New Jersey Department of Environmental
Protection contained in an Administrative Order and Notice of
Civil Administrative Penalty Assessment dated December 11,
2002. In that settlement, AmerGen agreed to pay a civil penalty
to the State of New Jersey of $190,000 and natural resource
damages of $183,000 to the New Jersey Hazardous Discharge Site
Cleanup Fund. In addition, AmerGen agreed to make contributions
totaling $127,000 to two environmental organizations to fund
environmental projects in the community near the plant. The
second settlement agreement is between AmerGen and the New
Jersey Division of Criminal Justice,

43



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Environmental Crimes Bureau. Pursuant to that
agreement, AmerGen agreed to pay a $250,000 fine to the New
Jersey Clean Water Enforcement Fund and an additional $250,000
contribution to an environmental organization in the community
near the plant.



| |                                   
| | ----------------------------------
| | 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, and 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 a counterparty to Dynegy, Inc. (Dynegy) in various
energy transactions. The credit ratings of Dynegy are below
investment grade. As of March 31, 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 $156 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 this agreement,
Generation would be required to impair this financial swap
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 $28 million.

In addition to the impairment of the financial
swap asset, if Dynegy were unable to fulfill its obligations
under the financial swap agreement and the tolling agreement,
Generation would likely incur a further impairment associated
with the Independence plant. 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. Additionally, 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.
In February 2004, Dynegy announced an agreement to sell Illinois
Power to a third party, which, upon closing of the transaction,
would reduce 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 Internal Revenue Service (IRS) and have made
refundable prepayments of $11 million and $5 million
to the tax consultant, respectively. The fees for these
agreements are contingent upon a successful outcome and are
based upon a percentage of the refunds to be recovered from the
IRS, if any. As such, ultimate net cash outflows to ComEd and
PECO related to these agreements will either be positive or
neutral depending upon the outcome of the refund claim 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. ComEds tax benefits for
periods prior to the merger of Exelon, Unicom Corporation and
PECO

44



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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 these refund claims.



| |            
| | -----------
| | Derivatives

PETT has entered into floating-to-fixed
interest-rate swaps to manage interest rate exposure associated
with the floating-rate series of transition bonds issued to
securitize PECOs stranded cost recovery. These
interest-rate swaps were designated as cash-flow hedges. These
interest-rate swaps had an aggregate fair market value exposure
of $6 million and $11 million at March 31, 2004
and December 31, 2003, respectively. As of
December 31, 2003, PETT, a wholly owned subsidiary, was
deconsolidated from the financial statements of PECO pursuant to
the adoption of FIN No. 46-R.



|    |                                                                
|--- | ---------------------------------------------------------------
|14. | Supplemental Financial Information (Exelon,
    ComEd and PECO)

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

|                                                             |  |           |        |              |  |   |        |  
|------------------------------------------------------------ |  | --------- | ------ | ------------ |  | - | ------ | -
|                                                             |  | March 31, |        | December 31,
|ComEd                                                        |  | 2004      |        | 2003        
|                                                             |  |           |        |             
|Regulatory Assets (Liabilities)                              |  |           |        |              |  |   |        |  
|Nuclear decommissioning                                      |  | $         | (1,227 | )            |  | $ | (1,183 | )
|Removal costs                                                |  |           | (985   | )            |  |   | (973   | )
|Recoverable transition costs                                 |  |           | 120    |              |  |   | 131    |  
|Reacquired debt costs and interest-rate swap
    settlements |  |           | 168    |              |  |   | 172    |  
|Deferred income taxes                                        |  |           | (61    | )            |  |   | (61    | )
|Other                                                        |  |           | 25     |              |  |   | 23     |  
|                                                             |  |           |        |              |  |   |        |  
|Total                                                        |  | $         | (1,960 | )            |  | $ | (1,891 | )
|                                                             |  |           |        |              |  |   |        |  

|                                                                       |  |           |       |              |  |   |       |  
|---------------------------------------------------------------------- |  | --------- | ----- | ------------ |  | - | ----- | -
|                                                                       |  | March 31, |       | December 31,
|PECO                                                                   |  | 2004      |       | 2003        
|                                                                       |  |           |       |             
|Regulatory Assets (Liabilities)                                        |  |           |       |              |  |   |       |  
|Competitive transition charge                                          |  | $         | 4,215 |              |  | $ | 4,303 |  
|Deferred income taxes                                                  |  |           | 768   |              |  |   | 762   |  
|Non-pension postretirement benefits                                    |  |           | 57    |              |  |   | 58    |  
|Reacquired debt costs                                                  |  |           | 46    |              |  |   | 49    |  
|MGP regulatory asset (see
    Note 13  Commitments and Contingencies) |  |           | 34    |              |  |   | 34    |  
|U.S. Department of Energy facility
    decommissioning                 |  |           | 24    |              |  |   | 26    |  
|Nuclear decommissioning                                                |  |           | (40   | )            |  |   | (12   | )
|Other                                                                  |  |           | 14    |              |  |   | 6     |  
|                                                                       |  |           |       |              |  |   |       |  
|Long-term regulatory assets                                            |  |           | 5,118 |              |  |   | 5,226 |  
|Deferred energy costs (current asset)                                  |  |           | 51    |              |  |   | 81    |  
|                                                                       |  |           |       |              |  |   |       |  
|Total                                                                  |  | $         | 5,169 |              |  | $ | 5,307 |  
|                                                                       |  |           |       |              |  |   |       |  

45



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following tables provide supplemental balance
sheet information as of March 31, 2004 and
December 31, 2003:

|                               |                                      |                |   |       |  |      |   |            |  |  |   |       |  |  |   |       | 
|------------------------------ | ------------------------------------ | -------------- | - | ----- |  | ---- | - | ---------- |  |  | - | ----- |  |  | - | ----- | 
|                               |                                      |               
|                               |                                      | March 31, 2004
|                               |                                      |               
|                               |                                      | Exelon         |   | ComEd |  | PECO |   | Generation
|                               |                                      |                |   |       |  |      |   |           
|Property, plant and equipment: |                                      |                |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Accumulated depreciation             |                | $ | 6,221 |  |      | $ | 809        |  |  | $ | 2,078 |  |  | $ | 3,224 | 
|Accounts receivable:           |                                      |                |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Allowance for uncollectible accounts |                |   | 105   |  |      |   | 16         |  |  |   | 65    |  |  |   | 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    | 



|    |                                                             
|--- | ------------------------------------------------------------
|15. | 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.

46



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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

|                                                                                                 |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|------------------------------------------------------------------------------------------------ |  | -------- | ------ | ---------- |  | ----------- | ------ | ------------- |  | ------------ | --- | ---- |  | - | ------ | - |  | - | ------ | 
|                                                                                                 |  |          |        |            |  |             |        | Corporate and |  |             
|                                                                                                 |  | Energy   |        |            |  |             |        | Intersegment  |  |             
|                                                                                                 |  | Delivery |        | Generation |  | Enterprises |        | Eliminations  |  | Consolidated
|                                                                                                 |  |          |        |            |  |             |        |               |  |             
|Total
    revenues(a):                                                                           |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                             |  | $        | 2,575  |            |  | $           | 1,953  |               |  | $            | 90  |      |  | $ | (896   | ) |  | $ | 3,722  | 
|2003                                                                                             |  |          | 2,642  |            |  |             | 2,203  | (b)           |  |              | 250 | (b)  |  |   | (1,021 | ) |  |   | 4,074  | 
|Intersegment revenues:                                                                           |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                             |  | $        | 15     |            |  | $           | 879    |               |  | $            | 4   |      |  | $ | (898   | ) |  | $ |       | 
|2003                                                                                             |  |          | 16     |            |  |             | 993    |               |  |              | 13  | (b)  |  |   | (1,022 | ) |  |   |       | 
|Income (loss) before income taxes and
    cumulative effect of changes in accounting principles:
|2004                                                                                             |  | $        | 497    |            |  | $           | 113    |               |  | $            | (25 | )    |  | $ | (62    | ) |  | $ | 523    | 
|2003                                                                                             |  |          | 517    |            |  |             | (89    | )(b)          |  |              | (14 | )(b) |  |   | (17    | ) |  |   | 397    | 
|Income taxes:                                                                                    |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                             |  | $        | 185    |            |  | $           | 46     |               |  | $            | (9  | )    |  | $ | (73    | ) |  | $ | 149    | 
|2003                                                                                             |  |          | 192    |            |  |             | (27    | )(b)          |  |              | (7  | )(b) |  |   | (10    | ) |  |   | 148    | 
|Cumulative effect of change in accounting
    principle:                                        
|2004                                                                                             |  | $        |       |            |  | $           | 32     |               |  | $            |    |      |  | $ |       |   |  | $ | 32     | 
|2003                                                                                             |  |          | 5      |            |  |             | 108    |               |  |              | (1  | )    |  |   |       |   |  |   | 112    | 
|Net income (loss):                                                                               |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                             |  | $        | 312    |            |  | $           | 99     |               |  | $            | (16 | )    |  | $ | 11     |   |  | $ | 406    | 
|2003                                                                                             |  |          | 330    |            |  |             | 46     | (b)           |  |              | (8  | )(b) |  |   | (7     | ) |  |   | 361    | 
|Total assets:                                                                                    |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|March 31, 2004                                                                                   |  | $        | 28,306 |            |  | $           | 16,563 | (c)           |  | $            | 689 |      |  | $ | (1,999 | ) |  | $ | 43,559 | 
|December 31, 2003                                                                                |  |          | 28,355 |            |  |             | 14,868 | (b)           |  |              | 727 | (b)  |  |   | (1,916 | ) |  |   | 42,034 | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | $62 million in utility taxes is included in
    the revenues and expenses for the three months ended
    March 31, 2004 and 2003 for ComEd. $50 million and
    $51 million in utility taxes are included in the revenues
    and expenses for the three months ended March 31, 2004 and
    2003, respectively, for PECO.                                                                                                                                                                                                                          
|   
|(b) |  | Effective January 1, 2004, Enterprises
    competitive retail sales business, Exelon Energy Company, became
    part of Generation. Segment information for the three months
    ended March 31, 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. Exelon Energy
    Companys total assets as of December 31, 2003 were
    $104 million and for the three months ended March 31,
    2003, Exelon Energy Company reported the following:

|                                  |  |   |     |   |  |                       |  |   |    |  
|--------------------------------- |  | - | --- | - |  | --------------------- |  | - | -- | -
|Total revenues                    |  | $ | 330 |   |  | Intersegment revenues |  | $ | 6  |  
|Income (loss) before income taxes |  | $ | (16 | ) |  | Income taxes          |  | $ | (6 | )
|Net income (loss)                 |  | $ | (10 | ) |  |                       |  |   |    |  



|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Includes $1,503 million of the total assets
    of Sithe consolidated on March 31, 2004 under the
    provisions of FIN No. 46-R. See Note 4 
    Sithe for further information regarding the consolidation of
    Sithe.

47



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|    |                                                                    
|--- | -------------------------------------------------------------------
|16. | 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. Prior periods were not
restated in accordance with FIN No. 46-R.

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

|                                                |                                  |                 |   |      |   |  |   |   | 
|----------------------------------------------- | -------------------------------- | --------------- | - | ---- | - |  | - | - | 
|                                                |                                  |                
|                                                |                                  | For the        
|                                                |                                  | Three Months   
|                                                |                                  | Ended March 31,
|                                                |                                  |                
|                                                |                                  | 2004            |   | 2003
|                                                |                                  |                 |   |     
|Interest expense to affiliates                  |                                  |                 |   |      |   |  |   |  
|                                                | ComEd Transitional Funding Trust |                 | $ | 24   |   |  | $ |  | 
|                                                | ComEd Financing II               |                 |   | 3    |   |  |   |  | 
|                                                | ComEd Financing III              |                 |   | 3    |   |  |   |  | 
|Equity in losses from unconsolidated affiliates |                                  |                 |   |      |   |  |   |  
|                                                | ComEd Funding LLC                |                 |   | (3   | ) |  |   |  | 

|                                                                 |                                  |           |   |              |  |  |   |       | 
|---------------------------------------------------------------- | -------------------------------- | --------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                                  | March 31, |   | December 31,
|                                                                 |                                  | 2004      |   | 2003        
|                                                                 |                                  |           |   |             
|Receivables from affiliates (current)                            |                                  |           |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |           | $ | 11           |  |  | $ | 9     | 
|Investment in affiliates                                         |                                  |           |   |              |  |  |   |      
|                                                                 | ComEd Funding, LLC               |           |   | 42           |  |  |   | 45    | 
|                                                                 | ComEd Financing II               |           |   | 8            |  |  |   | 8     | 
|                                                                 | ComEd Financing III              |           |   | 6            |  |  |   | 6     | 
|Receivable from affiliates (noncurrent)                          |                                  |           |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |           |   | 9            |  |  |   | 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 |           |   | 1,583        |  |  |   | 1,676 | 
|                                                                 | ComEd Financing II               |           |   | 155          |  |  |   | 155   | 
|                                                                 | ComEd Financing III              |           |   | 206          |  |  |   | 206   | 

48



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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

|                                         |                                   |                      |     |      |  |  |     |     | 
|---------------------------------------- | --------------------------------- | -------------------- | --- | ---- |  |  | --- | --- | 
|                                         |                                   |                     
|                                         |                                   | For the Three Months
|                                         |                                   | Ended March 31,     
|                                         |                                   |                     
|                                         |                                   | 2004                 |     | 2003
|                                         |                                   |                      |     |     
|Operating revenues from affiliates       |                                   |                      |     |      |  |  |     |    
|                                         | Generation(a)                     |                      | $   | 10   |  |  | $   | 11  | 
|                                         | Enterprises(a)                    |                      |     |     |  |  |     | 2   | 
|                                         | Other                             |                      |     | 1    |  |  |     |    | 
|Purchased power from affiliate           |                                   |                      |     |      |  |  |     |    
|                                         | PPA with Generation(b)            |                      |     | 530  |  |  |     | 572 | 
|Operations & maintenance from affiliates |                                   |                      |     |      |  |  |     |    
|                                         | BSC(c)                            |                      |     | 44   |  |  |     | 27  | 
|                                         | Enterprises(d, e)                 |                      |     | 4    |  |  |     | 3   | 
|Interest income from affiliates          |                                   |                      |     |      |  |  |     |    
|                                         | UII(f)                            |                      |     | 4    |  |  |     | 6   | 
|                                         | Exelon intercompany money pool(j) |                      |     | 1    |  |  |     |    | 
|                                         | Other                             |                      |     | 1    |  |  |     | 1   | 
|Capitalized costs                        |                                   |                      |     |      |  |  |     |    
|                                         | BSC(c)                            |                      |     | 2    |  |  |     | 1   | 
|                                         | Enterprises(e)                    |                      |     |     |  |  |     | 6   | 
|Cash dividends paid to parent            |                                   |                      | 103 |      |  |  | 120 |    

49



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                                     |                                   |           |     |              |  |  |     |       | 
|---------------------------------------------------- | --------------------------------- | --------- | --- | ------------ |  |  | --- | ----- | 
|                                                     |                                   | March 31, |     | December 31,
|                                                     |                                   | 2004      |     | 2003        
|                                                     |                                   |           |     |             
|Receivables from affiliates (current)                |                                   |           |     |              |  |  |     |      
|                                                     | UII(f)                            |           | $   | 4            |  |  | $   | 3     | 
|                                                     | PECO(h)                           |           |     | 1            |  |  |     | 6     | 
|                                                     | Exelon intercompany money pool(j) |           |     | 226          |  |  |     | 405   | 
|                                                     | Other                             |           |     | 7            |  |  |     | 5     | 
|Receivables from affiliates (noncurrent)             |                                   |           |     |              |  |  |     |      
|                                                     | UII(f)                            |           |     | 1,071        |  |  |     | 1,071 | 
|                                                     | Generation(k)                     |           |     | 1,227        |  |  |     | 1,183 | 
|                                                     | Other                             |           |     | 3            |  |  |     | 8     | 
|Payables to affiliates (current)                     |                                   |           |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |           |     | 11           |  |  |     | 11    | 
|                                                     | Generation(a, b)                  |           |     | 152          |  |  |     | 171   | 
|                                                     | BSC(c)                            |           |     | 22           |  |  |     | 13    | 
|                                                     | Other                             |           |     |             |  |  |     | 2     | 
|Payables to affiliates (noncurrent)                  |                                   |           |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |           |     | 22           |  |  |     | 22    | 
|                                                     | Other                             |           |     | 6            |  |  |     | 6     | 
|Shareholders equity  receivable
    from parent(i) |                                   |           | 219 |              |  |  | 250 |      



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | ComEd provides electric, transmission and other
    ancillary services to Generation and Enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(b) |  | Effective January 1, 2001, ComEd entered
    into a 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 has contracted with Exelon Services (an
    Enterprises company) to provide energy conservation services to
    ComEd customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(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 the 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 customers to Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(h) |  | In 2004, ComEds receivable from PECO was
    related to PECOs share of a joint invoice paid by ComEd.
    In 2003, ComEd provided hurricane restoration assistance to PECO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

50



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED 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 the money
    pool at a market rate of interest.                                      
|   
|(k) |  | ComEd has a 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. Prior
periods were not restated.

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

|                                  |                |                      |   |      |  |  |   |   | 
|--------------------------------- | -------------- | -------------------- | - | ---- |  |  | - | - | 
|                                  |                |                     
|                                  |                | For the Three Months
|                                  |                | Ended March 31,     
|                                  |                |                     
|                                  |                | 2004                 |   | 2003
|                                  |                |                      |   |     
|Operating revenues from affiliate |                |                      |   |      |  |  |   |  
|                                  | PETT(a)        |                      | $ | 2    |  |  | $ |  | 
|Interest expense to affiliates    |                |                      |   |      |  |  |   |  
|                                  | PETT           |                      |   | 60   |  |  |   |  | 
|                                  | PECO Trust III |                      |   | 2    |  |  |   |  | 
|                                  | PECO Trust IV  |                      |   | 1    |  |  |   |  | 

|                                                                 |                          |           |   |              |  |  |   |       | 
|---------------------------------------------------------------- | ------------------------ | --------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                          | March 31, |   | December 31,
|                                                                 |                          | 2004      |   | 2003        
|                                                                 |                          |           |   |             
|Investment in affiliates                                         |                          |           |   |              |  |  |   |      
|                                                                 | PETT                     |           | $ | 100          |  |  | $ | 104   | 
|                                                                 | PECO Energy Capital Corp |           |   | 16           |  |  |   | 16    | 
|                                                                 | PECO Trust IV            |           |   | 3            |  |  |   | 3     | 
|Receivables from affiliates (non-current)                        |                          |           |   |              |  |  |   |      
|                                                                 | PECO Trust IV            |           |   | 1            |  |  |   | 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                     |           |   | 3,761        |  |  |   | 3,849 | 
|                                                                 | PECO Trust III           |           |   | 81           |  |  |   | 81    | 
|                                                                 | PECO Trust IV            |           |   | 103          |  |  |   | 103   | 

51



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



---



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

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

|                                          |                |                      |    |      |  |  |    |     | 
|----------------------------------------- | -------------- | -------------------- | -- | ---- |  |  | -- | --- | 
|                                          |                |                     
|                                          |                | For the Three Months
|                                          |                | Ended March 31,     
|                                          |                |                     
|                                          |                | 2004                 |    | 2003
|                                          |                |                      |    |     
|Operating revenues from affiliate         |                |                      |    |      |  |  |    |    
|                                          | Generation(a)  |                      | $  | 2    |  |  | $  | 3   | 
|Purchased power from affiliate            |                |                      |    |      |  |  |    |    
|                                          | Generation(b)  |                      |    | 349  |  |  |    | 357 | 
|Operating and maintenance from affiliates |                |                      |    |      |  |  |    |    
|                                          | BSC(c)         |                      |    | 23   |  |  |    | 10  | 
|                                          | Enterprises(d) |                      |    |     |  |  |    | 2   | 
|Capitalized costs                         |                |                      |    |      |  |  |    |    
|                                          | Enterprises(d) |                      |    |     |  |  |    | 6   | 
|                                          | BSC(c)         |                      |    |     |  |  |    | 3   | 
|Cash dividends paid to parent             |                |                      | 90 |      |  |  | 89 |    

|                                                     |                               |           |       |              |  |  |       |     | 
|---------------------------------------------------- | ----------------------------- | --------- | ----- | ------------ |  |  | ----- | --- | 
|                                                     |                               | March 31, |       | December 31,
|                                                     |                               | 2004      |       | 2003        
|                                                     |                               |           |       |             
|Receivable from affiliate (noncurrent)               |                               |           |       |              |  |  |       |    
|                                                     | Generation decommissioning(e) |           | $     | 40           |  |  | $     | 12  | 
|Payables to affiliates (current)                     |                               |           |       |              |  |  |       |    
|                                                     | Generation(b)                 |           |       | 110          |  |  |       | 115 | 
|                                                     | BSC(c)                        |           |       | 18           |  |  |       | 15  | 
|                                                     | ComEd(f)                      |           |       | 1            |  |  |       | 6   | 
|                                                     | Other                         |           |       | 1            |  |  |       | 3   | 
|Shareholders equity  receivable
    from parent(g) |                               |           | 1,588 |              |  |  | 1,623 |    



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | PECO provides energy to Generation for
    Generations own use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(b) |  | Effective January 1, 2001, PECO entered into
    a PPA with Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) |  | 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.
|   
|(d) |  | PECO receives services from Enterprises for
    construction, which are capitalized, and the deployment of
    automated meter reading technology, which is expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

52



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|    |  |                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) |  | PECO has a receivable from Generation related to
    a regulatory liability as a result of the adoption of
    SFAS No. 143.                                                              
|   
|(f) |  | In 2004, PECOs payable to ComEd was related
    to PECOs share of a joint invoice paid by ComEd. In 2003,
    PECO received relief from ComEd workers during Hurricane Isabel.          
|   
|(g) |  | 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.



