Exhibit 4.2














                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                                     Between

                               PECO Energy Company

                                 (as Guarantor)

                                       and

                  Wachovia Trust Company, National Association

                                  (as Trustee)

                                   dated as of

                                  June 24, 2003


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                                TABLE OF CONTENTS

<S>                                                                                                              <C>
ARTICLE I  DEFINITIONS............................................................................................1

         SECTION 1.01.  Definitions...............................................................................1

ARTICLE II  TRUST INDENTURE ACT...................................................................................4

         SECTION 2.01.  Trust Indenture Act; Application..........................................................4
         SECTION 2.02.  Lists of Holders of Securities............................................................4
         SECTION 2.03.  Reports by the Trustee....................................................................4
         SECTION 2.04.  Periodic Reports to Trustee...............................................................4
         SECTION 2.05.  Evidence of Compliance with Conditions Precedent..........................................4
         SECTION 2.06.  Events of Default; Waiver.................................................................4
         SECTION 2.07.  Event of Default; Notice..................................................................5
         SECTION 2.08.  Conflicting Interests.....................................................................5

ARTICLE III  POWERS, DUTIES AND RIGHTS OF TRUSTEE.................................................................5

         SECTION 3.01.  Powers and Duties of the Trustee..........................................................5
         SECTION 3.02.  Certain Rights of Trustee.................................................................6
         SECTION 3.03.  Not Responsible for Recitals or Issuance of Preferred Securities..........................8

ARTICLE IV  TRUSTEE...............................................................................................8

         SECTION 4.01.  Trustee; Eligibility......................................................................8
         SECTION 4.02.  Appointment, Removal and Resignation of Trustee...........................................8

ARTICLE V  GUARANTEE..............................................................................................9

         SECTION 5.01.  Guarantee.................................................................................9
         SECTION 5.02.  Waiver of Notice and Demand...............................................................9
         SECTION 5.03.  Obligations Not Affected..................................................................9
         SECTION 5.04.  Rights of Holders........................................................................10
         SECTION 5.05.  Guarantee of Payment.....................................................................11
         SECTION 5.06.  Subrogation..............................................................................11
         SECTION 5.07.  Independent Obligations..................................................................11

ARTICLE VI  LIMITATION OF TRANSACTIONS; SUBORDINATION............................................................11

         SECTION 6.01.  Limitation of Transactions...............................................................11
         SECTION 6.02.  Subordination............................................................................11

ARTICLE VII  TERMINATION.........................................................................................11

         SECTION 7.01.  Termination..............................................................................11


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ARTICLE VIII  INDEMNIFICATION....................................................................................12

         SECTION 8.01.  Exculpation..............................................................................12
         SECTION 8.02.  Indemnification..........................................................................12
         SECTION 8.03.  Compensation and Fees....................................................................12

ARTICLE IX  MISCELLANEOUS........................................................................................13

         SECTION 9.01.  Successors and Assigns...................................................................13
         SECTION 9.02.  Amendments...............................................................................13
         SECTION 9.03.  Notices..................................................................................13
         SECTION 9.04.  Benefit..................................................................................14
         SECTION 9.05.  Interpretation...........................................................................14
         SECTION 9.06.  Governing Law............................................................................14
         SECTION 9.07.  Counterparts.............................................................................15

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                             CROSS-REFERENCE TABLE*

               Section of                       Section of Guarantee Agreement
 Trust Indenture Act of 1939, as amended

                 310(a)                                    4.01(a)
                 310(b)                                 4.01(c), 2.08
                 310(c)                                  Inapplicable
                 311(a)                                    2.02(b)
                 311(b)                                    2.02(b)
                 311(c)                                  Inapplicable
                 312(a)                                    2.02(a)
                 312(b)                                    2.02(b)
                 313                                         2.03
                 314(a)                                      2.04
                 314(b)                                  Inapplicable
                 314(c)                                      2.05
                 314(d)                                  Inapplicable
                 314(e)                                1.01, 2.05, 3.02
                 314(f)                                   2.01, 3.02
                 315(a)                                    3.01(d)
                 315(b)                                      2.07
                 315(c)                                      3.01
                 315(d)                                    3.01(d)
                 316(a)                                1.01, 2.06, 5.04
                 316(b)                                      5.03
                 316(c)                                      9.02
                 317(a)                                  Inapplicable
                 317(b)                                  Inapplicable
                 318(a)                                    2.01(b)
                 318(b)                                      2.01
                 318(c)                                    2.01(a)

___________________

*        This Cross-Reference Table does not constitute part of the Preferred
         Securities Guarantee Agreement and shall not affect the interpretation
         of any of its terms or provisions.

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                    PREFERRED SECURITIES GUARANTEE AGREEMENT

         This PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee Agreement"),
dated as of June 24, 2003 between PECO ENERGY COMPANY, a Pennsylvania
corporation (the "Company"), as guarantor (the "Guarantor"), and WACHOVIA TRUST
COMPANY, NATIONAL ASSOCIATION, a national banking association, as trustee (the
"Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of PECO ENERGY CAPITAL TRUST IV,
a Delaware statutory trust (the "Trust").

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration of Trust"), dated as of June 24, 2003, among Wachovia Trust
Company, National Association, as Delaware Trustee and Property Trustee, the
other Trustees named therein, the Company, as Sponsor, and the holders of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
as of June 24, 2003 $100,000,000 aggregate liquidation amount of its 5.75% Trust
Preferred Securities (the "Preferred Securities") representing preferred
undivided beneficial interests in the assets of the Trust and having the terms
set forth in the Declaration of Trust;

         WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof will be used to purchase the Debentures of the Company, which
will be held by the Trust as trust assets; and

         WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth herein, to pay to the Holders the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.

         NOW, THEREFORE, in consideration of the payment for Preferred
Securities by each Holder thereof, which payment the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.

                                    Article I
                                   DEFINITIONS

         Section 1.01 Definitions. As used in this Guarantee Agreement, the
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration of Trust as in effect on the date hereof.

                  "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

                  "Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.

                  "Covered Person" means any Holder or beneficial owner of
Preferred Securities.

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                  "Debentures" means the series of Deferrable Interest
Subordinated Debentures of the Guarantor designated the "5.75% Deferrable
Interest Subordinated Debentures due June 15, 2033" held by the Property Trustee
(as defined in the Declaration of Trust) of the Trust.

                  "Event of Default" means a failure by the Guarantor to perform
any of its payment or other obligations under this Guarantee Agreement.

                  "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Trust: (i) any accrued and
unpaid Distributions (as defined in the Declaration of Trust) that are required
to be paid on such Preferred Securities to the extent the Trust has funds
legally available therefor to make such payment; (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption (the
"Redemption Price"), with respect to the Preferred Securities called for
redemption by the Trust to the extent that the Trust has funds legally available
therefor to make such payment; and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Debentures to the Holders), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions on
the Preferred Securities to the date of payment, to the extent the Trust has