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

The financial statements of Exelon and Generation
reflect related-party transactions with unconsolidated
affiliates as reflected 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, became part of Generation.

|                                          |                                   |                 |   |      |  |  |   |     | 
|----------------------------------------- | --------------------------------- | --------------- | - | ---- |  |  | - | --- | 
|                                          |                                   |                
|                                          |                                   | For the        
|                                          |                                   | Three Months   
|                                          |                                   | Ended March 31,
|                                          |                                   |                
|                                          |                                   | 2004            |   | 2003
|                                          |                                   |                 |   |     
|Operating revenues from affiliates        |                                   |                 |   |      |  |  |   |    
|                                          | ComEd(a)                          |                 | $ | 530  |  |  | $ | 572 | 
|                                          | PECO(a)                           |                 |   | 349  |  |  |   | 357 | 
|                                          | Exelon Energy Company(b)          |                 |   |     |  |  |   | 64  | 
|Purchased power from affiliates           |                                   |                 |   |      |  |  |   |    
|                                          | AmerGen(c)                        |                 |   |     |  |  |   | 67  | 
|                                          | ComEd(a)                          |                 |   | 8    |  |  |   | 7   | 
|                                          | Exelon Energy Company(b)          |                 |   |     |  |  |   | 6   | 
|Operating and maintenance from affiliates |                                   |                 |   |      |  |  |   |    
|                                          | Sithe(d)                          |                 |   |     |  |  |   | 4   | 
|                                          | ComEd(a)                          |                 |   | 2    |  |  |   | 4   | 
|                                          | PECO(a)                           |                 |   | 2    |  |  |   | 3   | 
|                                          | BSC(e)                            |                 |   | 61   |  |  |   | 35  | 
|Interest expense to affiliates            |                                   |                 |   |      |  |  |   |    
|                                          | Sithe(d)                          |                 |   |     |  |  |   | 3   | 
|                                          | Exelon(f)                         |                 |   |     |  |  |   | 1   | 
|                                          | Exelon intercompany money pool(f) |                 |   | 1    |  |  |   |    | 
|Services provided to affiliates           |                                   |                 |   |      |  |  |   |    
|                                          | AmerGen(c)                        |                 |   |     |  |  |   | 17  | 

53



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                     |                                   |           |   |              |  |  |   |       | 
|------------------------------------ | --------------------------------- | --------- | - | ------------ |  |  | - | ----- | 
|                                     |                                   | March 31, |   | December 31,
|                                     |                                   | 2004      |   | 2003        
|                                     |                                   |           |   |             
|Receivables from affiliates          |                                   |           |   |              |  |  |   |      
|                                     | ComEd(a)                          |           | $ | 152          |  |  | $ | 171   | 
|                                     | ComEd decommissioning(g)          |           |   | 11           |  |  |   | 11    | 
|                                     | PECO(a)                           |           |   | 110          |  |  |   | 115   | 
|                                     | BSC(e)                            |           |   |             |  |  |   | 3     | 
|                                     | Exelon Energy Company(b)          |           |   |             |  |  |   | 18    | 
|                                     | Sithe(d)                          |           |   |             |  |  |   | 3     | 
|                                     | Other                             |           |   | 11           |  |  |   | 8     | 
|Note receivable from affiliate       |                                   |           |   |              |  |  |   |      
|                                     | Note receivable from Sithe(d)     |           |   |             |  |  |   | 92    | 
|                                     | Other                             |           |   | 1            |  |  |   |      | 
|Long-term receivable from affiliate  |                                   |           |   |              |  |  |   |      
|                                     | ComEd decommissioning(g)          |           |   | 22           |  |  |   | 22    | 
|Payables to affiliates               |                                   |           |   |              |  |  |   |      
|                                     | Exelon(f)                         |           |   |             |  |  |   | 1     | 
|                                     | Enterprises                       |           |   | 9            |  |  |   |      | 
|                                     | BSC(e)                            |           |   | 36           |  |  |   |      | 
|                                     | Other                             |           |   | 17           |  |  |   |      | 
|Payables to affiliates (non-current) |                                   |           |   |              |  |  |   |      
|                                     | ComEd decommissioning(h)          |           |   | 1,227        |  |  |   | 1,183 | 
|                                     | PECO decommissioning(h)           |           |   | 40           |  |  |   | 12    | 
|Notes payable to affiliates          |                                   |           |   |              |  |  |   |      
|                                     | Exelon(f)                         |           |   |             |  |  |   | 115   | 
|                                     | Exelon intercompany money pool(f) |           |   | 226          |  |  |   | 301   | 
|                                     | Sithe(d)                          |           |   |             |  |  |   | 90    | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Effective January 1, 2001, Generation
    entered into PPAs with ComEd and PECO. Generation purchases
    transmission 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.                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(b) |  | Generation sells power to Exelon Energy Company
    and buys back excess power. 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

54



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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
    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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(f) |  | Represents the outstanding balance of amounts
    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 customers to Generation resulting from the 2001
    corporate restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(h) |  | Generation has a long-term payable to ComEd and
    PECO as a result of the adoption of SFAS No. 143.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



|    |                                                           
|--- | ----------------------------------------------------------
|17. | Subsequent Events (Exelon, ComEd, PECO and
    Generation)

In April 2004, Enterprises signed an agreement to
sell its investment in PECO TelCove, a communications joint
venture, for estimated sales proceeds of $49 million. The
agreement to sell is subject to customary closing conditions and
various regulatory approvals and is expected to close during the
second quarter of 2004.



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

ComEd had entered into interest-rate swaps to
effectively convert $485 million in fixed-rate debt to
floating-rate debt. These swaps had been designated as
fair-value hedges, as defined by SFAS No. 133. In
April 2004, ComEd settled these swaps for net proceeds of
approximately $32 million. The proceeds will be amortized
as a reduction to interest expense over the remaining life of
the related debt.

55



---



##### Table of Contents



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONDENSED COMBINED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |     
| | ----
| | PECO

On April 15, 2004, PECO redeemed
$75 million of 6 3/8% First and Refunding Mortgage
Bonds due August 15, 2005 at a price equal to the principal
amount thereof plus accrued and unpaid interest to the date of
redemption. On April 23, 2004, PECO issued $75 million
of 5.90% First and Refunding Mortgage Bonds due 2034, the
proceeds of which will be used to finance the cost of the first
mortgage bonds that were redeemed on April 15, 2004. In
connection with the issuance, during March 2004 PECO entered
into a forward-starting interest rate swap in the aggregate
amount of $75 million which settled for net proceeds of
$5 million in April 2004 and will be amortized over the
life of the debt issuance.

56



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 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 energy services business of Exelon
    Services, Inc. (Exelon Services), the district cooling
    business of Exelon Thermal Holdings, Inc. (Thermal), the
    electrical contracting business of F & M Holdings, LLC,
    a communications joint venture, and other investments weighted
    towards the communications, energy services and retail services
    industries. Effective January 1, 2004, the competitive
    retail sales business of Exelon Energy Company became part of
    Generation.

See Note 15 of the Condensed Combined Notes
to Consolidated Financial Statements for further segment
information. Exelon corporate operations, through its business
services subsidiary Exelon Business Services Company (BSC),
provide the business segments 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 and
PECO 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. These costs are allocated to the business
segments. Additionally, the results of Exelons corporate
operations include costs for strategic long-term planning,
certain governmental affairs, 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 and Generation)

Exelon, through Generation, has a 50% interest in
Sithe, and 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 analysis of the economic benefits
accruing to all parties pursuant to their ownership interests
supplemented by managements judgment. Sithes

57



---



##### Table of Contents



total assets and total liabilities as of
March 31, 2004 were $1,503 million and
$1,399 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, this determination
could have a significant impact 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 impact on Exelons
and Generations income before cumulative effect of changes
in accounting principles for the three months ended
March 31, 2004, and Exelon and Generation do not anticipate
that the consolidation will have a significant impact on net
income in future periods.


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 required consolidation under FIN
No. 46-R and concluded that those entities should not be
consolidated within Exelons financial statements. Had
management determined that consolidation of one or more of these
entities was required, this determination could have had an
impact on the consolidated financial statements.

New Accounting Pronouncements

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

58



---



##### Table of Contents






EXELON CORPORATION

Executive Summary

Financial Results.Exelons diluted earnings per average common share
increased by 10% for the three months ended March 31, 2004
as compared to the same period in 2003, primarily as a result of
an increase in net income at Generation and favorable tax
effects from investments in synthetic fuel producing facilities,
partially offset by a decrease in net income at Energy Delivery.
The increase in Generations net income reflects a 2003
impairment charge of $200 million (before income taxes)
related to Generations investment in Sithe and an increase
in the first quarter of 2004 in revenues net of purchased power
and fuel expense, partially offset by increased operating and
maintenance expense primarily resulting from the acquisition of
AmerGen in December 2003. The net income of Energy Delivery was
unfavorably affected by a decrease in revenues net of purchased
power and fuel expense and increased depreciation and
amortization expense, partially offset by reduced operating and
maintenance expense and interest expense. In the first quarter
of 2004, Exelon recorded an after-tax gain of $32 million
in accordance with FIN No. 46-R. 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 that do not meet its goals.
Highlights in the first quarter of 2004 included:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On February 23, 2004, Generation and the
    lenders under the Boston Generating, LLC (Boston Generating)
    $1.25 billion credit facility (Boston Generating Facility)
    entered into a settlement that will result in the sale of Boston
    Generating, which owns the companies that own the Mystic 4-7,
    Mystic 8 and 9 and Fore River generating facilities, and the
    transfer of responsibility for plant operations and power
    marketing activities to a special purpose entity owned by the
    lenders. Exelon also settled certain litigation associated with
    the projects. Upon entering into the sale agreement with the
    lenders, the assets and liabilities of Boston Generating were
    classified as held for sale within Exelons Consolidated
    Balance Sheet.
|
| |  | Exelon continued to execute its divestiture
    strategy for Enterprises by selling three units of Exelon
    Services during the first quarter of 2004 for estimated sales
    proceeds of $3 million plus existing working capital and
    entering into an agreement in April 2004 to sell its investment
    in PECO TelCove, a communications joint venture, for estimated
    sales proceeds of $49 million. Exelon expects to close on
    the sale of the Chicago business of Exelon Thermal during the
    second quarter of 2004 and the Aladdin thermal facility during
    the second half of 2004.                                                                                                                                                                                        

Financing
Activities.Exelon repaid
approximately $181 million of transition trust notes and
$182 million of long-term debt, resulting in expected
annual interest savings of $23 million. Exelon met all of
its capital resource commitments with internally generated cash
and expects to do so in the foreseeable future, absent new
acquisitions. In January 2004, Exelon announced a 10% increase
in its quarterly dividend on its common stock, from $0.50 to
$0.55 per share, and approved a 2-for-1 stock split of its
common stock. The record date for the stock split was
April 19, 2004 and the distribution date will be
May 5, 2004.

Operations.On
March 18, 2004, the Federal Energy Regulatory Commission
(FERC) approved ComEds plan to complete the
integration of its transmission facilities into PJM
Interconnection (PJM) subject to the North American
Electric Regulatory Commission (NERC) approval of PJM and
Midwest ISO reliability plans to assure no adverse impacts. The
NERC granted the required approval on April 2, 2004. On
April 27, 2004, the FERC issued its order approving
ComEds application to fully integrate into PJM on
May 1, 2004. ComEd intends to accept the conditions in the
FERC order and expects full integration to occur on that date.
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

59



---



##### Table of Contents



competitive markets for the sale and purchase of
electricity. Upon joining PJM, ComEd will begin to incur
incremental administrative fees, which are expected to
approximate $30 million annually. However, Exelon believes
such costs will ultimately be more than offset by the benefits
of full access to a wholesale competitive marketplace, but
changes in market dynamics could affect the ultimate financial
impact to Exelon.


Generations nuclear fleet achieved a 90.5%
capacity factor in the first quarter of 2004 compared to 94.4%
in the first quarter of 2003 primarily as a result of increased
outage days.

Outlook for the Remainder of 2004 and
Beyond.Exelon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 
Exelon  Executive Summary in the 2003
Form 10-K.

Results of Operations



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2004
    Compared To Three Months Ended March 31, 2003

|                                                                                         |  |      |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|---------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                                                         |  | 2004 |       | 2003 |  | Variance |       | % Change
|                                                                                         |  |      |       |      |  |          |       |         
|Operating revenues                                                                       |  | $    | 3,722 |      |  | $        | 4,074 |          |  | $ | (352 | ) |  |  | (8.6  | )%
|Purchased power and fuel expense                                                         |  |      | 1,398 |      |  |          | 1,737 |          |  |   | (339 | ) |  |  | (19.5 | )%
|Operating and maintenance expense                                                        |  |      | 1,115 |      |  |          | 1,109 |          |  |   | 6    |   |  |  | 0.5   | % 
|Operating income                                                                         |  |      | 716   |      |  |          | 757   |          |  |   | (41  | ) |  |  | (5.4  | )%
|Other income and deductions                                                              |  |      | (193  | )    |  |          | (360  | )        |  |   | 167  |   |  |  | (46.4 | )%
|Income before income taxes and cumulative effect
    of changes in accounting principles |  |      | 523   |      |  |          | 397   |          |  |   | 126  |   |  |  | 31.7  | % 
|Income before cumulative effect of changes in
    accounting principles                  |  |      | 374   |      |  |          | 249   |          |  |   | 125  |   |  |  | 50.2  | % 
|Cumulative effect of changes in accounting
    principles                                |  |      | 32    |      |  |          | 112   |          |  |   | (80  | ) |  |  | (71.4 | )%
|Net income                                                                               |  |      | 406   |      |  |          | 361   |          |  |   | 45   |   |  |  | 12.5  | % 
|Diluted earnings per share                                                               |  |      | 1.22  |      |  |          | 1.11  |          |  |   | 0.11 |   |  |  | 9.9   | % 

Operating
Revenues.Operating revenues
decreased for the three months ended March 31, 2004 as
compared to the same period in 2003 primarily due to decreased
revenues at Enterprises due to the sale of the majority of the
businesses of InfraSource, Inc. (InfraSource) during the
third quarter of 2003, decreased competitive transition charge
(CTC) collections at ComEd and 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 the first
quarter of 2004 that changed the presentation of certain power
transactions and decreased operating revenues by
$213 million. The adoption of EITF 03-11 had no impact
on net income. 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 March 31, 2004 as
compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 during 2004 that
changed the presentation of certain power transactions and
resulted in a decrease in purchased power expense and fuel
expense of $206 million and $7 million, respectively.
In addition, purchased power decreased due to the
Generations acquisition of the remaining 50% of AmerGen,
which was only partially offset by an increase in fuel expense.
Purchased power represented 23% of Generations total
supply for the three months ended March 31, 2004 compared
to 37% for the same period in 2003. See further discussion of
purchased power and fuel expense by segment below.

Operating and Maintenance
Expense.Operating and maintenance
expense decreased slightly for the three months ended
March 31, 2004 as compared to the same period in 2003
primarily due to decreased expenses at Enterprises due to the
sale of the majority of the businesses of InfraSource during the
third quarter of 2003 and decreased expenses at Energy Delivery
due to a charge recorded in 2003 related to an

60



---



##### Table of Contents



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, generating assets placed into service
after the first quarter of 2003 and investments made in the
fourth quarter of 2003 in synthetic fuel-producing facilities.
See further discussion of operating and maintenance expenses by
segment below.


Operating
Income.The decrease in operating
income, exclusive of the changes in operating revenues,
purchased power and fuel expense and operating and maintenance
expense discussed above, was primarily due to an increase of
$27 million in depreciation and amortization expense
primarily at Energy Delivery and Generation, partially offset by
a $5 million decrease in taxes other than income, primarily
at Energy Delivery.

Other Income and
Deductions.Other income and
deductions changed primarily due to an impairment charge of
$200 million (before income taxes) recorded during the
first quarter of 2003 related to Generations investment in
Sithe. Equity in earnings of unconsolidated affiliates decreased
by $42 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. Interest
expense and distributions on preferred securities of
subsidiaries collectively decreased $13 million, primarily
due to lower outstanding debt and refinancing of existing debt
at lower interest rates at Energy Delivery, partially offset by
increased interest expense at Generation.

Effective Income Tax
Rate.Exelons effective
income tax rate decreased from 37% for the three months ended
March 31, 2003 to 28% for the same period in 2004,
primarily due to investments made in synthetic fuel producing
facilities during the fourth quarter of 2003.

Cumulative Effect of Changes in Accounting
Principles.Net income for the
three months ended March 31, 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 net income for the three months
ended March 31, 2003 reflects income of $112 million,
net of income taxes, for the adoption of SFAS No. 143.
See Note 2 of the Condensed 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

Exelon evaluates its performance on a business
segment basis. The comparisons of operating results and other
statistical information for the three months ended
March 31, 2004 and 2003 set forth below reflect
intercompany transactions, which are eliminated in Exelons
consolidated financial statements.



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

|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |      |   
|--------------- |  | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- | - |  |  | ---- | --
|                |  |                 |     |      |  |         
|                |  | Three Months    |     |      |  |         
|                |  | Ended March 31, |     |      |  |         
|                |  |                 |     |      |  |         
|                |  | 2004            |     | 2003 |  | Variance |     | % Change
|                |  |                 |     |      |  |          |     |         
|Energy Delivery |  | $               | 312 |      |  | $        | 325 |          |  | $ | (13 | ) |  |  | (4.0 | )%
|Generation      |  |                 | 67  |      |  |          | (52 | )        |  |   | 119 |   |  |  | n.m. |   
|Enterprises     |  |                 | (16 | )    |  |          | (17 | )        |  |   | 1   |   |  |  | (5.9 | )%
|Corporate       |  |                 | 11  |      |  |          | (7  | )        |  |   | 18  |   |  |  | n.m. |   
|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |      |   
|Total           |  | $               | 374 |      |  | $        | 249 |          |  | $ | 125 |   |  |  | 50.2 | % 
|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |      |   



| | 
| | 
| | 

n.m.  not meaningful

61



---



##### Table of Contents





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

|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |       |   
|--------------- |  | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- | - |  |  | ----- | --
|                |  |                 |     |      |  |         
|                |  | Three Months    |     |      |  |         
|                |  | Ended March 31, |     |      |  |         
|                |  |                 |     |      |  |         
|                |  | 2004            |     | 2003 |  | Variance |     | % Change
|                |  |                 |     |      |  |          |     |         
|Energy Delivery |  | $               | 312 |      |  | $        | 330 |          |  | $ | (18 | ) |  |  | (5.5  | )%
|Generation      |  |                 | 99  |      |  |          | 56  |          |  |   | 43  |   |  |  | 76.8  | % 
|Enterprises     |  |                 | (16 | )    |  |          | (18 | )        |  |   | 2   |   |  |  | (11.1 | )%
|Corporate       |  |                 | 11  |      |  |          | (7  | )        |  |   | 18  |   |  |  | n.m.  |   
|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |       |   
|Total           |  | $               | 406 |      |  | $        | 361 |          |  | $ | 45  |   |  |  | 12.5  | % 
|                |  |                 |     |      |  |          |     |          |  |   |     |   |  |  |       |   



| | 
| | 
| | 

n.m.  not meaningful

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, became
part of Generation. The information for the three months ended
March 31, 2003 related to the Enterprises and Generation
segments discussed below has not been adjusted to reflect the
transfer of Exelon Energy Company from the Enterprises segment
to the Generation segment. Exelon Energy Company reported the
following results for the three months ended March 31, 2003:

|                                  |  |   |     |  
|--------------------------------- |  | - | --- | -
|Total revenues                    |  | $ | 330 |  
|Intersegment revenues             |  |   | 6   |  
|Income (loss) before income taxes |  |   | (16 | )
|Income taxes (benefit)            |  |   | (6  | )
|Net income (loss)                 |  |   | (10 | )



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

|                                                                                         |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|---------------------------------------------------------------------------------------- |  | --------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ----- | --
|                                                                                         |  |                 |       |      |  |         
|                                                                                         |  | Three Months    |       |      |  |         
|                                                                                         |  | Ended March 31, |       |      |  |         
|                                                                                         |  |                 |       |      |  |         
|                                                                                         |  | 2004            |       | 2003 |  | Variance |       | % Change
|                                                                                         |  |                 |       |      |  |          |       |         
|Operating revenues                                                                       |  | $               | 2,575 |      |  | $        | 2,642 |          |  | $ | (67 | ) |  |  | (2.5  | )%
|Purchased power and fuel expense                                                         |  |                 | 1,179 |      |  |          | 1,191 |          |  |   | (12 | ) |  |  | (1.0  | )%
|Operating and maintenance expense                                                        |  |                 | 352   |      |  |          | 400   |          |  |   | (48 | ) |  |  | (12.0 | )%
|Depreciation and amortization expense                                                    |  |                 | 227   |      |  |          | 214   |          |  |   | 13  |   |  |  | 6.1   | % 
|Operating income                                                                         |  |                 | 680   |      |  |          | 694   |          |  |   | (14 | ) |  |  | (2.0  | )%
|Interest expense                                                                         |  |                 | 183   |      |  |          | 196   |          |  |   | (13 | ) |  |  | (6.6  | )%
|Income before income taxes and cumulative effect
    of a change in accounting principle |  |                 | 497   |      |  |          | 517   |          |  |   | (20 | ) |  |  | (3.9  | )%
|Income before cumulative effect of a change in
    accounting principle                  |  |                 | 312   |      |  |          | 325   |          |  |   | (13 | ) |  |  | (4.0  | )%
|Net income                                                                               |  |                 | 312   |      |  |          | 330   |          |  |   | (18 | ) |  |  | (5.5  | )%

62



---



##### Table of Contents



Operating Revenues.The changes in Energy
Deliverys operating revenues for the three months ended
March 31, 2004 compared to the same period in 2003
consisted of the following:

|                                          |  |          |      |     |  |                |    |   |  |   |     |  
|----------------------------------------- |  | -------- | ---- | --- |  | -------------- | -- | - |  | - | --- | -
|                                          |  | Electric |      | Gas |  | Total Variance
|                                          |  |          |      |     |  |               
|Customer choice                           |  | $        | (82  | )   |  | $              |   |   |  | $ | (82 | )
|Weather                                   |  |          | (30  | )   |  |                | (7 | ) |  |   | (37 | )
|Volume                                    |  |          | 52   |     |  |                | (7 | ) |  |   | 45  |  
|Rate changes and mix                      |  |          | (57  | )   |  |                | 69 |   |  |   | 12  |  
|Other effects                             |  |          | (6   | )   |  |                | 1  |   |  |   | (5  | )
|                                          |  |          |      |     |  |                |    |   |  |   |     |  
|(Decrease) increase in operating revenues |  | $        | (123 | )   |  | $              | 56 |   |  | $ | (67 | )
|                                          |  |          |      |     |  |                |    |   |  |   |     |  

Customer Choice.For
the three months ended March 31, 2004 and 2003, 26% and
22%, respectively, of energy delivered to Energy Deliverys
retail customers was provided by alternative electric suppliers
or under the ComEd Power Purchase Option (PPO). The decrease in
electric retail revenues attributable to customer choice
included a decrease in revenues of $56 million from
customers in Illinois electing to purchase energy from an
alternative retail energy supplier (ARES) or ComEds
PPO and a decrease in revenues of $26 million from
customers in Pennsylvania being assigned to or selecting an
alternative electric generation supplier.

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 affected by unfavorable
weather conditions resulting from milder winter weather in the
first quarter of 2004. Heating degree-days in the ComEd and PECO
service territories were 5% lower and 3% lower, respectively,
for the three months ended March 31, 2004 as compared to
the same period in 2003.

Energy Deliverys gas revenues were also
affected by milder winter weather in the first quarter of 2004.

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 commercial and
industrial. PECOs electric operating revenues increased as
a result of a higher delivery volume, exclusive of the effect of
weather and customer choice, due to an increased usage per
customer across all customer classes.

Rate Changes and
Mix.Energy Deliverys electric
revenues decreased $42 million at ComEd primarily due to
decreased average energy rates under ComEds PPO as a
result of lower wholesale market prices. Electric revenues
decreased $15 million at PECO primarily as a result of 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 Pennsylvania Public Utility
Commission (PUC) approved changes to the purchased gas
adjustment clause that became effective March 1, 2003,
December 1, 2003 and March 1, 2004. The average
purchased gas cost rate per million cubic feet for the three
months ended March 31, 2004 was 43% 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.

63



---



##### Table of Contents



Purchased Power and Fuel
Expense.The changes in Energy
Deliverys purchased power and fuel expense for the three
months ended March 31, 2004 compared to the same period in
2003 consisted of the following:

|                                                            |  |          |     |     |  |          |    |   |  |   |     |  
|----------------------------------------------------------- |  | -------- | --- | --- |  | -------- | -- | - |  | - | --- | -
|                                                            |  |          |     |     |  | Total   
|                                                            |  | Electric |     | Gas |  | Variance
|                                                            |  |          |     |     |  |         
|Customer choice                                             |  | $        | (78 | )   |  | $        |   |   |  | $ | (78 | )
|Weather                                                     |  |          | (11 | )   |  |          | (4 | ) |  |   | (15 | )
|Prices                                                      |  |          | (13 | )   |  |          | 69 |   |  |   | 56  |  
|Volume                                                      |  |          | 29  |     |  |          | (7 | ) |  |   | 22  |  
|Other                                                       |  |          | 2   |     |  |          | 1  |   |  |   | 3   |  
|                                                            |  |          |     |     |  |          |    |   |  |   |     |  
|(Decrease) increase in purchased power and fuel
    expense |  | $        | (71 | )   |  | $        | 59 |   |  | $ | (12 | )
|                                                            |  |          |     |     |  |          |    |   |  |   |     |  

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
ARES or ComEds PPO and PECOs residential and small
commercial and industrial customers selecting or being assigned
to purchase energy from alternative energy suppliers.

Weather.Energy
Deliverys purchased power and fuel expense decreased due
to the effect of milder winter weather for the three months
ended March 31, 2004 compared to the same period in 2003.

Prices.Energy
Deliverys purchased power decreased for electric due to a
decrease in the mix of on-peak/off-peak cost of electricity at
ComEd. Fuel expense for gas increased due to higher gas prices.

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 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
usage per customer across all customer classes.

Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the three months ended
March 31, 2004 compared to the same period in 2003
consisted of the following:

|                                                                                       |  |          |     |  
|-------------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Charge recorded at ComEd in 2003(a)                                                    |  | $        | (41 | )
|Decreased payroll expense due to fewer
    employees(b)                                |  |          | (31 | )
|Allowance for uncollectible accounts expense(d)                                        |  |          | (10 | )
|Higher corporate allocations(b,c)                                                      |  |          | 28  |  
|Employee fringe benefits                                                               |  |          | 8   |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 5   |  
|Other                                                                                  |  |          | (7  | )
|                                                                                       |  |          |     |  
|Decrease in operating and maintenance expense                                          |  | $        | (48 | )
|                                                                                       |  |          |     |  



---



|    |                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 and restructuring initiatives.                                                                                                                                                                                                                
|   
|(c) | Higher corporate allocations primarily result
    from payroll expenses and employee fringe benefits. To provide
    greater efficiencies, certain employees that provide services to
    ComEd and PECO were transferred to BSC, resulting in lower
    payroll expense at Energy Delivery but higher corporate
    allocations.
|   
|(d) | In 2004, PECOs uncollectible accounts
    expense decreased by $8 million as a result of increased
    collection efforts and customer deposits.                                                                                                                                                                                

64



---



##### Table of Contents



Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense was primarily due to
increased competitive transition charge amortization of
$7 million at PECO and increased depreciation of
$5 million due to capital additions across Energy Delivery.

Interest
Expense.The reduction in interest
expense was primarily due to scheduled principal payments and
refinancing existing debt at lower rates.



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

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

|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |      |   
|------------------------------------------------ | --------------------------- | --------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ----- | ------ | - |  | ----- | ---- | --
|                                                 |                             |                 |        |        |  |         
|                                                 |                             | Three Months    |        |        |  |         
|                                                 |                             | Ended March 31, |        |        |  |         
|                                                 |                             |                 |        |        |  |         
|Retail Deliveries  (in gigawatthours (GWhs))(a) |                             | 2004            |        | 2003   |  | Variance |        | % Change
|                                                 |                             |                 |        |        |  |          |        |         
|Full service(b)                                  |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|Residential                                      |                             |                 | 9,757  |        |  |          | 10,001 |          |  |  | (244  | )      |   |  | (2.4  | )%  
|Small commercial & industrial                    |                             |                 | 6,817  |        |  |          | 7,407  |          |  |  | (590  | )      |   |  | (8.0  | )%  
|Large commercial & industrial                    |                             |                 | 4,962  |        |  |          | 4,966  |          |  |  | (4    | )      |   |  | (0.1  | )%  
|Public authorities & electric railroads          |                             |                 | 1,469  |        |  |          | 1,669  |          |  |  | (200  | )      |   |  | (12.0 | )%  
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|                                                 | Total full service          |                 |        | 23,005 |  |          |        | 24,043   |  |  |       | (1,038 | ) |  |       | (4.3 | )%
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|PPO (ComEd only)                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|Small commercial & industrial                    |                             |                 | 731    |        |  |          | 793    |          |  |  | (62   | )      |   |  | (7.8  | )%  
|Large commercial & industrial                    |                             |                 | 747    |        |  |          | 1,433  |          |  |  | (686  | )      |   |  | (47.9 | )%  
|Public authorities & electric railroads          |                             |                 | 434    |        |  |          | 537    |          |  |  | (103  | )      |   |  | (19.2 | )%  
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|                                                 |                             |                 | 1,912  |        |  |          | 2,763  |          |  |  | (851  | )      |   |  | (30.8 | )%  
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|Delivery only(c)                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|Residential                                      |                             |                 | 582    |        |  |          | 264    |          |  |  | 318   |        |   |  | 120.5 | %   
|Small commercial & industrial                    |                             |                 | 2,196  |        |  |          | 1,550  |          |  |  | 646   |        |   |  | 41.7  | %   
|Large commercial & industrial                    |                             |                 | 3,090  |        |  |          | 2,042  |          |  |  | 1,048 |        |   |  | 51.3  | %   
|Public authorities & electric railroads          |                             |                 | 488    |        |  |          | 282    |          |  |  | 206   |        |   |  | 73.0  | %   
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|                                                 |                             |                 | 6,356  |        |  |          | 4,138  |          |  |  | 2,218 |        |   |  | 53.6  | %   
|                                                 | Total PPO and delivery only |                 |        | 8,268  |  |          |        | 6,901    |  |  |       | 1,367  |   |  |       | 19.8 | % 
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     
|Total retail deliveries                          |                             |                 | 31,273 |        |  |          | 30,944 |          |  |  | 329   |        |   |  | 1.1   | %   
|                                                 |                             |                 |        |        |  |          |        |          |  |  |       |        |   |  |       |     



---



|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(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 alternative energy
    supplier.

65



---



##### Table of Contents



|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |      |   
|--------------------------------------- | -------------------------------------- | --------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | ---- | --- | - |  | ----- | ---- | --
|                                        |                                        |                 |       |       |  |         
|                                        |                                        | Three Months    |       |       |  |         
|                                        |                                        | Ended March 31, |       |       |  |         
|                                        |                                        |                 |       |       |  |         
|Electric Revenue                        |                                        | 2004            |       | 2003  |  | Variance |       | % Change
|                                        |                                        |                 |       |       |  |          |       |         
|Full service(a)                         |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Residential                             |                                        | $               | 874   |       |  | $        | 905   |          |  | $ | (31  | )   |   |  | (3.4  | )%  
|Small commercial & industrial           |                                        |                 | 549   |       |  |          | 591   |          |  |   | (42  | )   |   |  | (7.1  | )%  
|Large commercial & industrial           |                                        |                 | 330   |       |  |          | 340   |          |  |   | (10  | )   |   |  | (2.9  | )%  
|Public authorities & electric railroads |                                        |                 | 93    |       |  |          | 106   |          |  |   | (13  | )   |   |  | (12.3 | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                        | Total full service                     |                 |       | 1,846 |  |          |       | 1,942    |  |   |      | (96 | ) |  |       | (4.9 | )%
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|PPO (ComEd only)(b)                     |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Small commercial & industrial           |                                        |                 | 48    |       |  |          | 50    |          |  |   | (2   | )   |   |  | (4.0  | )%  
|Large commercial & industrial           |                                        |                 | 42    |       |  |          | 72    |          |  |   | (30  | )   |   |  | (41.7 | )%  
|Public authorities & electric railroads |                                        |                 | 22    |       |  |          | 27    |          |  |   | (5   | )   |   |  | (18.5 | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                        |                                        |                 | 112   |       |  |          | 149   |          |  |   | (37  | )   |   |  | (24.8 | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Delivery only(c)                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Residential                             |                                        |                 | 42    |       |  |          | 17    |          |  |   | 25   |     |   |  | 147.1 | %   
|Small commercial & industrial           |                                        |                 | 53    |       |  |          | 51    |          |  |   | 2    |     |   |  | 3.9   | %   
|Large commercial & industrial           |                                        |                 | 44    |       |  |          | 54    |          |  |   | (10  | )   |   |  | (18.5 | )%  
|Public authorities & electric railroads |                                        |                 | 8     |       |  |          | 9     |          |  |   | (1   | )   |   |  | (11.1 | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                        |                                        |                 | 147   |       |  |          | 131   |          |  |   | 16   |     |   |  | 12.2  | %   
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                        | Total PPO and delivery only            |                 |       | 259   |  |          |       | 280      |  |   |      | (21 | ) |  |       | (7.5 | )%
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Total electric retail revenues          |                                        |                 | 2,105 |       |  |          | 2,222 |          |  |   | (117 | )   |   |  | (5.3  | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                        | Wholesale and miscellaneous revenue(d) |                 |       | 126   |  |          |       | 132      |  |   |      | (6  | ) |  |       | (4.5 | )%
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Total electric revenue                  |                                        | $               | 2,231 |       |  | $        | 2,354 |          |  | $ | (123 | )   |   |  | (5.2  | )%  
|                                        |                                        |                 |       |       |  |          |       |          |  |   |      |     |   |  |       |     



---



|    |                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 competitive transition charge.                                                                            
|   
|(b) | Revenue from customers choosing ComEds PPO
    includes on 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
    alternative energy supplier. Revenue from customers choosing an
    alternative energy supplier includes a distribution charge and a
    CTC. Transmission charges received from alternative energy
    suppliers are included in wholesale and miscellaneous revenue.
|   
|(d) | Wholesale and miscellaneous revenues include
    transmission revenue, sales to municipalities and other
    wholesale energy sales.                                                                                                                                                                                                                                              

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

|                                                       |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------------------------ |  | --------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                                       |  |                 |        |      |  |         
|                                                       |  | Three Months    |        |      |  |         
|                                                       |  | Ended March 31, |        |      |  |         
|                                                       |  |                 |        |      |  |         
|Deliveries to customers (in million cubic feet (mmcf)) |  | 2004            |        | 2003 |  | Variance |        | % Change
|                                                       |  |                 |        |      |  |          |        |         
|Retail sales                                           |  |                 | 29,803 |      |  |          | 31,460 |          |  |  | (1,657 | ) |  |  | (5.3  | )%
|Transportation                                         |  |                 | 7,132  |      |  |          | 8,166  |          |  |  | (1,034 | ) |  |  | (12.7 | )%
|                                                       |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total                                                  |  |                 | 36,935 |      |  |          | 39,626 |          |  |  | (2,691 | ) |  |  | (6.8  | )%
|                                                       |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   

66



---



##### Table of Contents



|                  |  |              |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|----------------- |  | ------------ | --- | ---- |  | -------- | --- | -------- |  | - | -- |  |  |  | ---- | -
|                  |  |              |     |      |  |         
|                  |  | Three Months |     |      |  |         
|                  |  | Ended        |     |      |  |         
|                  |  | March 31,    |     |      |  |         
|                  |  |              |     |      |  |         
|Revenue           |  | 2004         |     | 2003 |  | Variance |     | % Change
|                  |  |              |     |      |  |          |     |         
|Retail sales      |  | $            | 328 |      |  | $        | 273 |          |  | $ | 55 |  |  |  | 20.1 | %
|Transportation    |  |              | 5   |      |  |          | 5   |          |  |   |   |  |  |  |     |  
|Resales and other |  |              | 11  |      |  |          | 10  |          |  |   | 1  |  |  |  | 10.0 | %
|                  |  |              |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|Total             |  | $            | 344 |      |  | $        | 288 |          |  | $ | 56 |  |  |  | 19.4 | %
|                  |  |              |     |      |  |          |     |          |  |   |    |  |  |  |      |  



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

|                                                                                                |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|----------------------------------------------------------------------------------------------- |  | --------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                                                                |  |                 |       |      |  |         
|                                                                                                |  | Three Months    |       |      |  |         
|                                                                                                |  | Ended March 31, |       |      |  |         
|                                                                                                |  |                 |       |      |  |         
|                                                                                                |  | 2004            |       | 2003 |  | Variance |       | % Change
|                                                                                                |  |                 |       |      |  |          |       |         
|Operating revenues                                                                              |  | $               | 1,953 |      |  | $        | 1,879 |          |  | $ | 74   |   |  |  | 3.9   | % 
|Purchased power and fuel expense                                                                |  |                 | 1,105 |      |  |          | 1,205 |          |  |   | (100 | ) |  |  | (8.3  | )%
|Operating and maintenance expense                                                               |  |                 | 652   |      |  |          | 487   |          |  |   | 165  |   |  |  | 33.9  | % 
|Operating income                                                                                |  |                 | 94    |      |  |          | 94    |          |  |   |     |   |  |  |      |   
|Income (loss) before income taxes and cumulative
    effect of changes in accounting principles |  |                 | 113   |      |  |          | (73   | )        |  |   | 186  |   |  |  | n.m.  |   
|Income (loss) before cumulative effect of changes
    in accounting principles                  |  |                 | 67    |      |  |          | (52   | )        |  |   | 119  |   |  |  | n.m.  |   
|Cumulative effect of changes in accounting
    principles                                       |  |                 | 32    |      |  |          | 108   |          |  |   | (76  | ) |  |  | (70.4 | )%
|Net income                                                                                      |  |                 | 99    |      |  |          | 56    |          |  |   | 43   |   |  |  | 76.8  | % 



| | 
| | 
| | 

n.m.  not meaningful

Operating
Revenues.The changes in
Generations operating revenues for the three months ended
March 31, 2004 compared to the same period in 2003
consisted of the following:

|                                          |  |          |      |  
|----------------------------------------- |  | -------- | ---- | -
|                                          |  | Variance
|                                          |  |         
|Retail gas revenue                        |  | $        | 176  |  
|Energy Delivery and Exelon Energy Company |  |          | (111 | )
|Market and retail electric sales          |  |          | 40   |  
|Other                                     |  |          | (31  | )
|                                          |  |          |      |  
|Increase in operating revenues            |  | $        | 74   |  
|                                          |  |          |      |  

Retail Gas Revenue.Retail revenue increased $176 million as a result of Exelon
Energy Company retail operations, which were not included in
Generations financial results in 2003.

Energy Delivery and Exelon Energy
Company.Revenue from sales to
affiliates decreased primarily due to $55 million in lower
volume sales to Energy Delivery, primarily due to Energy
Deliverys customers purchasing energy from alternative
electric suppliers or ComEds PPO and unfavorable weather
conditions in the ComEd and PECO service territories. Price
increases in the PECO region partially offset by minimal price
decreases in the ComEd region resulted in an overall
$5 million increase in affiliate revenue due to price
fluctuations.

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. Revenue from sales to
Exelon Energy Company for the three months ended March 31,
2003 was $64 million.

67



---



##### Table of Contents



Market and Retail Electric
Sales.The changes in
Generations market and retail electric sales for the three
months ended March 31, 2004 compared to the same period in
2003, consisted of the following:

|                                             |  |          |      |  
|-------------------------------------------- |  | -------- | ---- | -
|                                             |  | Variance
|                                             |  |         
|Effects of EITF 03-11 adoption               |  | $        | (206 | )
|Boston Generating                            |  |          | 117  |  
|Exelon Energy Company and AmerGen operations |  |          | 78   |  
|Other operations                             |  |          | 51   |  
|                                             |  |          |      |  
|Increase in market and retail electric sales |  | $        | 40   |  
|                                             |  |          |      |  

Other.Revenues
decreased for the three months ended March 31, 2004 as
compared to the same period in 2003, primarily due to a
$10 million decrease in fuel sales which is due primarily
to gas sales in 2003 to Exelon Energy Company which is
consolidated in 2004, as well as decreased coal sales year over
year due to the unwinding of coal contracts, and the effects of
adopting EITF 03-11, which calls for fuel expense to offset
revenue derived from certain fossil fuel transactions. See
Note 2 of the Condensed Combined Notes to Consolidated
Financial Statements for additional information regarding
EITF 03-11. As a result, revenues and fuel expense were
lowered by $7 million, of which $5 million was related
to Boston Generating operations.

Purchased Power and Fuel
Expense.The changes in
Generations purchased power and fuel expense for the three
months ended March 31, 2004 compared to the same period in
2003 consisted of the following:

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Volume                                         |  | $        | (176 | )
|Price                                          |  |          | (96  | )
|AmerGen and Exelon Energy Company              |  |          | 112  |  
|Midwest Generation                             |  |          | (23  | )
|Boston Generating                              |  |          | 108  |  
|Mark-to-market adjustments on hedging activity |  |          | 8    |  
|Other                                          |  |          | (33  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (100 | )
|                                               |  |          |      |  

Volume.The decrease
reflects the effects of adopting EITF 03-11, resulting in a
decrease of $200 million. The decrease was partially offset
by a $21 million increase in purchased power volume and a
$3 million increase due to increased generation.

Prices.The decrease
reflects lower market prices of $48 million and lower
average fossil fuel costs used for non-Boston Generating
operations of $48 million during the three months ended
March 31, 2004 as compared to the same period in 2003.

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen and the transfer of Exelon Energy Company to Generation
effective January 1, 2004, purchased power decreased
$62 million and fuel expense increased $174 million.
Generation recorded no related party purchased power for the
quarter ended March 31, 2004. During the quarter ended
March 31, 2003, Generation recorded $68 million for
purchased power from AmerGen.

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. TheMystic 8 and 9 generating
facilities began commercial operations during the second quarter
of 2003, and the Fore River generating facilities began
commercial operations during the third quarter of 2003. As a
result, purchased power and fuel expense increased
$121 million. The increase was offset by a decrease of
$13 million related to the effects of adopting
EITF 03-11.

68



---



##### Table of Contents



Hedging Activity.Mark-to-market losses on hedging activities were
$39 million for the three months ended March 31, 2004
compared to losses of $31 million for the same period of
2003. Hedging activities in 2004 relating to non-Boston
Generating accounted for a loss of $37 million, and Boston
Generating operations in 2004 accounted for a loss of
$2 million.

Other.Other
decreases in purchased power and fuel were primarily due to
$21 million lower transmission expense resulting from
reduced inter-region transmission and a $4 million decrease
in intercompany purchased power expense.

Operating and Maintenance
Expense.The changes in operating and
maintenance expense for the three months ended March 31,
2004 compared to the same period in 2003 consisted of the
following:

|                                                                      |  |          |     |  
|--------------------------------------------------------------------- |  | -------- | --- | -
|                                                                      |  | Variance
|                                                                      |  |         
|AmerGen and Exelon Energy Company(a)                                  |  | $        | 110 |  
|Refueling outage costs(b)                                             |  |          | 36  |  
|Boston Generating                                                     |  |          | 20  |  
|Decommissioning accretion costs(c)                                    |  |          | 7   |  
|Co-owned facilities                                                   |  |          | 5   |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |          | (9  | )
|Other                                                                 |  |          | (4  | )
|                                                                      |  |          |     |  
|Increase in operating and maintenance expense                         |  | $        | 165 |  
|                                                                      |  |          |     |  



---



|    |                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes refueling outage expense of
    $24 million at AmerGen.                                                                          
|   
|(b) | Refueling outage days increased from 50 days
    for the three months ended March 31, 2003 to 114 days
    during the same period in 2004.
|   
|(c) | Includes $10 million due to AmerGen asset
    retirement obligation accretion.                                                            

Depreciation and
Amortization.The increase in
depreciation and amortization expense for the three months ended
March 31, 2004 as compared to the same period in 2003 was
primarily attributable to $8 million of additional
depreciation expense on capital additions placed in service
after the first quarter of 2003, of which $3 million of
expense was related to the Boston Generating facilities. In
addition, depreciation and amortization expense increased
$2 million due to increased amortization of long-term debt
and capital leases.

Effective Income Tax
Rate.The effective income tax
rate was 40.6% for the three months ended March 31, 2004
compared to 28.8% for the same period in 2003. This increase was
primarily attributable to the impairments recorded in 2003
related to Generations investment in Sithe which resulted
in a pre-tax loss. In addition, the rate increased due to the
additional nuclear decommissioning investment income and its
related taxes.

Cumulative Effect of Changes in Accounting
Principles.Cumulative effect of
changes in accounting principles recorded during the three
months ended March 31, 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 Condensed
Combined Notes to Consolidated Financial Statements for further
discussion of these effects.

69



---



##### Table of Contents





| |                                
| | -------------------------------
| | Generation Operating Statistics

Generations sales and the supply of these
sales, excluding the trading portfolio, were as follows:

|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|-------------------------------------------- |  | --------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ------ | --
|                                             |  |                 |       |      |  |         
|                                             |  | Three Months    |       |      |  |         
|                                             |  | Ended March 31, |       |      |  |         
|                                             |  |                 |       |      |  |         
|Revenue                                      |  | 2004            |       | 2003 |  | Variance |       | % Change
|                                             |  |                 |       |      |  |          |       |         
|Energy Delivery and Exelon Energy Company(a) |  | $               | 860   |      |  | $        | 965   |          |  | $ | (105 | ) |  |  | (10.9  | )%
|Market and retail electric sales(b)          |  |                 | 884   |      |  |          | 857   |          |  |   | 27   |   |  |  | 3.2    | % 
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Total energy sales revenue                   |  |                 | 1,744 |      |  |          | 1,822 |          |  |   | (78  | ) |  |  | (4.3   | )%
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Retail gas sales                             |  |                 | 176   |      |  |          |      |          |  |   | 176  |   |  |  | n.m.   |   
|Trading portfolio                            |  |                 |      |      |  |          | (1    | )        |  |   | 1    |   |  |  | (100.0 | )%
|Other revenue                                |  |                 | 33    |      |  |          | 58    |          |  |   | (25  | ) |  |  | (43.1  | )%
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Total revenue                                |  | $               | 1,953 |      |  | $        | 1,879 |          |  | $ | 74   |   |  |  | 3.9    | % 
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   



---



|    |                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                                                          

n.m.  not meaningful

|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|-------------------------------------------- |  | ------------ | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                             |  |              |        |      |  |         
|                                             |  | Three Months |        |      |  |         
|                                             |  | Ended,       |        |      |  |         
|                                             |  |              |        |      |  |         
|Sales (in GWhs)                              |  | 2004(c)      |        | 2003 |  | Variance |        | % Change
|                                             |  |              |        |      |  |          |        |         
|Energy Delivery and Exelon Energy Company(a) |  |              | 27,464 |      |  |          | 30,594 |          |  |  | (3,130 | ) |  |  | (10.2 | )%
|Market and retail electric sales(b)          |  |              | 23,983 |      |  |          | 23,815 |          |  |  | 168    |   |  |  | 0.7   | % 
|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total sales                                  |  |              | 51,447 |      |  |          | 54,409 |          |  |  | (2,962 | ) |  |  | (5.4  | )%
|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                                            
|   
|(c) | Sales in 2004 do not include 5,453 GWhs, which
    are netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------ |  | --------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                     |  |                 |        |      |  |         
|                                     |  | Three Months    |        |      |  |         
|                                     |  | Ended March 31, |        |      |  |         
|                                     |  |                 |        |      |  |         
|Supply Source (in GWhs)              |  | 2004(c)         |        | 2003 |  | Variance |        | % Change
|                                     |  |                 |        |      |  |          |        |         
|Nuclear generation(a)                |  |                 | 33,411 |      |  |          | 29,330 |          |  |  | 4,081  |   |  |  | 13.9  | % 
|Purchases  non-trading portfolio(b) |  |                 | 11,691 |      |  |          | 20,029 |          |  |  | (8,338 | ) |  |  | (41.6 | )%
|Fossil and hydro generation          |  |                 | 6,345  |      |  |          | 5,050  |          |  |  | 1,295  |   |  |  | 25.6  | % 
|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total supply                         |  |                 | 51,447 |      |  |          | 54,409 |          |  |  | (2,962 | ) |  |  | (5.4  | )%
|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Excludes AmerGen in 2003. AmerGen generated 4,639
    GWhs during the three months ended March 31, 2004.                                                                                        
|   
|(b) | Includes PPAs with AmerGen, which represented
    2,488 GWhs in 2003.                                                                                                                           
|   
|(c) | Sales in 2004 do not include 5,453 GWhs, which
    are netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

Trading volumes of 5,113 GWhs and 9,527 GWhs for
the three months ended March 31, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

70



---



##### Table of Contents



Generations supply mix changed as a result
of increased fossil generation due to the effect of Boston
Generatings Mystic units 8 and 9 and Fore River generating
facilities becoming operational in the second and third quarter
of 2003, which in total account for an increase of
2,266 GWhs, and as a result of Generations
acquisition of the remaining 50% interest in AmerGen in December
2003. All of the power generated by AmerGen plants is included
in nuclear generation for 2004; previously, power obtained from
AmerGen facilities was treated as purchased power. Purchased
power from AmerGen during the three months ended March 31,
2003 was 2,488 GWhs.

Generations average margin and other
operating data for the three months ended March 31, 2004
and 2003 were as follows:

|                                                             |                                              |                 |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | -------------------------------------------- | --------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                              |                 |       |      
|                                                             |                                              | Three Months    |       |      
|                                                             |                                              | Ended March 31, |       |      
|                                                             |                                              |                 |       |      
|                                                             |                                              | 2004            |       | 2003  |  | % Change
|                                                             |                                              |                 |       |       |  |         
|                                                             |                                              |                 |       |      
|                                                             |                                              | ($/MWh)         |       |      
|Average revenue                                              |                                              |                 |       |       |  |          |       |       |  |  |      |     
|                                                             | Energy Delivery and Exelon Energy Company(a) |                 | $     | 31.31 |  |          | $     | 31.54 |  |  |      | (0.7 | )%
|                                                             | Market and retail electric sales(b)          |                 |       | 36.86 |  |          |       | 35.99 |  |  |      | 2.4  | % 
|                                                             | Total  excluding the trading portfolio      |                 |       | 33.90 |  |          |       | 33.49 |  |  |      | 1.2  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                              | $               | 21.48 |       |  | $        | 22.06 |       |  |  | (2.6 | )%  
|Average margin  excluding the trading
    portfolio         |                                              | $               | 12.42 |       |  | $        | 11.43 |       |  |  | 8.7  | %   



---



|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 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.                                                                          

Generations average margin, excluding the
trading portfolio, increased due to higher market prices as a
result of increased fuel prices and decreased average supply
cost due to a decrease in purchased power and increased nuclear
generation.

|                                                                     |  |                  |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ---------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |                 
|                                                                     |  | Three Months    
|                                                                     |  | Ended March 31,?
|                                                                     |  |                 
|                                                                     |  | 2004             |       | 2003
|                                                                     |  |                  |       |     
|Nuclear fleet capacity factor(a)                                     |  |                  | 90.5  | %    |  |   | 94.4  | %
|Nuclear fleet production cost per MWh(a)                             |  | $                | 14.29 |      |  | $ | 12.80 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $                | 44.48 |      |  | $ | 41.99 |  



---



|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(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 and increased
nuclear production costs are primarily due to 64 additional
planned refueling outage days, resulting in a $60 million
increase in planned outage costs in the three months ended
March 31, 2004 as compared to the same period in 2003.
There were four planned outages during the three months ended
March 31, 2004, compared to two planned outages during the
same period in 2003. The three months ended March 31, 2004
included five unplanned outages compared to three unplanned
outages during the same period in 2003. 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-Extended Power Uprate (EPU) generation
levels due to performance issues with their steam dryers. Exelon
is currently evaluating data to determine when the units can
return to EPU output levels. There is a continued risk that the
Quad Cities units will not return to EPU operating levels in the
near future. There is also a risk that additional expenditures
will be required on these units to allow extended operations at
the EPU output levels.

71



---



##### Table of Contents





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

|                                                                                     |  |                 |     |      |  |          |     |          |  |   |      |   |  |  |        |   
|------------------------------------------------------------------------------------ |  | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | ---- | - |  |  | ------ | --
|                                                                                     |  |                 |     |      |  |         
|                                                                                     |  | Three Months    |     |      |  |         
|                                                                                     |  | Ended March 31, |     |      |  |         
|                                                                                     |  |                 |     |      |  |         
|                                                                                     |  | 2004            |     | 2003 |  | Variance |     | % Change
|                                                                                     |  |                 |     |      |  |          |     |         
|Operating revenues                                                                   |  | $               | 90  |      |  | $        | 580 |          |  | $ | (490 | ) |  |  | (84.5  | )%
|Purchased power and fuel expense                                                     |  |                 |    |      |  |          | 339 |          |  |   | (339 | ) |  |  | (100.0 | )%
|Operating and maintenance expense                                                    |  |                 | 106 |      |  |          | 256 |          |  |   | (150 | ) |  |  | (58.6  | )%
|Depreciation and amortization expense                                                |  |                 |    |      |  |          | 10  |          |  |   | (10  | ) |  |  | (100.0 | )%
|Operating income (loss)                                                              |  |                 | (20 | )    |  |          | (27 | )        |  |   | 7    |   |  |  | (25.9  | )%
|Loss before income taxes and cumulative effect of
    change in accounting principle |  |                 | (25 | )    |  |          | (30 | )        |  |   | 5    |   |  |  | (16.7  | )%
|Loss before cumulative effect of change in
    accounting principle                  |  |                 | (16 | )    |  |          | (17 | )        |  |   | 1    |   |  |  | (5.9   | )%
|Net income (loss)                                                                    |  |                 | (16 | )    |  |          | (18 | )        |  |   | 2    |   |  |  | (11.1  | )%



---

Operating
Revenues.The changes in
Enterprises operating revenues for the three months ended
March 31, 2004 compared to the same period in 2003
consisted of the following:

|                               |  |          |      |  
|------------------------------ |  | -------- | ---- | -
|                               |  | Variance
|                               |  |         
|Exelon Energy Company          |  | $        | (330 | )
|F & M Holdings, LLC(a)         |  |          | (149 | )
|Exelon Services                |  |          | (11  | )
|                               |  |          |      |  
|Decrease in operating revenues |  | $        | (490 | )
|                               |  |          |      |  



---



|    |                                                              
|--- | -------------------------------------------------------------
|(a) | Includes the operations of former InfraSource
    businesses.

Exelon Energy
Company.Operating revenues decreased
as a result of Exelon Energy Company becoming part of Generation
effective January 1, 2004.

F & M Holdings,
LLC.Operating revenues decreased
$117 million as a result of the sale of the majority of the
InfraSource businesses in the third quarter of 2003. For the
remaining businesses, F & M Holdings, LLC, operating
revenues decreased $32 million as a result of the sale of
certain businesses and the reduction of new business as a result
of wind-down efforts.

Exelon Services.Operating revenues decreased $14 million at Exelon Services
due to unfavorable economic conditions in the construction
market and the sale of certain Exelon Services business units.
This decrease was partially offset by improved performance
contracting activities of $3 million.

Purchased Power and Fuel
Expense.Purchased power and fuel
expense decreased as a result of Exelon Energy Company becoming
part of Generation effective January 1, 2004.

Operating and Maintenance
Expense.The changes in
Enterprises operating and maintenance expense for the
three months ended March 31, 2004 compared to the same
period in 2003 consisted of the following:

|                                              |  |          |      |  
|--------------------------------------------- |  | -------- | ---- | -
|                                              |  | Variance
|                                              |  |         
|F & M Holdings, LLC(a)                        |  | $        | (131 | )
|Exelon Services                               |  |          | (4   | )
|Other                                         |  |          | (15  | )
|                                              |  |          |      |  
|Decrease in operating and maintenance expense |  | $        | (150 | )
|                                              |  |          |      |  



---



|    |                                                              
|--- | -------------------------------------------------------------
|(a) | Includes the operations of former InfraSource
    businesses.

72



---



##### Table of Contents



F & M Holdings,
LLC.Operating and maintenance expense
decreased $111 million as a result of the sale of the
majority of the InfraSource businesses in the third quarter of
2003. For the remaining businesses, F & M Holdings,
LLC, operating and maintenance expense decreased
$33 million as a result of wind-down efforts for these
businesses. These decreases were partially offset by increased
expense of $12 million due to margin deterioration on
various construction projects.

Exelon Services.Operating and maintenance expense decreased $4 million at
Exelon Services due primarily to delays on mechanical
construction projects resulting from poor economic conditions in
the construction market and the sale of certain Exelon Services
business units. This decrease was partially offset by additional
costs from increased performance contracting activities of
$2 million and other asset impairments of $2 million.

Depreciation and
Amortization.Depreciation and
amortization expense decreased primarily as a result of the sale
of the majority of the InfraSource businesses in the third
quarter of 2003 and property, plant and equipment classified as
held for sale.

Effective Income Tax
Rate.The effective income tax
rate was 36.0% for the three months ended March 31, 2004
compared to 43.3% for the same period in 2003. The decrease in
the effective tax rate was primarily attributable to impacts of
state income tax adjustments in 2003.

Divestiture of
Businesses.In the first quarter
of 2004, Enterprises sold three business units of Exelon
Services. Cash proceeds to Enterprises from the sales were
approximately $3 million. Enterprises recorded a net loss
of $3 million before income taxes in other income and
deductions on the sale.

In December 2003, Enterprises signed an agreement
to sell its Chicago business of Exelon Thermal for approximately
$135 million, subject to working capital adjustments. The
agreement to sell the Chicago thermal operations is subject to
customary closing conditions and approval from the City of
Chicago (Chicago) and is expected to close during the second
quarter of 2004. The sale of the Aladdin thermal facility is
expected to close during the second half of 2004. In April 2004,
Enterprises signed an agreement to sell its investment in PECO
TelCove, a communications joint venture, for $49 million.
The agreement to sell is subject to customary closing conditions
and various regulatory approvals and is expected to close during
the second quarter of 2004.

Enterprises continues to pursue the divestiture
of other businesses; however, it may be unable to successfully
implement its divestiture strategy of certain businesses for a
number of reasons, including an inability to locate appropriate
buyers or to negotiate acceptable terms for the transactions. In
addition, the amount that Enterprises may realize from a
divestiture is subject to fluctuating market conditions that may
contribute to pricing and other terms that are materially
different than expected and could result in a loss on the sale.
Timing of any divestitures may positively or negatively affect
the results of operations.

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. The working capital deficit at March 31, 2004
is expected to be eliminated through the anticipated continuance
of positive operating cash flows and the eventual elimination of
the Boston Generating debt balance (included in liabilities held
for sale) upon the sale of Boston Generating. The sale of Boston
Generating will be substantively a non-cash transaction, with
the Boston Generating credit facility continuing as a liability
of Boston Generating at the time it is sold, without recourse to
Exelon or Generation. See Note 3 of the Condensed Combined
Notes to Consolidated Financial Statements for further
discussion of the sale of Boston Generating. 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 $1.5 billion through revolving credit facilities
that it currently utilizes to support its commercial paper
programs. See the Credit Issues section of Liquidity and Capital
Resources for further

73



---



##### Table of Contents



discussion. Exelon primarily uses its capital
resources to fund capital requirements, including construction,
to repay maturing 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 three months
ended March 31, 2004 and 2003 were $851 million and
$383 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 three months ended March 31, 2004 and
2003:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Natural gas inventories and deferred natural gas
    costs decreased $71 million and $30 million,
    respectively, during the three months ended March 31, 2004
    resulting in a $101 million increase to operating cash
    flows. During 2003, a decrease in natural gas inventories of
    $43 million partially offset by an increase in deferred
    natural gas costs of $28 million resulted in a
    $15 million increase in operating cash flow.
|
| |  | An increase in required deposits for energy
    trading activity of $118 million resulted from Generation
    exceeding its negotiated credit positions with counterparties
    during the three months ended March 31, 2003.                                                                                                                                                                                                                               
|
| |  | An income tax refund of $150 million
    increased cash from operations during the three months ended
    March 31, 2004. Income tax payments of $137 million
    and interest payments of $63 million contributed to the
    $217 million use of cash for accounts payable, accrued
    expenses and other current liabilities during 2003.                                                                                                                
|
| |  | Discretionary tax-deductible pension plan
    payments were $143 million for the three months ended
    March 31, 2004 compared to $125 million for the same
    period in 2003. Additionally, $22 million and
    $15 million was contributed to the postretirement welfare
    benefit plans in the first quarter of 2004 and 2003,
    respectively.                                                                                                     

Exelon expects to contribute up to approximately
$419 million to its pension plans in 2004. These
contributions exclude benefit payments expected to be made
directly from corporate assets. Of the $419 million
expected to be contributed to the pension plans during 2004,
$17 million is estimated to be needed to satisfy IRS
minimum funding requirements.

Exelon, through its ComEd subsidiary, has taken
certain tax positions, which have been disclosed to the Internal
Revenue Service (IRS), to defer the tax gain on the 1999 sale of
its fossil generating assets. As of March 31, 2004,
deferred tax liabilities related to the fossil plant sale are
reflected in Exelons Consolidated

74



---



##### Table of Contents



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, reflects the most likely probable expected outcome in
accordance with SFAS No. 5, Accounting for
Contingencies (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 used in investing activities for the
three months ended March 31, 2004 and 2003 were
$373 million and $383 million, respectively. The
$10 million decrease in cash used in investing activities
during the three months ended March 31, 2004 is primarily
attributable to cash proceeds of $42 million received
during the three months ended March 31, 2004 from the sale
of three gas turbines at Generation that were classified as
assets held for sale at December 31, 2003, partially offset
by an increase in capital expenditures of $12 million and
an increase in investments in nuclear decommissioning trust
funds of $21 million over amounts invested during the same
period in 2003. Additionally, 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 Condensed Combined Notes to Consolidated
Financial Statements for further information regarding the
FIN No. 46-R consolidation of Sithe.

Capital expenditures by business segment for the
three months ended March 31, 2004 and 2003 were as follows:

|                           |  |                 |     |      |  |   |     | 
|-------------------------- |  | --------------- | --- | ---- |  | - | --- | 
|                           |  |                
|                           |  | Three Months   
|                           |  | Ended March 31,
|                           |  |                
|                           |  | 2004            |     | 2003
|                           |  |                 |     |     
|Energy Delivery            |  | $               | 226 |      |  | $ | 239 | 
|Generation                 |  |                 | 213 |      |  |   | 175 | 
|Enterprises                |  |                 |    |      |  |   | 6   | 
|Corporate and other        |  |                 |    |      |  |   | 7   | 
|                           |  |                 |     |      |  |   |     | 
|Total capital expenditures |  | $               | 439 |      |  | $ | 427 | 
|                           |  |                 |     |      |  |   |     | 

Energy Deliverys capital expenditures for
the three months ended March 31, 2004 reflect continuing
efforts to improve the reliability of its transmission and
distribution systems and capital additions to support new
business and customer growth. 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.

Generations capital expenditures for the
three months ended March 31, 2004 reflect additions and
upgrades to existing facilities (including nuclear refueling
outages), nuclear fuel and increases in capacity at existing
plants. Generations capital expenditures for the three
months ended March 31, 2003 reflect the construction of
three Boston Generating facilities with capacity of
2,288 MWs of energy. Exelon anticipates that
Generations capital expenditures will be funded by
internally generated funds, Generations borrowings or
capital contributions from Exelon.

75



---



##### Table of Contents





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

Cash flows used in financing activities for the
three months ended March 31, 2004 were $472 million
compared to cash provided by financing activities for the three
months ended March 31, 2003 of $34 million. See
Note 7 of the Condensed Combined Notes to Consolidated
Financial Statements for further information regarding debt
issuances and retirements during the three months ended
March 31, 2004.

The cash dividend payments on common stock for
the three months ended March 31, 2004 and 2003 were
$181 million and $145 million, respectively. On
January 27, 2004, the Exelon Board of Directors approved a
10% increase in the quarterly dividend to $0.55 per share.
Payment of future dividends is subject to approval and
declaration by the Board.



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

Exelon Credit
Facility.Exelon meets its short-term
liquidity requirements primarily through the issuance of
commercial paper by Exelon corporate holding company (Exelon
Corporate) and by ComEd, PECO and Generation. Exelon Corporate
participates, along with ComEd, PECO 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. 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. The 364-day agreement includes a
term-out option provision that allows a borrower to extend the
maturity of revolving credit borrowings outstanding at the end
of the 364-day period for one year. At March 31, 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 |  | $           | 550 |             |  | $                | 529 |  |  | $ | 70  | 
|ComEd            |  |             | 100 |             |  |                  | 66  |  |  |   |    | 
|PECO             |  |             | 250 |             |  |                  | 221 |  |  |   | 81  | 
|Generation       |  |             | 600 |             |  |                  | 449 |  |  |   | 165 | 



---



|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 175 basis points. For the three months ended
March 31, 2004, the average interest rate on notes payable
was approximately 1.05%.

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 and
interest on the debt of Exelon New Englands project
subsidiaries. Exelon Corporate is measured at the Exelon
consolidated level. The following table summarizes the minimum
thresholds reflected in the credit agreement for the
twelve-month period ended March 31, 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 March 31, 2004, each of Exelon Corporate,
ComEd, PECO and Generation were in compliance with the foregoing
thresholds.

76



---



##### Table of Contents



Capital Structure.At March 31, 2004, Exelons, ComEds, PECOs
and Generations capital structure consisted of the
following:

|                             |  |              |    |          |  |         |    |            |  |  |    |     |  |  |    |     
|---------------------------- |  | ------------ | -- | -------- |  | ------- | -- | ---------- |  |  | -- | --- |  |  | -- | ----
|                             |  | Exelon       |    |          |  |         |    |           
|                             |  | Consolidated |    | ComEd(a) |  | PECO(a) |    | Generation
|                             |  |              |    |          |  |         |    |           
|Long-term debt               |  |              | 40 | %(b)     |  |         | 34 | %          |  |  | 21 | %   |  |  | 53 | %(b)
|Long-term debt to affiliates |  |              | 24 | (c)      |  |         | 15 | (c)        |  |  | 61 | (c) |  |  |   |     
|Common equity                |  |              | 35 |          |  |         | 51 |            |  |  | 16 |     |  |  |   |     
|Members equity              |  |              |   |          |  |         |   |            |  |  |   |     |  |  | 41 |     
|Preferred securities         |  |              |   |          |  |         |   |            |  |  | 1  |     |  |  |   |     
|Notes payable                |  |              | 1  |          |  |         |   |            |  |  | 1  |     |  |  | 5  |     
|Minority interest            |  |              |   |          |  |         |   |            |  |  |   |     |  |  | 1  |     



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | At March 31, 2004, ComEds capital
    structure, excluding the deduction from shareholders
    equity of the $219 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 33% long-term debt, 15% long-term
    debt to affiliates and 52% common equity. Likewise, PECOs
    capital structure, excluding the deduction from
    shareholders equity of the $1.6 billion receivable
    from Exelon, consisted of 32% common equity, 1% notes
    payable, 1% preferred securities and 66% long-term debt,
    including long-term debt to unconsolidated affiliates.
|   
|(b) | Includes $1.0 billion Boston Generating
    project debt, classified as liabilities held for sale on the
    Consolidated Balance Sheets, and $1.2 billion of senior
    unsecured notes representing 9% and 33% of capitalization for
    Exelon and Generation, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(c) | 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 Condensed Combined Notes to
    Consolidated Financial Statements for further information
    regarding FIN No. 46-R.                                                                                                                                                                                                                  

Boston Generating Project
Debt.Boston Generating has a
$1.25 billion credit facility (Boston Generating Facility),
which was entered into primarily to finance the development and
construction of the Mystic 8 and 9 and Fore River generating
facilities. Approximately $1.0 billion of debt was
outstanding under the credit facility at March 31, 2004,
all of which was reflected in Exelons Consolidated Balance
Sheets as a liability held for sale. The Boston Generating
Facility is non-recourse to Exelon and Generation and an event
of default under the Boston Generating Facility does not
constitute an event of default under any other of Exelons
debt instruments or the debt instruments of Exelons
subsidiaries.

Exelon is in the process of the sale of Boston
Generating, which owns the companies that own the
Mystic 4-7, Mystic 8 and 9 and Fore River generating
facilities. Exelons decision to transition out of the
projects was made as a result of its evaluation of the projects
and discussions with the lenders under the Boston Generating
Facility. See Note 3 of the Condensed 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 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

77



---



##### Table of Contents



economic benefits. Interest on borrowings is
based on short-term market rates of interest, or, if from an
external source, specific borrowing rates. During 2004, ComEd
and PECO had various contributions to the money pool, and
Generation and BSC had various loans from the money pool as
described in the attached table:


|           |  |          |     |          |  |                |     |  |  |   |      |  
|---------- |  | -------- | --- | -------- |  | -------------- | --- |  |  | - | ---- | -
|           |  |          |     |          |  | March 31, 2004
|           |  | Maximum  |     | Maximum  |  | Contributed   
|           |  | Invested |     | Borrowed |  | (Borrowed)    
|           |  |          |     |          |  |               
|ComEd      |  | $        | 487 |          |  | $              |    |  |  | $ | 226  |  
|PECO       |  |          | 162 |          |  |                |    |  |  |   |     |  
|Generation |  |          |    |          |  |                | 407 |  |  |   | (226 | )
|BSC        |  |          |    |          |  |                | 197 |  |  |   |     |  

Sithe Long-Term
Debt.At March 31, 2004,
long-term debt of $850 million was consolidated in Exelon
and Generations Consolidated Balance Sheets as a result of
the adoption of FIN No. 46-R. See Note 2 and
Note 4 of the Condensed Combined Notes to Consolidated
Financial Statements for further information regarding the
consolidation of Sithe and see Note 7 of the Condensed
Combined Notes to Consolidated Financial Statements for further
information regarding Sithes long-term debt and the annual
maturities.

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 Exelons security ratings.

Shelf Registration.As of March 31, 2004, Exelon, ComEd and PECO have current
shelf registration statements for the sale of $3.2 billion
of securities that are effective with the SEC. Each
company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,
the current financial condition of the company, its securities
ratings and market conditions.

PUHCA Restrictions.On April 1, 2004, Exelon obtained a new 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 at December 31, 2003. The new financing
order replaced a prior SEC order that expired on March 31,
2004 that authorized up to $4.0 billion of financing. As of
March 31, 2004, there was $2.1 billion of financing
authority remaining under the prior SEC order. The prior order
limited Exelons short-term debt outstanding to
$3.0 billion of the $4.0 billion total financing
authority. The new order eliminates the short-term debt
sub-limit restriction. The prior order also authorized Exelon to
issue guarantees of up to $4.5 billion outstanding at any
one time. The new order gives Exelon an additional
$1.5 billion of guaranty authority. At March 31, 2004,
Exelon had provided $2.0 billion of guarantees under the
SEC order. 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 March 31, 2004,
Exelons common equity ratio was 35%. 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 March 31, 2004, Exelon had invested
$2.8 billion in EWGs, leaving $1.2 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. Under Illinois law, ComEd may not pay any
dividend on its stock unless its earnings and earned surplus are
sufficient to declare and pay same after provision is made for
reasonable and proper reserves, or unless it has specific
authorization from the Illinois Commerce Commission (ICC).
Furthermore, a significant loss recorded at ComEd may limit the
dividends that ComEd can distribute to

78



---



##### Table of Contents



Exelon. At March 31, 2004, Exelon had
retained earnings of $2.5 billion, including ComEds
retained earnings of $962 million (of which
$891 million had been appropriated for future dividend
payments), PECOs retained earnings of $586 million
and Generations undistributed earnings of
$647 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 March 31, 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 consolidation of Sithe
    pursuant to FIN No. 46-R, Generation maintains a
    $50 million non-debt letter of credit under its credit
    agreement.                                                        
|
| |  | See Note 7 and Note 17 to the Condensed
    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.

79



---



##### Table of Contents






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 Summary

Financial Results.ComEd experienced an overall decline in net income of 7% in the
first quarter of 2004. This decline primarily reflects lower
collections of CTCs, partially offset by lower operating and
maintenance expense compared to the first quarter of 2003 in
which ComEd recorded charges associated with an agreement with
various Illinois retail market participants and other interested
parties.

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.ComEd repaid
$176 million of long-term debt and made a $93 million
payment on long-term debt to ComEd Transitional Funding Trust
during the first quarter of 2004. ComEd met all of its capital
resource commitments with internally generated cash and expects
to do so in the foreseeable future.

Operations.On
March 18, 2004, the FERC approved ComEds plan to
complete the integration of its transmission facilities into PJM
subject to the NERC approval of PJM and Midwest ISO reliability
plans to assure no adverse impacts. The NERC granted the
required approval on April 2, 2004. On April 27, 2004,
the FERC issued its order approving ComEds application to
fully integrate into PJM on May 1, 2004. ComEd intends to
accept the conditions in the FERC order and expects full
integration to occur on that date. 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 electricity. Upon joining PJM,
ComEd will begin to incur incremental administrative fees, which
are expected to approximate $30 million annually.

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.

80



---



##### Table of Contents



Results of Operations



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2004
    Compared to Three Months Ended March 31, 2003

|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |        |      |   
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ---- | ---- | -------- | ----- | -------- | ----- | - | --- | --- | --- | - | ------ | ------ | ---- | --
|                                                                                         |                                                                  |                                   |       |      |      |         
|                                                                                         |                                                                  | Three Months                      |       |      |      |         
|                                                                                         |                                                                  | Ended March 31,                   |       |      |      |         
|                                                                                         |                                                                  |                                   |       |      |      |         
|                                                                                         |                                                                  | 2004                              |       | 2003 |      | Variance |       | % Change
|                                                                                         |                                                                  |                                   |       |      |      |          |       |         
|Operating revenues                                                                       |                                                                  | $                                 | 1,336 |      |      | $        | 1,424 |          |       | $ | (88 | )   |     |   | (6.2   | )%    
|Operating expenses                                                                       |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         | Purchased power                                                  |                                   |       | 533  |      |          |       | 578      |       |   |     | (45 | )   |   |        | (7.8   | )%  
|                                                                                         | Operating and maintenance                                        |                                   |       | 217  |      |          |       | 261      |       |   |     | (44 | )   |   |        | (16.9  | )%  
|                                                                                         | Depreciation and amortization                                    |                                   |       | 102  |      |          |       | 94       |       |   |     | 8   |     |   |        | 8.5    | %   
|                                                                                         | Taxes other than income                                          |                                   |       | 79   |      |          |       | 80       |       |   |     | (1  | )   |   |        | (1.3   | )%  
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         |                                                                  | Total operating expense           |       |      | 931  |          |       |          | 1,013 |   |     |     | (82 | ) |        |        | (8.1 | )%
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|Operating income                                                                         |                                                                  |                                   | 405   |      |      |          | 411   |          |       |   | (6  | )   |     |   | (1.5   | )%    
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|Other income and deductions                                                              |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         | Interest expense                                                 |                                   |       | (106 | )    |          |       | (110     | )     |   |     | 4   |     |   |        | (3.6   | )%  
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                   |       |     |      |          |       | (7       | )     |   |     | 7   |     |   |        | (100.0 | )%  
|                                                                                         | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |       | (3   | )    |          |       |         |       |   |     | (3  | )   |   |        | n.m.   |     
|                                                                                         | Other, net                                                       |                                   |       | 9    |      |          |       | 22       |       |   |     | (13 | )   |   |        | (59.1  | )%  
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         |                                                                  | Total other income and deductions |       |      | (100 | )        |       |          | (95   | ) |     |     | (5  | ) |        |        | 5.3  | % 
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                   | 305   |      |      |          | 316   |          |       |   | (11 | )   |     |   | (3.5   | )%    
|Income taxes                                                                             |                                                                  |                                   | 123   |      |      |          | 126   |          |       |   | (3  | )   |     |   | (2.4   | )%    
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|Net income before cumulative effect of a
    change in accounting principle              |                                                                  |                                   | 182   |      |      |          | 190   |          |       |   | (8  | )   |     |   | (4.2   | )%    
|Cumulative effect of a change in accounting
    principle                                |                                                                  |                                   |      |      |      |          | 5     |          |       |   | (5  | )   |     |   | (100.0 | )%    
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       
|Net income                                                                               |                                                                  | $                                 | 182   |      |      | $        | 195   |          |       | $ | (13 | )   |     |   | (6.7   | )%    
|                                                                                         |                                                                  |                                   |       |      |      |          |       |          |       |   |     |     |     |   |        |       



---



|       |               
|------ | --------------
|n.m.  | not meaningful

81



---



##### Table of Contents





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

ComEds electric sales statistics were as
follows:

|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |      |   
|--------------------------------------- | --------------------------- | --------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ----- | ---- | - |  | ----- | ---- | --
|                                        |                             |                 |        |        |  |         
|                                        |                             | Three Months    |        |        |  |         
|                                        |                             | Ended March 31, |        |        |  |         
|                                        |                             |                 |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004            |        | 2003   |  | Variance |        | % Change
|                                        |                             |                 |        |        |  |          |        |         
|Full service(a)                         |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|Residential                             |                             |                 | 7,013  |        |  |          | 6,886  |          |  |  | 127   |      |   |  | 1.8   | %   
|Small commercial & industrial           |                             |                 | 5,133  |        |  |          | 5,627  |          |  |  | (494  | )    |   |  | (8.8  | )%  
|Large commercial & industrial           |                             |                 | 1,345  |        |  |          | 1,484  |          |  |  | (139  | )    |   |  | (9.4  | )%  
|Public authorities & electric railroads |                             |                 | 1,240  |        |  |          | 1,416  |          |  |  | (176  | )    |   |  | (12.4 | )%  
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|                                        | Total full service          |                 |        | 14,731 |  |          |        | 15,413   |  |  |       | (682 | ) |  |       | (4.4 | )%
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|PPO                                     |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|Small commercial & industrial           |                             |                 | 731    |        |  |          | 793    |          |  |  | (62   | )    |   |  | (7.8  | )%  
|Large commercial & industrial           |                             |                 | 747    |        |  |          | 1,433  |          |  |  | (686  | )    |   |  | (47.9 | )%  
|Public authorities & electric railroads |                             |                 | 434    |        |  |          | 537    |          |  |  | (103  | )    |   |  | (19.2 | )%  
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|                                        |                             |                 | 1,912  |        |  |          | 2,763  |          |  |  | (851  | )    |   |  | (30.8 | )%  
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|Delivery only(b)                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|Small commercial & industrial           |                             |                 | 1,772  |        |  |          | 1,348  |          |  |  | 424   |      |   |  | 31.5  | %   
|Large commercial & industrial           |                             |                 | 2,940  |        |  |          | 1,832  |          |  |  | 1,108 |      |   |  | 60.5  | %   
|Public authorities & electric railroads |                             |                 | 488    |        |  |          | 282    |          |  |  | 206   |      |   |  | 73.0  | %   
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|                                        |                             |                 | 5,200  |        |  |          | 3,462  |          |  |  | 1,738 |      |   |  | 50.2  | %   
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|                                        | Total PPO and delivery only |                 |        | 7,112  |  |          |        | 6,225    |  |  |       | 887  |   |  |       | 14.2 | % 
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     
|Total retail deliveries                 |                             |                 | 21,843 |        |  |          | 21,638 |          |  |  | 205   |      |   |  | 0.9   | %   
|                                        |                             |                 |        |        |  |          |        |          |  |  |       |      |   |  |       |     



---



|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(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 ARES.

82



---



##### Table of Contents



|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|--------------------------------------- |  | --------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ----- | --
|                                        |  |                 |       |      |  |         
|                                        |  | Three Months    |       |      |  |         
|                                        |  | Ended March 31, |       |      |  |         
|                                        |  |                 |       |      |  |         
|Electric Revenue                        |  | 2004            |       | 2003 |  | Variance |       | % Change
|                                        |  |                 |       |      |  |          |       |         
|Full service(a)                         |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Residential                             |  | $               | 560   |      |  | $        | 546   |          |  | $ | 14  |   |  |  | 2.6   | % 
|Small commercial & industrial           |  |                 | 373   |      |  |          | 397   |          |  |   | (24 | ) |  |  | (6.0  | )%
|Large commercial & industrial           |  |                 | 60    |      |  |          | 74    |          |  |   | (14 | ) |  |  | (18.9 | )%
|Public authorities & electric railroads |  |                 | 73    |      |  |          | 84    |          |  |   | (11 | ) |  |  | (13.1 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total full service                      |  |                 | 1,066 |      |  |          | 1,101 |          |  |   | (35 | ) |  |  | (3.2  | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|PPO(b)                                  |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Small commercial & industrial           |  |                 | 48    |      |  |          | 50    |          |  |   | (2  | ) |  |  | (4.0  | )%
|Large commercial & industrial           |  |                 | 42    |      |  |          | 72    |          |  |   | (30 | ) |  |  | (41.7 | )%
|Public authorities & electric railroads |  |                 | 22    |      |  |          | 27    |          |  |   | (5  | ) |  |  | (18.5 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|                                        |  |                 | 112   |      |  |          | 149   |          |  |   | (37 | ) |  |  | (24.8 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Delivery only(c)                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Small commercial & industrial           |  |                 | 33    |      |  |          | 41    |          |  |   | (8  | ) |  |  | (19.5 | )%
|Large commercial & industrial           |  |                 | 40    |      |  |          | 49    |          |  |   | (9  | ) |  |  | (18.4 | )%
|Public authorities & electric railroads |  |                 | 8     |      |  |          | 9     |          |  |   | (1  | ) |  |  | (11.1 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|                                        |  |                 | 81    |      |  |          | 99    |          |  |   | (18 | ) |  |  | (18.2 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total PPO and delivery only             |  |                 | 193   |      |  |          | 248   |          |  |   | (55 | ) |  |  | (22.2 | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total electric retail revenues          |  |                 | 1,259 |      |  |          | 1,349 |          |  |   | (90 | ) |  |  | (6.7  | )%
|Wholesale and miscellaneous revenue(d)  |  |                 | 77    |      |  |          | 75    |          |  |   | 2   |   |  |  | 2.7   | % 
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total electric revenue                  |  | $               | 1,336 |      |  | $        | 1,424 |          |  | $ | (88 | ) |  |  | (6.2  | )%
|                                        |  |                 |       |      |  |          |       |          |  |   |     |   |  |  |       |   



---



|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 ComEds PPO
    includes an energy charge at market rates, transmission and
    distribution charges and a CTC.                                                                               
|   
|(c) | Delivery only revenue from customers choosing an
    ARES includes a distribution charge and a CTC charge.
    Transmission charges received from ARES are included in
    wholesale and miscellaneous revenue.               
|   
|(d) | Wholesale and miscellaneous revenues include
    transmission revenue, sales to municipalities and other
    wholesale energy sales.                                                                                          

The changes in electric retail revenues for the
three months ended March 31, 2004, as compared to the same
period in 2003, are attributable to the following:

|                        |  |          |     |  
|----------------------- |  | -------- | --- | -
|                        |  | Variance
|                        |  |         
|Customer choice         |  | $        | (56 | )
|Rate changes            |  |          | (42 | )
|Weather                 |  |          | (23 | )
|Volume                  |  |          | 31  |  
|                        |  |          |     |  
|Electric retail revenue |  | $        | (90 | )
|                        |  |          |     |  

Customer Choice.All
ComEd customers have the choice to purchase energy from other
suppliers. This choice generally does not impact the volume of
deliveries, but affects revenue collected from customers related
to energy supplied by ComEd. However, as of March 31, 2004,
no ARES has sought approval from the ICC, and no electric
utilities have chosen, to enter the ComEd residential market for
the supply of electricity.

83



---



##### Table of Contents



For the three months ended March 31, 2004,
the energy provided by alternative suppliers was 5,200 GWhs, or
23.8%, as compared to 3,462 GWhs, or 16.0%, for the same period
in 2003.

The decrease in revenues reflects customers in
Illinois electing to purchase energy from an ARES or the PPO. As
of March 31, 2004, the number of retail customers that had
elected to purchase energy from an ARES or the ComEd PPO was
approximately 20,200 as compared to 22,700 as of March 31,
2003, representing less than 1% of total customers in each
period. MWhs delivered to such customers increased from
approximately 6.2 million for the three months ended
March 31, 2003 to 7.1 million for three months ended
March 31, 2004, or from 29% to 33% of total quarterly
retail deliveries.

Rate Changes.The
$76 million decrease in ComEds collection of CTCs for
the three months ended March 31, 2004 as compared to the
same period in 2003 was due to a decrease in the CTC rates as a
result of higher wholesale market prices of electricity, net of
increased mitigation factors. This decrease was partially offset
by increased wholesale market prices which increased energy
revenue received under ComEds PPO by $19 million and
by increased average rates paid by residential customers of
$5 million. Although residential rates are frozen through
2006, average residential rates fluctuate due to the usage
patterns of customers. Starting in the June 2003 billing cycle,
the increased wholesale market price of electricity, net of
increased mitigation factors, decreases the collection of CTCs
as compared to the respective prior year period.

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 March 31,
2004 were unfavorable compared to the same period in 2003 as a
result of milder winter weather in 2004. Heating degree-days
decreased 5% for the three months ended March 31, 2004
compared to the same period in 2003, and were 2% lower than
normal.

Volume.Revenues
from higher delivery volume, exclusive of weather, increased
$31 million due to an increased usage per customer,
primarily residential and large commercial and industrial.

Wholesale and miscellaneous revenue for the three
months ended March 31, 2004 compared to the three months
ended March 31, 2003 remained constant.



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

The decrease in purchased power expense was
primarily attributable to a $52 million decrease as a
result of customers choosing to purchase energy from an ARES, an
$8 million decrease due to unfavorable weather conditions,
and a $7 million decrease due to the mix of average pricing
related to ComEds PPA with Generation partially offset by
an increase of $15 million due to higher volume.



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

The decrease in O&M expense was primarily
attributable to a net one-time charge of $41 million in
2003 as a result of an agreement with various Illinois retail
market participants and other interested parties (Agreement) and
a decrease in payroll expenses at ComEd of $22 million due
to fewer employees as a result of Exelon Way terminations and
the centralization of key functions partially offset by
$17 million due to higher corporate allocations and
$8 million of higher employee fringe benefits in 2004. The
increase in corporate allocations was driven by payroll expenses
and employee fringe benefits resulting from the centralization
of certain functions which transferred certain employees from
ComEd to BSC in 2004.

84



---



##### Table of Contents





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

|                                          |  |                 |     |      |  |          |    |          |  |   |   |  |  |  |      |  
|----------------------------------------- |  | --------------- | --- | ---- |  | -------- | -- | -------- |  | - | - |  |  |  | ---- | -
|                                          |  |                 |     |      |  |         
|                                          |  | Three Months    |     |      |  |         
|                                          |  | Ended March 31, |     |      |  |         
|                                          |  |                 |     |      |  |         
|                                          |  | 2004            |     | 2003 |  | Variance |    | % Change
|                                          |  |                 |     |      |  |          |    |         
|Depreciation expense                      |  | $               | 81  |      |  | $        | 75 |          |  | $ | 6 |  |  |  | 8.0  | %
|Recoverable transition costs amortization |  |                 | 11  |      |  |          | 11 |          |  |   |  |  |  |  |     |  
|Other amortization expense                |  |                 | 10  |      |  |          | 8  |          |  |   | 2 |  |  |  | 25.0 | %
|                                          |  |                 |     |      |  |          |    |          |  |   |   |  |  |  |      |  
|Total depreciation and amortization       |  | $               | 102 |      |  | $        | 94 |          |  | $ | 8 |  |  |  | 8.5  | %
|                                          |  |                 |     |      |  |          |    |          |  |   |   |  |  |  |      |  

The increase in depreciation expense is primarily
due to higher property, plant and equipment balances.

Recoverable transition costs amortization
remained constant in the three months ended March 31, 2004
compared to the same period in 2003. ComEd expects to fully
recover its recoverable transition costs regulatory asset
balance of $120 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 remained constant for
three months ended March 31, 2004 as compared to the same
period in 2003.



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

The aggregate of interest expense, interest
expense to affiliates and distributions on mandatorily
redeemable preferred securities decreased as a result of
scheduled principal payments and refinancing existing debt at
lower interest rates. Effective December 31, 2003, at the
adoption of FIN No. 46-R, ComEd deconsolidated its
financing trusts (see Note 2 of the Condensed 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

In 2004, ComEd has $3 million of equity in
net loss of subsidiaries as a result of deconsolidating its
financing trusts.



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

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



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

The effective income tax rate was 40.3% for the
three months ended March 31, 2004, compared to 39.9% for
the three months ended March 31, 2003.



| |                                                          
| | ---------------------------------------------------------
| | 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

85



---



##### Table of Contents



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,
repayments of maturing 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 three months
ended March 31, 2004 and 2003 were $299 million and
$36 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 three
months ended March 31, 2004 and 2003 were affected by the
following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the first quarter of 2003, ComEd made
    additional payments to Generation for amounts owed under the
    PPA. At March 31, 2004 and December 31, 2003, ComEd
    had accrued payments due to Generation under the PPA of
    $152 million and $171 million, respectively. At
    March 31, 2003 and December 31, 2002, ComEd had
    accrued payments due to Generation under the PPA of
    $154 million and $339 million, respectively.
|
| |  | Discretionary contributions by ComEd to
    Exelons defined benefit pension plans were
    $72 million for the three months ended March 31, 2004
    compared to $59 million for the same period in 2003.                                                                                                                                                                                                                                        

ComEd participates in Exelons defined
benefit pension plans. Exelon expects to contribute up to
approximately $419 million to its pension plans in 2004,
including $17 million to satisfy IRS minimum funding
requirements, of which $216 million is expected to be
funded by ComEd.

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 March 31, 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, reflects the most likely probable
expected outcome 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 from investing activities were
$24 million for the three months ended March 31, 2004
compared to cash flows used in investing activities of
$169 million for the same period in 2003. The increase in

86



---



##### Table of Contents



cash flows from investing activities was
primarily attributable to $179 million of proceeds from an
investment in the Exelon intercompany money pool and
$22 million net changes in restricted cash. ComEds
investing activities for the three months ended March 31,
2004 were funded primarily through operating activities.


ComEds capital expenditures for the three
months ended March 31, 2004 and 2003 were $178 million
and $174 million, respectively. ComEd estimates that it
will spend approximately $616 million in total capital
expenditures for 2004. Approximately one half of the budgeted
2004 expenditures are for continuing efforts to improve the
reliability of its transmission and distribution systems. The
remaining amount is for capital additions to support new
business and customer growth. ComEd anticipates that it will
obtain financing, when necessary, through borrowings, the
issuance of 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
three months ended March 31, 2004 were $341 million as
compared to cash flows from financing activities of
$149 million in 2003. The increase in cash flows used in
financing activities is primarily attributable to net changes in
long-term debt of $592 million, partially offset by net
changes in short-term debt of $26 million and interest-rate
swap settlements of $43 million. Additionally, ComEd paid a
$103 million dividend to Exelon during the three months
ended March 31, 2004 compared to a $120 million
dividend during the same period in 2003.



| |              
| | -------------
| | 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. ComEd participates, along with Exelon Corporate,
PECO 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.
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 March 31, 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 three months ended March 31, 2004, ComEd earned
$1 million in interest on its investments 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 March 31, 2004, ComEd has a current shelf registration
statement for the sale of $555 million of securities that
is effective with the SEC. 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 March 31, 2004,
ComEd had retained earnings of $962 million, of which
$891 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.

87



---



##### Table of Contents





| |                                                                                      
| | -------------------------------------------------------------------------------------
| | 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 March 31, 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 7 to the Condensed 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.

88



---



##### Table of Contents






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 Summary

Financial Results.PECO experienced an overall decline in net income of 4% in the
first quarter of 2004. This decline was a result of lower
electric operating revenues net of purchased power, primarily
due to lower full service residential and small commercial and
industrial sales.

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. PECO
recorded a severance charge of $5 million associated with
the implementation of The Exelon Way for the three months ended
March 31, 2004 and is considering whether it will incur
additional severance related costs in future periods.

Financing
Activities.PECO repaid
$88 million of long-term debt to PECO Energy Transition
Trust. PECO met all of its capital resource commitments with
internally generated cash and expects to do so in the
foreseeable future.

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.

89



---



##### Table of Contents



Results of Operations



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Three Months Ended March 31, 2004
    Compared to Three Months Ended March 31, 2003

|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |        |     |  
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ---- | --- | -------- | ----- | -------- | --- | - | --- | --- | -- | - | ----- | ------ | --- | -
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | Three Months                      |       |      |     |         
|                            |                                                                  | Ended March 31,                   |       |      |     |         
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | 2004                              |       | 2003 |     | Variance |       | % Change
|                            |                                                                  |                                   |       |      |     |          |       |         
|Operating revenues          |                                                                  | $                                 | 1,239 |      |     | $        | 1,217 |          |     | $ | 22  |     |    |   | 1.8   | %     
|Operating expenses          |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|                            | Purchased power                                                  |                                   |       | 396  |     |          |       | 422      |     |   |     | (26 | )  |   |       | (6.2   | )% 
|                            | Fuel                                                             |                                   |       | 250  |     |          |       | 191      |     |   |     | 59  |    |   |       | 30.9   | %  
|                            | Operating and maintenance                                        |                                   |       | 135  |     |          |       | 139      |     |   |     | (4  | )  |   |       | (2.9   | )% 
|                            | Depreciation and amortization                                    |                                   |       | 125  |     |          |       | 120      |     |   |     | 5   |    |   |       | 4.2    | %  
|                            | Taxes other than income                                          |                                   |       | 58   |     |          |       | 63       |     |   |     | (5  | )  |   |       | (7.9   | )% 
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|                            |                                                                  | Total operating expenses          |       |      | 964 |          |       |          | 935 |   |     |     | 29 |   |       |        | 3.1 | %
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|Operating income            |                                                                  |                                   | 275   |      |     |          | 282   |          |     |   | (7  | )   |    |   | (2.5  | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|Other income and deductions |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|                            | Interest expense                                                 |                                   |       | (14  | )   |          |       | (86      | )   |   |     | 72  |    |   |       | (83.7  | )% 
|                            | Interest expense to affiliates                                   |                                   |       | (63  | )   |          |       |         |     |   |     | (63 | )  |   |       | n.m.   |    
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |     |     |          |       | (2       | )   |   |     | 2   |    |   |       | (100.0 | )% 
|                            | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |       | (7   | )   |          |       |         |     |   |     | (7  | )  |   |       | n.m.   |    
|                            | Other, net                                                       |                                   |       | 2    |     |          |       | 9        |     |   |     | (7  | )  |   |       | (77.8  | )% 
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|                            |                                                                  | Total other income and deductions |       |      | (82 | )        |       |          | (79 | ) |     |     | (3 | ) |       |        | 3.8 | %
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|Income before income taxes  |                                                                  |                                   | 193   |      |     |          | 203   |          |     |   | (10 | )   |    |   | (4.9  | )%    
|Income taxes                |                                                                  |                                   | 62    |      |     |          | 66    |          |     |   | (4  | )   |    |   | (6.1  | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|Net income                  |                                                                  |                                   | 131   |      |     |          | 137   |          |     |   | (6  | )   |    |   | (4.4  | )%    
|Preferred stock dividends   |                                                                  |                                   | 1     |      |     |          | 2     |          |     |   | (1  | )   |    |   | (50.0 | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       
|Net income on common stock  |                                                                  | $                                 | 130   |      |     | $        | 135   |          |     | $ | (5  | )   |    |   | (3.7  | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |     |   |     |     |    |   |       |       



| | 
| | 
| | 

n.m.  not meaningful

90



---



##### Table of Contents





| |                  
| | -----------------
| | Operating Revenue

PECOs electric sales statistics were as
follows:

|                                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |      |   
|---------------------------------------------- | ------------------- | ------------ | ----- | ----- |  | -------- | ----- | -------- |  |  | ---- | ---- | - |  | ----- | ---- | --
|                                               |                     |              |       |       |  |         
|                                               |                     | Three Months |       |       |  |         
|                                               |                     | March 31,    |       |       |  |         
|                                               |                     |              |       |       |  |         
|Retail Deliveries  (in GWhs)                  |                     | 2004         |       | 2003  |  | Variance |       | % Change
|                                               |                     |              |       |       |  |          |       |         
|Full service(a)                                |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |              | 2,744 |       |  |          | 3,115 |          |  |  | (371 | )    |   |  | (11.9 | )%  
|Small commercial & industrial                  |                     |              | 1,684 |       |  |          | 1,780 |          |  |  | (96  | )    |   |  | (5.4  | )%  
|Large commercial & industrial                  |                     |              | 3,617 |       |  |          | 3,482 |          |  |  | 135  |      |   |  | 3.9   | %   
|Public authorities & electric railroads        |                     |              | 229   |       |  |          | 253   |          |  |  | (24  | )    |   |  | (9.5  | )%  
|                                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|                                               | Total full service  |              |       | 8,274 |  |          |       | 8,630    |  |  |      | (356 | ) |  |       | (4.1 | )%
|                                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|Delivery only(b)                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |              | 582   |       |  |          | 264   |          |  |  | 318  |      |   |  | 120.5 | %   
|Small commercial & industrial                  |                     |              | 424   |       |  |          | 202   |          |  |  | 222  |      |   |  | 109.9 | %   
|Large commercial & industrial                  |                     |              | 150   |       |  |          | 210   |          |  |  | (60  | )    |   |  | (28.6 | )%  
|Public authorities & electric
    railroads(c) |                     |              |      |       |  |          |      |          |  |  |     |      |   |  |      |     
|                                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|                                               | Total delivery only |              |       | 1,156 |  |          |       | 676      |  |  |      | 480  |   |  |       | 71.0 | % 
|                                               |                     |              |       |       |  |          |       |          |  |  |      |      |   |  |       |     
|Total retail deliveries                        |                     |              | 9,430 |       |  |          | 9,306 |          |  |  | 124  |      |   |  | 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 alternative energy
    supplier.
|   
|(c) | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than one GWh per
    quarter.        

|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |       |   
|---------------------------------------------- | ------------------- | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- | --- | - |  | ----- | ----- | --
|                                               |                     |                 |     |      |  |         
|                                               |                     | Three Months    |     |      |  |         
|                                               |                     | Ended March 31, |     |      |  |         
|                                               |                     |                 |     |      |  |         
|Electric Revenue                               |                     | 2004            |     | 2003 |  | Variance |     | % Change
|                                               |                     |                 |     |      |  |          |     |         
|Full service(a)                                |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|Residential                                    |                     | $               | 314 |      |  | $        | 359 |          |  | $ | (45 | )   |   |  | (12.5 | )%   
|Small commercial & industrial                  |                     |                 | 176 |      |  |          | 194 |          |  |   | (18 | )   |   |  | (9.3  | )%   
|Large commercial & industrial                  |                     |                 | 270 |      |  |          | 266 |          |  |   | 4   |     |   |  | 1.5   | %    
|Public authorities & electric railroads        |                     |                 | 20  |      |  |          | 22  |          |  |   | (2  | )   |   |  | (9.1  | )%   
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|                                               | Total full service  |                 |     | 780  |  |          |     | 841      |  |   |     | (61 | ) |  |       | (7.3  | )%
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|Delivery only(b)                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|Residential                                    |                     |                 | 42  |      |  |          | 17  |          |  |   | 25  |     |   |  | 147.1 | %    
|Small commercial & industrial                  |                     |                 | 20  |      |  |          | 10  |          |  |   | 10  |     |   |  | 100.0 | %    
|Large commercial & industrial                  |                     |                 | 4   |      |  |          | 6   |          |  |   | (2  | )   |   |  | (33.3 | )%   
|Public authorities & electric
    railroads(c) |                     |                 |    |      |  |          |    |          |  |   |    |     |   |  |      |      
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|                                               | Total delivery only |                 |     | 66   |  |          |     | 33       |  |   |     | 33  |   |  |       | 100.0 | % 
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|Total electric retail revenues                 |                     |                 | 846 |      |  |          | 874 |          |  |   | (28 | )   |   |  | (3.2  | )%   
|Wholesale and miscellaneous revenue(d)         |                     |                 | 49  |      |  |          | 55  |          |  |   | (6  | )   |   |  | (10.9 | )%   
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      
|Total electric revenue                         |                     | $               | 895 |      |  | $        | 929 |          |  | $ | (34 | )   |   |  | (3.7  | )%   
|                                               |                     |                 |     |      |  |          |     |          |  |   |     |     |   |  |       |      

91



---



##### Table of Contents





---



|    |                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.
|   
|(b) | Delivery only revenue reflects revenue from
    customers receiving generation from an alternative supplier,
    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 and other wholesale energy sales.                                                                                                                                     

The changes in electric retail revenues for the
three months ended March 31, 2004, as compared to the same
period in 2003, were as follows:

|                |  |          |     |  
|--------------- |  | -------- | --- | -
|                |  | Variance
|                |  |         
|Customer choice |  | $        | (26 | )
|Rate mix        |  |          | (19 | )
|Weather         |  |          | (7  | )
|Volume          |  |          | 20  |  
|Rate change     |  |          | 4   |  
|                |  |          |     |  
|Retail revenue  |  | $        | (28 | )
|                |  |          |     |  

Customer Choice.All
PECO customers may choose to purchase energy from other
suppliers. This choice generally 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 March 31, 2004,
the energy provided by alternative suppliers was
1,156 GWhs, or 12.3%, as compared to 676 GWhs, or
7.3%, for the three months ended March 31, 2003. As of
March 31, 2004, the number of customers served by
alternative suppliers was 302,000, or 19.6%, as compared to
273,700, or 17.9%, as of March 31, 2003. The increase in
both the energy provided by alternative suppliers and the number
of customers served by alternative suppliers was due to the
assignment of customers to alternative suppliers in 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 during the three months
ended March 31, 2004 as compared to the same period in 2003.

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 were unfavorable compared to the prior year
as a result of milder winter weather during the quarter. Heating
degree-days decreased 3% compared to the same period in 2003.

Volume.Exclusive of
the effect of weather conditions and customer choice, higher
delivery volume related primarily to increased usage by all
customer classes.

Rate change.Revenues increased $4 million due to a scheduled phase-out
of merger-related rate reductions. Under the settlement
agreement entered into by PECO in 2000 relating to the
PUCs approval of the merger among PECO, Unicom
Corporation, the former parent company of ComEd, and Exelon,
PECO agreed to $200 million in aggregate rate reductions
for all customers over the period January 1, 2002 through
2005. Rates were reduced by $60 million per year in 2002
and 2003 and will be reduced by $40 million per year in
2004 and 2005.

Electric wholesale and miscellaneous revenue
decreased $6 million primarily due to lower transmission
revenue from PJM.

92



---



##### Table of Contents



PECOs gas sales statistics for the three
months ended March 31, 2004 as compared to the same period
in 2003 were as follows:

|                                  |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|--------------------------------- |  | --------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                  |  |                 |        |      |  |         
|                                  |  | Three Months    |        |      |  |         
|                                  |  | Ended March 31, |        |      |  |         
|                                  |  |                 |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004            |        | 2003 |  | Variance |        | % Change
|                                  |  |                 |        |      |  |          |        |         
|Retail sales                      |  |                 | 29,803 |      |  |          | 31,460 |          |  |  | (1,657 | ) |  |  | (5.3  | )%
|Transportation                    |  |                 | 7,132  |      |  |          | 8,166  |          |  |  | (1,034 | ) |  |  | (12.7 | )%
|                                  |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total                             |  |                 | 36,935 |      |  |          | 39,626 |          |  |  | (2,691 | ) |  |  | (6.8  | )%
|                                  |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   

|                  |  |                 |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|----------------- |  | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- |  |  |  | ---- | -
|                  |  |                 |     |      |  |         
|                  |  | Three Months    |     |      |  |         
|                  |  | Ended March 31, |     |      |  |         
|                  |  |                 |     |      |  |         
|Revenue           |  | 2004            |     | 2003 |  | Variance |     | % Change
|                  |  |                 |     |      |  |          |     |         
|Retail sales      |  | $               | 328 |      |  | $        | 273 |          |  | $ | 55 |  |  |  | 20.1 | %
|Transportation    |  |                 | 5   |      |  |          | 5   |          |  |   |   |  |  |  |     |  
|Resales and other |  |                 | 11  |      |  |          | 10  |          |  |   | 1  |  |  |  | 10.0 | %
|                  |  |                 |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|Total             |  | $               | 344 |      |  | $        | 288 |          |  | $ | 56 |  |  |  | 19.4 | %
|                  |  |                 |     |      |  |          |     |          |  |   |    |  |  |  |      |  

The changes in gas retail revenue for the three
months ended March 31, 2004 as compared to the same period
in 2003, were as follows:

|                          |  |          |    |  
|------------------------- |  | -------- | -- | -
|                          |  | Variance
|                          |  |         
|Rate changes              |  | $        | 69 |  
|Volume                    |  |          | (7 | )
|Weather                   |  |          | (7 | )
|                          |  |          |    |  
|Total gas retail revenues |  | $        | 55 |  
|                          |  |          |    |  

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,
December 1, 2003, and March 1, 2004. The average rate
per mmcf for the three months ended March 31, 2004 was 43%
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.

Volume.Exclusive of
the effect of weather conditions, revenues were lower in the
three months ended March 31, 2004 compared to the same
period in 2003 due primarily to decreased sales in the
residential and small commercial and industrial classes.

Weather.The weather
conditions were unfavorable compared to the prior year as a
result of milder winter weather during the quarter. Heating
degree-days decreased 3% compared to the same period in 2003.



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

The decrease in purchased power expense was
attributable to $26 million from customers in Pennsylvania
assigned to or selecting an alternative electric generation
supplier, $6 million of lower prices, a $5 million
decrease in PJM transmission charges, and a $3 million
decrease associated with lower sales due to unfavorable weather
conditions, partially offset by an increase of $14 million
related to increased sales exclusive of the effect of weather
conditions.



| |     
| | ----
| | Fuel

The increase in fuel expense was primarily
attributable to $69 million of higher gas costs, partially
offset by a decrease of $7 million related to decreased
sales exclusive of the effect of weather conditions and a
$4 million decrease associated with lower sales due to
unfavorable weather conditions.

93



---



##### Table of Contents





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

The decrease in operating and maintenance expense
was primarily attributable to $9 million of lower payroll
due to The Exelon Way and $8 million of lower expenses
related to the allowance for uncollectible accounts due to
increased collection efforts and customer deposits, partially
offset by $11 million of higher corporate allocations and
$5 million of severance and severance-related costs
associated with The Exelon Way. The increase in corporate
allocations was driven by payroll expenses and employee fringe
benefits resulting from the centralization of certain functions
which transferred certain employees from PECO to BSC in 2004.



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

|                                           |  |                 |     |      |  |          |     |          |  |   |    |   |  |  |       |   
|------------------------------------------ |  | --------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- | - |  |  | ----- | --
|                                           |  |                 |     |      |  |         
|                                           |  | Three Months    |     |      |  |         
|                                           |  | Ended March 31, |     |      |  |         
|                                           |  |                 |     |      |  |         
|                                           |  | 2004            |     | 2003 |  | Variance |     | % Change
|                                           |  |                 |     |      |  |          |     |         
|Competitive transition charge amortization |  | $               | 88  |      |  | $        | 81  |          |  | $ | 7  |   |  |  | 8.6   | % 
|Depreciation expense                       |  |                 | 33  |      |  |          | 33  |          |  |   |   |   |  |  |      |   
|Other amortization expense                 |  |                 | 4   |      |  |          | 6   |          |  |   | (2 | ) |  |  | (33.3 | )%
|                                           |  |                 |     |      |  |          |     |          |  |   |    |   |  |  |       |   
|Total depreciation and amortization        |  | $               | 125 |      |  | $        | 120 |          |  | $ | 5  |   |  |  | 4.2   | % 
|                                           |  |                 |     |      |  |          |     |          |  |   |    |   |  |  |       |   

The additional amortization of the CTC is in
accordance with PECOs original settlement under the
Pennsylvania Competition Act.



| |                        
| | -----------------------
| | Taxes Other Than Income

The decrease in taxes other than income was
primarily attributable to $3 million of lower capital stock
tax and $1 million related to lower payroll taxes.



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

The aggregate of interest expense, interest
expense to affiliates and distributions on mandatorily
redeemable preferred securities decreased primarily due to lower
outstanding debt and refinancing existing debt at lower rates.
Effective December 31, 2003, at the adoption of
FIN No. 46-R, PECO deconsolidated its financing trusts
(see Note 2 of the Condensed Combined Notes to Consolidated
Financial Statements). PECO no longer records distributions on
mandatorily redeemable preferred securities but records interest
expense to affiliates related to PECOs obligations to the
financing trusts.



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

In 2004, PECO has $7 million in the equity
in net loss of subsidiaries as a result of deconsolidating its
financing trusts.



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

The decrease was attributable to a
$4 million decrease in interest income and a
$3 million favorable settlement of a customer contract in
2003.



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

The effective tax rate was 32.1% for the three
months ended March 31, 2004 as compared to 32.5% for the
same period in 2003.

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

94



---



##### Table of Contents



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, repayments of maturing
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 three months
ended March 31, 2004 and 2003 were $218 million and
$96 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 three
months ended March 31, 2004 and 2003 were affected by the
following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Natural gas inventories and deferred natural gas
    costs decreased $30 million and $70 million,
    respectively, during the three months ended March 31, 2004
    resulting in a $100 million increase to operating cash
    flows. During 2003, a decrease in natural gas inventories of
    $45 million partially offset by an increase in deferred
    natural gas costs of $28 million resulted in cash from
    operations of $17 million.
|
| |  | Discretionary contributions by PECO to
    Exelons defined benefit pension plans were $3 million
    during the three months ended March 31, 2004 compared to
    $6 million for the same period in 2003.                                                                                                                                                                                                                                        

PECO participates in Exelons defined
benefit pension plans. Exelon expects to contribute up to
approximately $419 million to its pension plans in 2004,
including $17 million to satisfy IRS minimum funding
requirements, of which $8 million is expected to be funded
by PECO.



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

Cash flows used in investing activities for the
three months ended March 31, 2004 were $48 million
compared to $77 million of cash flows provided by investing
activities in 2003. The decrease in cash flows used in investing
activities was primarily attributable to a change in restricted
cash of $136 million and a decrease in capital expenditures
of $17 million. PECOs investing activities during the
three months ended March 31, 2004 were funded primarily by
operating activities.

PECOs projected capital expenditures for
2004 are $233 million. Approximately 60% of the budgeted
2004 expenditures are 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
three months ended March 31, 2004 were $107 million
compared to $132 million for the same period in 2003. Cash
flows used in financing activities are primarily attributable to
debt service and payment of dividends to Exelon. The decrease in
cash flows used in financing

95



---



##### Table of Contents



activities was primarily attributable to
decreased debt redemptions of $276 million, partially
offset by decreased issuances of long-term debt of
$250 million. PECO paid dividends of $91 million
during the three months ended March 31, 2004 and 2003,
respectively, of which $90 million and $89 million,
respectively, were paid to Exelon.




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

Exelon Credit
Facility.PECO meets its short-term
liquidity requirements primarily through the issuance of
commercial paper and borrowings from Exelons intercompany
money pool. PECO participates, 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.
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 March 31, 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 three months ended
March 31, 2004, PECO earned less than $1 million in
interest from its investments 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 PECOs security ratings.

Shelf Registration.As of March 31, 2004, PECO has a current shelf registration
statement for the sale of $625 million of securities that
is effective with the SEC. 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 March 31, 2004,
PECO had retained earnings of $586 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 March 31, 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 17 to the Condensed 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.

96



---



##### Table of Contents






EXELON GENERATION COMPANY, LLC

General

Generation operates as a single segment and
consists of electric generating facilities, energy marketing
operations, a 50% interest in Sithe 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. Generations results of operations have
not been adjusted to reflect Exelon Energy Company as a part of
Generation for 2003. Exelon Energy Company reported the
following results for the three months ended March 31, 2003:

|                                  |  |   |     |  
|--------------------------------- |  | - | --- | -
|Total revenues                    |  | $ | 330 |  
|Intersegment revenues             |  |   | 6   |  
|Income (loss) before income taxes |  |   | (16 | )
|Income taxes (benefit)            |  |   | (6  | )
|Net income (loss)                 |  |   | (10 | )

Executive Summary

Financial Results.Generation reported an overall increase in net income for the
first quarter of 2004 as compared to the first quarter of 2003.
This increase was primarily the result of the first quarter 2003
$200 million impairment charge of Generations
investment in Sithe. Overall results were also affected by
modest improvements in wholesale energy prices in 2004, which
increased Generations energy margins. Generations
revenue, net of purchased power and fuel, increased
significantly in 2004 as compared to 2003, primarily as a result
of the acquisition of the remaining 50% of AmerGen in December
2003, the transfer of Exelon Energy Company to Generation on
January 1, 2004 and the commencement of commercial
operations at Boston Generatings Mystic 8 and 9 and
Fore River generating facilities after the first quarter of
2003. In 2004, Generation recorded an after-tax gain of
$32 million due to the adoption of FIN No. 46-R, which
resulted in the consolidation of Sithe within Generations
financial statements as of March 31, 2004, compared to an
after-tax gain of $108 million recorded in 2003 upon the
adoption of SFAS No. 143.

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. Generation released related
reserves of $6 million during the first quarter of 2004.
Based upon current estimates, Generation expects that
513 employees will be severed through 2004.

Investment Strategy.Generation continues to follow a disciplined approach in
investing to maximize the earnings and cash flows from its
assets and businesses and to sell those that do not meet its
goals.

On February 23, 2004, Generation and the
lenders under the Boston Generating Facility entered into a
settlement that will result in the sale of Boston Generating,
which owns the companies that own the Mystic 4-7,
Mystic 8 and 9 and Fore River generating facilities, and
the transfer of responsibility for plant operations and power
marketing activities to a special purpose entity owned by the
lenders. Generation also settled certain litigation associated
with the projects. Upon entering into the sale agreement with
the lenders, the assets and liabilities of Boston Generating
were classified as held for sale within Generations
Consolidated Balance Sheet.

Financing
Activities.During the first quarter,
Generation issued $165 million of commercial paper to fund
operations, however, following the sale of Boston Generating,
Generation expects to meet all of its capital resource
commitments with internally generated cash for the foreseeable
future, absent new acquisitions

Operations.Generations nuclear fleet achieved a 90.5% capacity factor
in the first quarter of 2004 compared to 94.4% in the first
quarter of 2003, primarily as a result of an increased number of
planned outages and outage days in 2004 as compared to 2003.
Generation continued the integration of the AmerGen fleet into

97



---



##### Table of Contents



Generation, following the 2003 acquisition of the
remaining 50% interest in the venture, which was previously held
by British Energy plc (British Energy).


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 March 31, 2004
    Compared to Three Months Ended March 31, 2003

|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |        |        |   
|------------------------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------- | ----- | ---- | ----- | -------- | ----- | -------- | ----- | - | --- | ---- | --- |  | ----- | ------ | ------ | --
|                                                                               |                                                              |                                   |       |      |       |         
|                                                                               |                                                              | Three Months                      |       |      |       |         
|                                                                               |                                                              | Ended March 31,                   |       |      |       |         
|                                                                               |                                                              |                                   |       |      |       |         
|                                                                               |                                                              | 2004                              |       | 2003 |       | Variance |       | % Change
|                                                                               |                                                              |                                   |       |      |       |          |       |         
|Operating revenues                                                             |                                                              | $                                 | 1,953 |      |       | $        | 1,879 |          |       | $ | 74  |      |     |  | 3.9   | %     
|Operating expenses                                                             |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                               | Purchased power                                              |                                   |       | 519  |       |          |       | 841      |       |   |     | (322 | )   |  |       | (38.3  | )%    
|                                                                               | Fuel                                                         |                                   |       | 586  |       |          |       | 364      |       |   |     | 222  |     |  |       | 61.0   | %     
|                                                                               | Operating and maintenance                                    |                                   |       | 652  |       |          |       | 487      |       |   |     | 165  |     |  |       | 33.9   | %     
|                                                                               | Depreciation and amortization                                |                                   |       | 55   |       |          |       | 45       |       |   |     | 10   |     |  |       | 22.2   | %     
|                                                                               | Taxes other than income                                      |                                   |       | 47   |       |          |       | 48       |       |   |     | (1   | )   |  |       | (2.1   | )%    
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                               |                                                              | Total operating expenses          |       |      | 1,859 |          |       |          | 1,785 |   |     |      | 74  |  |       |        | 4.1    | % 
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|Operating income                                                               |                                                              |                                   | 94    |      |       |          | 94    |          |       |   |    |      |     |  |      |       
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|Other income and deductions                                                    |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                               | Interest expense                                             |                                   |       | (26  | )     |          |       | (19      | )     |   |     | (7   | )   |  |       | 36.8   | %     
|                                                                               | Equity in earnings (losses) of unconsolidated
    affiliates |                                   |       | (2   | )     |          |       | 19       |       |   |     | (21  | )   |  |       | (110.5 | )%    
|                                                                               | Other, net                                                   |                                   |       | 47   |       |          |       | (167     | )     |   |     | 214  |     |  |       | (128.1 | )%    
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                               |                                                              | Total other income and deductions |       |      | 19    |          |       |          | (167  | ) |     |      | 186 |  |       |        | (111.4 | )%
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|Income (loss) before income taxes                                              |                                                              |                                   | 113   |      |       |          | (73   | )        |       |   | 186 |      |     |  | n.m.  |       
|Income tax expense (benefit)                                                   |                                                              |                                   | 46    |      |       |          | (21   | )        |       |   | 67  |      |     |  | n.m.  |       
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|Income (loss) before cumulative effect of
    changes in accounting principles |                                                              |                                   | 67    |      |       |          | (52   | )        |       |   | 119 |      |     |  | n.m.  |       
|Cumulative effect of changes in accounting
    principles, net of income taxes |                                                              |                                   | 32    |      |       |          | 108   |          |       |   | (76 | )    |     |  | (70.4 | )%    
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       
|Net income                                                                     |                                                              | $                                 | 99    |      |       | $        | 56    |          |       | $ | 43  |      |     |  | 76.8  | %     
|                                                                               |                                                              |                                   |       |      |       |          |       |          |       |   |     |      |     |  |       |       



---

n.m.  not meaningful

98



---



##### Table of Contents





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

For the three months ended March 31, 2004
and 2003, Generations sales were as follows:

|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|-------------------------------------------- |  | --------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ------ | --
|                                             |  |                 |       |      |  |         
|                                             |  | Three Months    |       |      |  |         
|                                             |  | Ended March 31, |       |      |  |         
|                                             |  |                 |       |      |  |         
|Revenue                                      |  | 2004            |       | 2003 |  | Variance |       | % Change
|                                             |  |                 |       |      |  |          |       |         
|Energy Delivery and Exelon Energy Company(a) |  | $               | 860   |      |  | $        | 965   |          |  | $ | (105 | ) |  |  | (10.9  | )%
|Market and retail electric sales(b)          |  |                 | 884   |      |  |          | 857   |          |  |   | 27   |   |  |  | 3.2    | % 
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Total electric energy sales revenue          |  |                 | 1,744 |      |  |          | 1,822 |          |  |   | (78  | ) |  |  | (4.3   | )%
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Retail gas sales                             |  |                 | 176   |      |  |          |      |          |  |   | 176  |   |  |  | n.m.   |   
|Trading portfolio                            |  |                 |      |      |  |          | (1    | )        |  |   | 1    |   |  |  | (100.0 | )%
|Other revenue                                |  |                 | 33    |      |  |          | 58    |          |  |   | (25  | ) |  |  | (43.1  | )%
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   
|Total revenue                                |  | $               | 1,953 |      |  | $        | 1,879 |          |  | $ | 74   |   |  |  | 3.9    | % 
|                                             |  |                 |       |      |  |          |       |          |  |   |      |   |  |  |        |   



---



|    |                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                                                          



|       |               
|------ | --------------
|n.m.  | not meaningful

|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|-------------------------------------------- |  | ------------ | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                             |  |              |        |      |  |         
|                                             |  | Three Months |        |      |  |         
|                                             |  | Ended,       |        |      |  |         
|                                             |  |              |        |      |  |         
|Sales (in GWhs)                              |  | 2004 (c)     |        | 2003 |  | Variance |        | % Change
|                                             |  |              |        |      |  |          |        |         
|Energy Delivery and Exelon Energy Company(a) |  |              | 27,464 |      |  |          | 30,594 |          |  |  | (3,130 | ) |  |  | (10.2 | )%
|Market and retail electric sales(b)          |  |              | 23,983 |      |  |          | 23,815 |          |  |  | 168    |   |  |  | 0.7   | % 
|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total sales                                  |  |              | 51,447 |      |  |          | 54,409 |          |  |  | (2,962 | ) |  |  | (5.4  | )%
|                                             |  |              |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                                            
|   
|(c) | Sales in 2004 do not include 5,453 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 5,113 GWhs and 9,527 GWhs for
the three months ended March 31, 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 and other
operating data for the three months ended March 31, 2004
and 2003 are as follows:

|                                                             |                                              |                 |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | -------------------------------------------- | --------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                              |                 |       |      
|                                                             |                                              | Three Months    |       |      
|                                                             |                                              | Ended March 31, |       |      
|                                                             |                                              |                 |       |      
|($/MWh)                                                      |                                              | 2004            |       | 2003  |  | % Change
|                                                             |                                              |                 |       |       |  |         
|Average revenue                                              |                                              |                 |       |       |  |          |       |       |  |  |      |     
|                                                             | Energy Delivery and Exelon Energy Company(a) |                 | $     | 31.31 |  |          | $     | 31.54 |  |  |      | (0.7 | )%
|                                                             | Market and retail electric sales(b)          |                 |       | 36.86 |  |          |       | 35.99 |  |  |      | 2.4  | % 
|                                                             | Total  excluding the trading portfolio      |                 |       | 33.90 |  |          |       | 33.49 |  |  |      | 1.2  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                              | $               | 21.48 |       |  | $        | 22.06 |       |  |  | (2.6 | )%  
|Average margin  excluding the trading
    portfolio         |                                              | $               | 12.42 |       |  | $        | 11.43 |       |  |  | 8.7  | %   



---



|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 sales.

99



---



##### Table of Contents





|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(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.

Market and Retail Electric
Sales.Market and retail electric
sales increased $40 million for the three months ended
March 31, 2004 compared to the same period in 2003,
primarily resulting from the following:

|                                             |  |          |      |  
|-------------------------------------------- |  | -------- | ---- | -
|                                             |  | Variance
|                                             |  |         
|Effects of EITF 03-11 adoption               |  | $        | (206 | )
|Boston Generating                            |  |          | 117  |  
|Exelon Energy Company and AmerGen operations |  |          | 78   |  
|Other operations                             |  |          | 51   |  
|                                             |  |          |      |  
|Increase in market and retail electric sales |  | $        | 40   |  
|                                             |  |          |      |  

Retail Gas Sales.Retail gas revenue increased $176 million as a result of
Exelon Energy Company retail operations, which were not included
in Generations financial results in 2003.

Energy Delivery and Exelon Energy
Company.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.
Revenue from sales to Exelon Energy Company for the three months
ended March 31, 2003 was $64 million.

Revenue from sales to affiliates decreased
primarily due to lower volume sales to Energy Delivery of
$55 million primarily due to customers electing to purchase
energy from alternative electric suppliers or ComEds PPO
and unfavorable weather conditions in the ComEd and PECO service
territories. Price increases in the PECO region, partially
offset by minimal price decreases in the ComEd region, resulted
in a $5 million increase in affiliate revenue.

Other.Revenues
decreased for the three months ended March 31, 2004 as
compared to the same period in 2003, primarily due to a
$10 million decrease in fuel sales which is due primarily
to gas sales in 2003 to Exelon Energy Company which is
consolidated in 2004, as well as decreased coal sales year over
year due to fewer coal contracts; and the effects of adopting
EITF 03-11, which calls for fuel expense to offset revenue
derived from certain fossil fuel transactions. See Note 2
of the Condensed Combined Notes to Consolidated Financial
Statements for additional information regarding EITF 03-11.
As a result, revenues and fuel expense were lowered by
$7 million, of which $5 million was related to Boston
Generating operations.



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

Generations supply source is summarized
below:

|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------ |  | --------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                     |  |                 |        |      |  |         
|                                     |  | Three Months    |        |      |  |         
|                                     |  | Ended March 31, |        |      |  |         
|                                     |  |                 |        |      |  |         
|Supply Source (in GWhs)              |  | 2004(c)         |        | 2003 |  | Variance |        | % Change
|                                     |  |                 |        |      |  |          |        |         
|Nuclear generation(a)                |  |                 | 33,411 |      |  |          | 29,330 |          |  |  | 4,081  |   |  |  | 13.9  | % 
|Purchases  non-trading portfolio(b) |  |                 | 11,691 |      |  |          | 20,029 |          |  |  | (8,338 | ) |  |  | (41.6 | )%
|Fossil and hydro generation          |  |                 | 6,345  |      |  |          | 5,050  |          |  |  | 1,295  |   |  |  | 25.6  | % 
|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total supply                         |  |                 | 51,447 |      |  |          | 54,409 |          |  |  | (2,962 | ) |  |  | (5.4  | )%
|                                     |  |                 |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Excludes AmerGen for 2003. AmerGen generated
    4,639 GWhs during the three months ended March 31, 2004.                                                                                        
|   
|(b) | Includes PPAs with AmerGen, which represented
    2,488 GWhs in 2003.                                                                                                                            
|   
|(c) | Sales in 2004 do not include 5,453 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

100



---



##### Table of Contents



Generations supply mix changed as a result
of increased fossil generation due to Boston Generatings
Mystic units 8 and 9 and Fore River generating facilities
becoming operational in the second and third quarter of 2003,
which in total account for an increase of 2,266 GWhs, and
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003. All of the power generated by AmerGen
plants is included in nuclear generation for 2004; previously,
power obtained from the AmerGen facilities was treated as
purchased power. Purchased power from AmerGen during the three
months ended March 31, 2003 was 2,488 GWhs.

The changes in Generations purchased power
and fuel expense for the three months ended March 31, 2004
compared to the same period in 2003 consisted of the following:

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Volume                                         |  | $        | (176 | )
|Price                                          |  |          | (96  | )
|AmerGen and Exelon Energy Company              |  |          | 112  |  
|Midwest Generation                             |  |          | (23  | )
|Boston Generating                              |  |          | 108  |  
|Mark-to-market adjustments on hedging activity |  |          | 8    |  
|Other                                          |  |          | (33  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (100 | )
|                                               |  |          |      |  

Volume.The decrease
reflects the effects of adopting EITF 03-11, resulting in a
decrease of $200 million. The decrease was partially offset
by a $21 million increase in purchased power volume and a
$3 million increase due to increased generation.

Price.The decrease
reflects lower market purchased power prices of $48 million
and lower average fossil fuel costs used for non-Boston
Generating operations of $48 million during the three
months ended March 31, 2004 as compared to the same period
in 2003.

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen and the transfer of Exelon Energy Company to Generation
effective January 1, 2004, purchased power decreased
$62 million and fuel expense increased $174 million.
Generation recorded no related party purchased power for the
quarter ended March 31, 2004. During the quarter ended
March 31, 2003, Generation recorded $68 million for
purchased power from AmerGen.

Midwest Generation.Generation decreased the volume of purchased power from Midwest
Generation as a result of Generation exercising its option to
reduce the capacity purchased from Midwest Generation.

Boston Generating.The Mystic 8 and 9 generating facilities began commercial
operations during the second quarter of 2003, and the Fore River
generating facility began commercial operations during the third
quarter of 2003. As a result, purchased power and fuel expense
increased $121 million. The increase was partially offset
by a decrease of $13 million related to the effects of
adopting EITF 03-11.

Hedging Activity.Mark-to-market losses on hedging activities were
$39 million for the three months ended March 31, 2004
compared to losses of $31 million for the same period of
2003. Hedging activities in 2004 relating to non-Boston
Generating accounted for a loss of $37 million, and
non-Boston Generating operations in 2004 accounted for a loss of
$2 million.

Other.Other
decreases in purchased power and fuel were primarily due to a
$21 million decrease in transmission expense resulting from
reduced inter-region transmission and a $4 million decrease
in intercompany purchased power expense.

101



---



##### Table of Contents





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

The changes in operating and maintenance expense
for the three months ended March 31, 2004 compared to the
same period in 2003 consisted of the following:

|                                                                      |  |          |     |  
|--------------------------------------------------------------------- |  | -------- | --- | -
|                                                                      |  | Variance
|                                                                      |  |         
|AmerGen and Exelon Energy Company(a)                                  |  | $        | 110 |  
|Refueling outage costs(b)                                             |  |          | 36  |  
|Boston Generating                                                     |  |          | 20  |  
|Decommissioning accretion costs(c)                                    |  |          | 7   |  
|Co-owned facilities                                                   |  |          | 5   |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |          | (9  | )
|Other                                                                 |  |          | (4  | )
|                                                                      |  |          |     |  
|Increase in operating and maintenance expense                         |  | $        | 165 |  
|                                                                      |  |          |     |  



---



|    |                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes refueling outage expenses of
    $24 million at AmerGen.                                                                         
|   
|(b) | Refueling outage days increased from 50 days
    for the three months ended March 31, 2003 to 114 days
    during the same period in 2004.
|   
|(c) | Includes $10 million due to AmerGen asset
    retirement obligation accretion.                                                            

Nuclear fleet operating data and purchased power
costs data for the three months ended March 31, 2004 and
2003 were as follows:

|                                                                     |  |                 |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | --------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |                
|                                                                     |  | Three Months   
|                                                                     |  | Ended March 31,
|                                                                     |  |                
|                                                                     |  | 2004            |       | 2003
|                                                                     |  |                 |       |     
|Nuclear fleet capacity factor(a)                                     |  |                 | 90.5  | %    |  |   | 94.4  | %
|Nuclear fleet production cost per MWh(a)                             |  | $               | 14.29 |      |  | $ | 12.80 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $               | 44.48 |      |  | $ | 41.99 |  



---



|    |                                                                      
|--- | ---------------------------------------------------------------------
|(a) | Includes AmerGen and excluding Salem, which is
    operated by PSE&G.
|   
|(b) | Includes PPAs with AmerGen in 2003.                                  

Lower nuclear capacity factors and increased
nuclear production costs were primarily due to 64 additional
planned refueling outage days, resulting in a $60 million
increase in planned outage costs, including $24 million of
planned refueling outage costs at AmerGen, in the three months
ended March 31, 2004 as compared to the same period in
2003. There were four planned outages during the three months
ended March 31, 2004, compared to two planned outages
during the same period in 2003. The three months ended
March 31, 2004 included five unplanned outages compared to
three unplanned outages during the same period in 2003. 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-Extended Power Uprate (EPU) generation
levels due to performance issues with their steam dryers.
Generation is currently evaluating data to determine when the
units can return to EPU output levels. There is a continued risk
that the Quad Cities units will not return to EPU operating
levels in the near future. There is also a risk that additional
expenditures will be required on these units to allow extended
operations at the EPU output levels.



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

The increase in depreciation and amortization
expense for the three months ended March 31, 2004 as
compared to the same period in 2003 was primarily attributable
to $8 million of additional depreciation expense on capital
additions placed in service after the first quarter of 2003, of
which $3 million of expense is

102



---



##### Table of Contents



related to the Boston Generating facilities. In
addition, depreciation and amortization expense increased
$2 million due to increased amortization of long-term debt
and capital leases.




| |                 
| | ----------------
| | Interest Expense

The increase in interest expense was primarily
due to the issuance of $500 million of Senior Notes in
December 2003.



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

The decrease in equity in earnings of
unconsolidated affiliates was partially due to a
$17 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.
See Note 3 of the Condensed Combined Notes to Consolidated
Financial Statements for further discussion of Generations
purchase of British Energys 50% interest in AmerGen. The
decrease was also due to a $4 million decrease in
Generations equity in earnings of Sithe. Sithes
earnings were primarily affected by unfavorable mark-to-market
activity.



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

The increase in other, net was primarily due to a
$200 million impairment charge during the three months
ended March 31, 2003 as a result of a change in fair value
of Generations investment in Sithe, and $11 million
of nuclear decommissioning trust income related to AmerGen in
2004.



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

The effective income tax rate was 40.6% for the
three months ended March 31, 2004 compared to 28.8% for the
same period in 2003. This increase was primarily attributable to
the impairment charges recorded in 2003 related to
Generations investment in Sithe which resulted in a
pre-tax loss. In addition, the rate increased due to the
additional nuclear decommissioning investment income associated
with AmerGen and its related taxes.



| |                                                          
| | ---------------------------------------------------------
| | Cumulative Effect of Changes in Accounting
    Principles

Net income for the three months ended
March 31, 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 net income for
the three months ended March 31, 2003 reflects income of
$108 million, net of income taxes, for the adoption of
SFAS No. 143. See Note 2 of the Condensed
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 and/or capital
contributions from Exelon. Generations working capital
deficit at March 31, 2004 is expected to be eliminated with
its anticipated continuance of positive operating cash flows and
the eventual elimination of Boston Generatings debt
balance upon the sale of Boston Generating. The sale of Boston
Generating will be substantively a non-cash transaction, with
the Boston Generating credit facility continuing as a liability
of Boston Generating at the time it is sold, without recourse to
Exelon or Generation. See Note 3 of the Condensed Combined
Notes to Consolidated Financial Statements for further
discussion of the sale of Boston Generating. 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

103



---



##### Table of Contents



construction, repayments of maturing debt, the
payment of distributions to Exelon, contributions to
Exelons pension plans and investments in new and existing
ventures. Any 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 three months
ended March 31, 2004 and 2003 were $202 million and
$278 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
Operation, Generations operating cash flows for the three
months ended March 31, 2004 were affected by the following
items:



| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sales to ComEd decreased in 2003 in line with the
    lower load requirements of the territory due to the customer
    choice initiative.                                                        
|
| |  | Discretionary contributions to Exelons
    defined benefit pension plans were $59 million for the
    three months ended March 31, 2004 compared to
    $50 million for the same period in 2003.

Generation participates in Exelons defined
benefit pension plans. Exelon expects to contribute up to
approximately $419 million to its pension plans in 2004,
including $17 million to satisfy IRS minimum funding
requirements, of which $170 million is expected to be
funded by Generation during 2004.



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

Cash flows used in investing activities were
$152 million and $272 million for the three months
ended March 31, 2004 and 2003, respectively. The decrease
in cash used in investing activities during the three months
ended March 31, 2004 is primarily attributable to
$53 million of restricted cash used for Boston Generating
operations during the three months ended March 31, 2004,
compared to $56 million of restricted cash received during
the three months ended March 31, 2003. In addition,
Generation received $42 million during the three months
ended March 31, 2004 from the sale of three gas turbines at
Generation that were classified as assets held for sale at
December 31, 2003. Generations capital expenditures
for the three months ended March 31, 2004 and 2003 were
$213 million and $175 million, respectively.
Generations capital expenditures represent additions to
nuclear fuel and additions and upgrades to existing facilities.
Generation estimates that it will spend approximately
$972 million in total capital expenditures in 2004.
Generation anticipates that nuclear refueling outages will
increase from eight in 2003 to ten in 2004. Generations
capital expenditures are expected to be funded by internally
generated funds.



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

Cash flows used in financing activities were
$108 million for the three months ended March 31,
2004, compared to $7 million cash provided in 2003. The
increase in cash flows used in financing activities was
primarily a result of the repayment of intercompany borrowings
of $190 million during the three months ended
March 31, 2004, compared to $6 million during the same
period in 2003, and the partial repayment of the acquisition
note payable to Sithe of $27 million. An additional use of
cash was the payment of distributions to Exelon totaling
$54 million. This use of cash was partially offset by the
issuance of $165 million of commercial paper during the
three months ended March 31, 2004.

104



---



##### Table of Contents





| |              
| | -------------
| | 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. Generation participates,
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. 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 March 31, 2004 is
described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Boston Generating Project
Debt.A description of this project
financing, and the orderly transition out of the ownership of
the related assets, is set forth above under Credit
Issues  Boston Generating Project Debt 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 three months
ended March 31, 2004, Generation paid $1 million in
interest to the money pool.

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 March 31, 2004, Generation had
undistributed earnings of $647 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 March 31, 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.
|
| |  | In connection with the consolidation of Sithe
    pursuant to FIN No. 46-R, Generation maintains a
    $50 million non-debt letter of credit under its credit
    agreement.           

105



---



##### Table of Contents








|        |                                                              
|------- | -------------------------------------------------------------
|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, including
forwards, futures, swaps, and options, with approved
counterparties to hedge its anticipated exposures. Generation
has an estimated 90% 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s 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 our 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 ten percent reduction in the annual average
around-the-clock market price of electricity is approximately a
$64 million decrease in net income. This sensitivity
assumes a 90% 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 first quarter of 2004
was a loss of less than $1 million (before taxes) which
included a $1 million unrealized mark-to-market loss. The
Value-at-Risk (VaR) on proprietary trading activity averaged
$200,000 dollars of exposure over the

106



---



##### Table of Contents



last 18 months. Because of the diminutive
nature of the trading portfolio in comparison to
Generations total gross margin of $848 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 earnings on a current basis.

The following detailed presentation of the
trading and non-trading marketing activities at Generation is
included to address the recommended disclosures by the energy
industrys Committee of Chief Risk Officers. Generation
does not consider its proprietary trading to be a significant
activity in its business; however, Generation believes it is
important to include these risk management disclosures.

The following tables describe the drivers of
Generations energy trading and marketing business and
gross margin included in the income statement for the three
months ended March 31, 2004 and 2003. Normal operations and
hedging activities represent the marketing of electricity
available from Generations owned or contracted generation,
including Energy Deliverys retail load, sold into the
wholesale market. As the information in these tables highlights,
mark-to-market activities represent a small portion of the
overall gross margin for Generation. Accrual activities,
including normal purchases and sales, account for the majority
of the gross margin. The mark-to-market activities reported here
are those relating to changes in fair value due to external
movement in prices. Further delineation of gross margin by the
type of accounting treatment typically afforded each type of
activity is also presented (i.e., mark-to-market vs. accrual
accounting treatment).

|                                                                      |                                                             |                 |    |      |   |   |    |     |  
|--------------------------------------------------------------------- | ----------------------------------------------------------- | --------------- | -- | ---- | - | - | -- | --- | -
|                                                                      |                                                             |                
|                                                                      |                                                             | Three Months   
|                                                                      |                                                             | Ended March 31,
|                                                                      |                                                             |                
|                                                                      |                                                             | 2004            |    | 2003
|                                                                      |                                                             |                 |    |     
|Mark-to-market activities:                                            |                                                             |                 |    |      |   |   |    |    
|Unrealized mark-to-market gain/(loss)                                 |                                                             |                 |    |      |   |   |    |    
|                                                                      | Origination unrealized gain/(loss) at inception             |                 | $  |     |   |   | $  |    |  
|                                                                      | Changes in fair value prior to settlements(a)               |                 |    | 35   |   |   |    | 24  |  
|                                                                      | Changes in valuation techniques and assumptions             |                 |    |     |   |   |    |    |  
|                                                                      | Reclassification to realized at settlement of
    contracts |                 |    | (75  | ) |   |    | (57 | )
|                                                                      |                                                             |                 |    |      |   |   |    |    
|                                                                      | Total change in unrealized fair value(b)                    |                 |    | (40  | ) |   |    | (33 | )
|Realized net settlement of transactions subject
    to mark-to-market |                                                             |                 | 75 |      |   |   | 57 |    
|                                                                      |                                                             |                 |    |      |   |   |    |    
|Total mark-to-market activities gross margin                          |                                                             | $               | 35 |      |   | $ | 24 |    
|                                                                      |                                                             |                 |    |      |   |   |    |    

107



---



##### Table of Contents



|                                                             |                                       |                 |       |       |  |   |       |       | 
|------------------------------------------------------------ | ------------------------------------- | --------------- | ----- | ----- |  | - | ----- | ----- | 
|                                                             |                                       |                
|                                                             |                                       | Three Months   
|                                                             |                                       | Ended March 31,
|                                                             |                                       |                
|                                                             |                                       | 2004            |       | 2003 
|                                                             |                                       |                 |       |      
|Accrual activities:                                          |                                       |                 |       |       |  |   |       |      
|Accrual activities revenue                                   |                                       | $               | 1,395 |       |  | $ | 1,352 |      
|Hedge gains reclassified from OCI                            |                                       |                 | 501   |       |  |   | 398   |      
|                                                             |                                       |                 |       |       |  |   |       |      
|                                                             | Total revenue  accrual activities    |                 |       | 1,896 |  |   |       | 1,750 | 
|                                                             |                                       |                 |       |       |  |   |       |      
|Purchased power and fuel                                     |                                       |                 | 458   |       |  |   | 597   |      
|Hedges of purchased power and fuel reclassified
    from OCI |                                       |                 | 625   |       |  |   | 503   |      
|                                                             |                                       |                 |       |       |  |   |       |      
|                                                             | Total purchased power and fuel        |                 |       | 1,083 |  |   |       | 1,100 | 
|                                                             |                                       |                 |       |       |  |   |       |      
|                                                             | Total accrual activities gross margin |                 |       | 813   |  |   |       | 650   | 
|                                                             |                                       |                 |       |       |  |   |       |      
|Total gross margin(c)                                        |                                       | $               | 848   |       |  | $ | 674   |      
|                                                             |                                       |                 |       |       |  |   |       |      



---



|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes hedge ineffectiveness of $1 million
    recorded in earnings.                                                                                                  
|   
|(b) | Includes $1 million and $2 million of
    unrealized losses due to proprietary trading activity during the
    three months ended March 31, 2004 and 2003, respectively.
|   
|(c) | Total gross margin represents revenue, net of
    purchased power and fuel expense.                                                                                     

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 March 31, 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 shown in the
previous table, as well as the settlements from OCI to earnings
and changes in fair value for the hedging activities that are
recorded in Accumulated Other Comprehensive Income on the
March 31, 2004 Consolidated Balance Sheet.

|                                                                                    |  |   |      |  
|----------------------------------------------------------------------------------- |  | - | ---- | -
|Total mark-to-market energy contract net assets
    at January 1, 2004              |  | $ | (216 | )
|Total change in fair value during 2004 of
    contracts recorded in earnings        |  |   | 33   |  
|Reclassification to realized at settlement of
    contracts recorded in earnings    |  |   | (74  | )
|Reclassification to realized at settlement from
    OCI                             |  |   | 124  |  
|Effective portion of changes in fair
    value  recorded in OCI                    |  |   | (438 | )
|Purchase/sale of existing contracts or portfolios
    subject to mark-to-market     |  |   | 144  |  
|                                                                                    |  |   |      |  
|Total mark-to-market energy contract net assets
    (liabilities) at March 31, 2004 |  | $ | (427 | )
|                                                                                    |  |   |      |  

The following table details the balance sheet
classification of the mark-to-market energy contract net assets
(liabilities) recorded as of March 31, 2004 and
December 31, 2003:

|                                                                  |                                                  |           |      |              |   |   |      |      |  
|----------------------------------------------------------------- | ------------------------------------------------ | --------- | ---- | ------------ | - | - | ---- | ---- | -
|                                                                  |                                                  | March 31, |      | December 31,
|                                                                  |                                                  | 2004      |      | 2003        
|                                                                  |                                                  |           |      |             
|Current assets                                                    |                                                  | $         | 399  |              |   | $ | 322  |     
|Noncurrent assets                                                 |                                                  |           | 375  |              |   |   | 100  |     
|                                                                  |                                                  |           |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract assets      |           |      | 774          |   |   |      | 422  |  
|                                                                  |                                                  |           |      |              |   |   |      |     
|Current liabilities                                               |                                                  |           | (811 | )            |   |   | (505 | )   
|Noncurrent liabilities                                            |                                                  |           | (390 | )            |   |   | (133 | )   
|                                                                  |                                                  |           |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract liabilities |           |      | (1,201       | ) |   |      | (638 | )
|                                                                  |                                                  |           |      |              |   |   |      |     
|Total mark-to-market energy contract net assets
    (liabilities) |                                                  | $         | (427 | )            |   | $ | (216 | )   
|                                                                  |                                                  |           |      |              |   |   |      |     

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

108



---



##### Table of Contents



exchanges. Prices reflect the average of the
bid-ask midpoint prices obtained from all sources that
Generation believes provide the most liquid market for the
commodity. The terms for which such price information is
available varies by commodity, 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
March 31, 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
and 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.


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, this table provides
the maturity, by year, of Generations net
assets/liabilities, giving an indication of when these
mark-to-market amounts will settle and either generate or
require cash.

|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |      |      |  
|--------------------------------------------------------------- | ------------------------------------------------ | ----------------- | - | -------- | ---- | ---------- | - | ---- | ---- | ------ | - | ----- | --- | - | - | -- | -- | - | - | -- | -- |  | - | ---- | ---- | -
|                                                                |                                                  |                   |   |         
|                                                                |                                                  | Maturities Within |   |         
|                                                                |                                                  |                   |   |         
|                                                                |                                                  |                   |   | 2008 and |      | Total Fair
|                                                                |                                                  | 2004              |   | 2005     |      | 2006       |   | 2007 |      | Beyond |   | Value
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |      
|Normal operations, qualifying cash-flow hedge
    contracts(a): |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 47       |      |            | $ | 1    |      |        | $ |      |     |   | $ |   |    |   | $ |   |    |  | $ | 48   |     
|                                                                | Prices provided by other external sources        |                   |   | (361     | )    |            |   | (177 | )    |        |   | (31   | )   |   |   | (7 | )  |   |   |   |    |  |   | (576 | )   
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | (314 | )          |   | $    | (176 | )      |   | $     | (31 | ) |   | $  | (7 | ) |   | $  |   |  |   | $    | (528 | )
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|Normal operations, other derivative
    contracts(b):           |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 36       |      |            | $ | 1    |      |        | $ |      |     |   | $ |   |    |   | $ |   |    |  | $ | 37   |     
|                                                                | Prices provided by other external sources        |                   |   | (71      | )    |            |   | 8    |      |        |   | 1     |     |   |   |   |    |   |   |   |    |  |   | (62  | )   
|                                                                | Prices based on model or other valuation methods |                   |   | 14       |      |            |   | (5   | )    |        |   | 15    |     |   |   | 13 |    |   |   | 89 |    |  |   | 126  |     
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | (21  | )          |   | $    | 4    |        |   | $     | 16  |   |   | $  | 13 |   |   | $  | 89 |  |   | $    | 101  |  
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     



---



|    |  |                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

109



---



##### Table of Contents



The table below provides details of effective
cash-flow hedges under SFAS No. 133 included in the
balance sheet as of March 31, 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 three months ended March 31, 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                                           |      |                  
|                                                       |  | Operations and                                   |      | Interest Rate and |  | Total Cash 
|                                                       |  | Hedging Activities                               |      | Other Hedges(a)   |  | Flow Hedges
|                                                       |  |                                                  |      |                   |  |            
|Accumulated OCI derivative loss at
    January 1, 2004 |  | $                                                | (133 | )                 |  | $           | (13 | ) |  | $ | (146 | )
|Changes in fair value                                  |  |                                                  | (266 | )                 |  |             |    |   |  |   | (266 | )
|Reclassifications from OCI to net income               |  |                                                  | 75   |                   |  |             | (4  | ) |  |   | 71   |  
|Exelon Energy Company opening balance                  |  |                                                  | 2    |                   |  |             |    |   |  |   | 2    |  
|Sithe                                                  |  |                                                  |     |                   |  |             | (10 | ) |  |   | (10  | )
|                                                       |  |                                                  |      |                   |  |             |     |   |  |   |      |  
|Accumulated OCI derivative loss at March 31,
    2004  |  | $                                                | (322 | )                 |  | $           | (27 | ) |  | $ | (349 | )
|                                                       |  |                                                  |      |                   |  |             |     |   |  |   |      |  



---



|    |  |                                             
|--- |  | --------------------------------------------
|(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 and 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 reduce
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.

110



---



##### Table of Contents



The following tables provide information on
Generations wholesale credit exposure, net of collateral,
as of March 31, 2004. They 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 a companys credit
risk by credit rating of the 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  
|                     |                                         | Before Credit |     | Credit     |  | Net      |    | Greater than 10% |  | Greater than 10%
|Rating(a)            |                                         | Collateral    |     | Collateral |  | Exposure |    | of Net Exposure  |  | of Net Exposure 
|                     |                                         |               |     |            |  |          |    |                  |  |                 
|Investment grade     |                                         | $             | 98  |            |  | $        | 15 |                  |  | $                | 83  |    |  |  | 1 |   |  | $ | 18 |  
|Split rating         |                                         |               |    |            |  |          |   |                  |  |                  |    |    |  |  |  |   |  |   |   |  
|Non-investment grade |                                         |               | 67  |            |  |          | 6  |                  |  |                  | 61  |    |  |  | 1 |   |  |   | 54 |  
|No external ratings  |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |    |  
|                     | Internally rated  investment grade     |               |     | 15         |  |          |    |                 |  |                  |     | 15 |  |  |   |  |  |   |    |  | 
|                     | Internally rated  non-investment grade |               |     | 1          |  |          |    |                 |  |                  |     | 1  |  |  |   |  |  |   |    |  | 
|                     |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |    |  
|Total                |                                         | $             | 181 |            |  | $        | 21 |                  |  | $                | 160 |    |  |  | 2 |   |  | $ | 72 |  
|                     |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |    |  



---



|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(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)            |                                         | 2 Years                          |     | 2-5 Years |  | 5 Years        |    | Collateral   
|                     |                                         |                                  |     |           |  |                |    |              
|Investment grade     |                                         | $                                | 87  |           |  | $              | 11 |               |  | $ |  |   |  | $ | 98  |   
|Split rating         |                                         |                                  |    |           |  |                |   |               |  |   |  |   |  |   |    |   
|Non-investment grade |                                         |                                  | 67  |           |  |                |   |               |  |   |  |   |  |   | 67  |   
|No external ratings  |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|                     | Internally rated  investment grade     |                                  |     | 15        |  |                |    |              |  |   |   |  |  |   |     | 15 | 
|                     | Internally rated  non-investment grade |                                  |     | 1         |  |                |    |              |  |   |   |  |  |   |     | 1  | 
|                     |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|Total                |                                         | $                                | 170 |           |  | $              | 11 |               |  | $ |  |   |  | $ | 181 |   
|                     |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   



---



|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(a) | Table does not include credit risk associated
    with Generations retail operations.

Dynegy.Generation
is a counterparty to Dynegy, Inc. (Dynegy) in various
energy transactions. The credit ratings of Dynegy are below
investment grade. As of March 31, 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 $156 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 this agreement,
Generation would be required to impair this financial swap
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 $28 million.

In addition to the impairment of the financial
swap asset, if Dynegy were unable to fulfill its obligations
under the financial swap agreement and the tolling agreement,
Generation would likely incur a further impairment associated
with the Independence plant. 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

111



---



##### Table of Contents



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. Additionally, 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.
In February 2004, Dynegy announced an agreement to sell Illinois
Power to a third party, which, upon closing of the transaction,
would reduce Generations credit risk associated with
Dynegy.


Additionally, the future economic value of
AmerGens PPA with Illinois Power could be affected by
events related to Dynegys financial condition. In February
2004, Dynegy announced an agreement to sell Illinois Power to a
third party, which, upon closing of the transaction, would
reduce 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, California 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, the 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 our financial condition,
results of operations or net cash flows.

Interest Rate Risk



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

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 March 31, 2004, ComEd did not have any
interest-rate swaps designated as cash-flow hedges.

ComEd has 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 $485 million. At March 31,
2004, these interest-rate swaps, designated as fair-value
hedges, had an aggregate fair market value of $37 million
based on the present value difference between the contract and
market rates at March 31, 2004. If these derivative
instruments had been terminated at March 31, 2004, this
estimated fair value represents the amount that would be paid by
the counterparties to ComEd.

112



---



##### Table of Contents



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 March 31, 2004 is estimated to be $42 million
in ComEds favor. If the derivative instrument had been
terminated at March 31, 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 March 31, 2004 is estimated to be $31 million
in ComEds favor. If the derivative instrument had been
terminated at March 31, 2004, this estimated fair value
represents the amount the counterparties would pay ComEd.

In April 2004, ComEd settled these interest-rate
swaps designated as fair-value hedges for net proceeds of
approximately $32 million. The proceeds will be amortized
as a reduction to interest expense over the remaining life of
the related debt.



| |     
| | ----
| | PECO

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. At March 31, 2004, this swap
had an aggregate fair market value of less than $1 million
based on the present value difference between the contract and
market rates at March 31, 2004. If the derivative
instrument had been terminated at March 31, 2004, this
estimated fair value represents the amount the counterparties
would pay PECO.

The aggregate fair value of the interest-rate
swap designated as a cash-flow hedge that would have resulted
from a hypothetical 50 basis point decrease in the spot
yield at March 31, 2004 is estimated to be $6 million
in the counterpartys favor. If the derivative instrument
had been terminated at March 31, 2004, this estimated fair
value represents the amount PECO would pay the counterparty.

The aggregate fair value of the interest-rate
swap designated as a cash-flow hedge that would have resulted
from a hypothetical 50 basis point increase in the spot
yield at March 31, 2004 is estimated to be $6 million
in PECOs favor. If the derivative instrument had been
terminated at March 31, 2004, this estimated fair value
represents the amount the counterparty would pay PECO.

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
March 31, 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.

Under the terms of the Boston Generating
Facility, Boston Generating was required to effectively fix the
interest rate on 50% of borrowings under the facility through
its maturity in 2007. In January 2004, the counterparties
terminated the interest-rate swaps with Boston Generating. The
total net value of these swaps as of the respective termination
dates was $82 million, which is a net payable to the
counterparties. The Boston Generating Facility and the related
cost of interest rate swaps are non-recourse to Exelon and
Generation and an event of default under the Boston Generating
Facility does not constitute an event of default under any other
of Exelons debt instruments or the debt instruments of
Exelons subsidiaries.

113



---



##### Table of Contents



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 March 31, 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
$291 million reduction in the fair value of the trust
assets.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

During the first 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, summarization 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 March 31, 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.




PART II  OTHER
INFORMATION





|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

ComEd

See Retail Rate Law within the
litigation section of Note 13 of the Condensed Combined
Notes to Consolidated Financial Statements for a discussion of
legal proceeding developments.

Generation

See Raytheon and Mitsubishi
Litigation, Clean Air Act and Oyster
Creek within the litigation section of Note 13 of the
Condensed Combined Notes to Consolidated Financial Statements
for a discussion of legal proceeding developments.

114



---



##### Table of Contents








|        |                                
|------- | -------------------------------
|Item 3. | Defaults Upon Senior Securities



| |     |           
| | --- | ----------
| | (a) | Generation

See Boston Generating Facility of
Note 7 of the Condensed Combined Notes to Consolidated
Financial Statements for a description of the event of default
under the Boston Generating Facility.






|        |                  
|------- | -----------------
|Item 5. | Other Information



| |     |      
| | --- | -----
| | (a) | ComEd

See Note 6 of the Condensed Combined Notes
to Consolidated Financial Statements for a discussion of
regulatory developments.



| |     |                                   
| | --- | ----------------------------------
| | (b) | Exelon, ComEd, PECO and Generation

None.






|        |                                 
|------- | --------------------------------
|Item 6. | Exhibits and Reports on Form 8-K

(a) Exhibits:

| |    |    |  |   |  |                                                                                                    
| | -- | -- |  | - |  | ---------------------------------------------------------------------------------------------------
| | 10 | .1 |  |  |  | Michael B. Bemis separation letter, dated
    December 19, 2003. Filed on behalf of ComEd and PECO.

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 March 31, 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 Oliver D. Kingsley Jr. 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
March 31, 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 Oliver D. Kingsley Jr. for Exelon
    Generation Company, LLC
|32-8 |  |  |  | Filed by J. Barry Mitchell for Exelon Generation
    Company, LLC     

115



---



##### Table of Contents



(b) Reports on Form 8-K:

Exelon, ComEd, PECO and/or Generation filed
Current Reports on Form 8-K during the three months ended
March 31, 2004 regarding the following items:

|                 |                   |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------- | ----------------- | ---------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date of Earliest |                   |                             
|Event Reported   |                   | Description of Item Reported
|                 |                   |                             
|                 | January 27, 2004  |                              |  | ITEM 5. OTHER EVENTS filed for
    Exelon announcing the declaration of a quarterly dividend and a
    2-for-1 stock split.                                                                                                                                                                                                                                                                                                                                                                                                                 
|                 | January 29, 2004  |                              |  | ITEM 5. OTHER EVENTS filed for
    Exelon announcing the election of Honorable Nelson A. Diaz to
    the board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                
|                 | February 20, 2004 |                              |  | ITEM 5. OTHER EVENTS filed for
    Exelon regarding certain financial information of Exelon
    Corporation and Subsidiary Companies. The exhibits under
    ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS filed for
    Exelon include Consent of the Independent Public Accountants,
    Selected Financial Data, Market for Registrants Common
    Equity and Related Stockholder Matters, Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations, and Financial Statements and Supplementary Data.
|                 | February 23, 2004 |                              |  | ITEM 5. OTHER EVENTS filed for
    Exelon and Generation regarding a settlement with the lenders
    under the Boston Generating Facility and the resolution of
    certain disputes associated with the projects of Boston
    Generating.                                                                                                                                                                                                                                                                                                 
|                 | February 26, 2004 |                              |  | ITEM 5. OTHER EVENTS filed for
    Exelon regarding a structured, prearranged trading plan
    established by John W. Rowe, Chairman and Chief Executive
    Officer of Exelon.                                                                                                                                                                                                                                                                                                                                                             

116



---



##### Table of Contents






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)                

April 28, 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/ DUANE M. DESPARTEDuane M. DesParte |  | Vice President and Controller, Exelon Energy
    Delivery
    (Principal Accounting Officer)      
|                                      
|/s/ FRANK M. CLARKFrank M. Clark       |  | President, ComEd                                                                                  

April 28, 2004

117



---



##### Table of Contents



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 MITCHELLJ. Barry Mitchell |  | Senior Vice President, Treasurer and
    Chief Financial Officer
    (Principal Financial Officer) |  | 
|                                      
|/s/ DUANE M. DESPARTEDuane M. DesParte |  | Vice President and Controller,
    Exelon Energy Delivery
    (Principal Accounting Officer)       |  | 
|                                      
|/s/ DENIS P. OBRIENDenis P. OBrien   |  | President, PECO                                                                                    |  | 

April 28, 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/ OLIVER D. KINGSLEY JR.Oliver D. Kingsley Jr. |  | Chief Executive Officer and
    President
    (Principal Executive Officer)                        |  | 
|                                                
|/s/ J. BARRY MITCHELLJ. 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)                                   |  | 

April 28, 2004

118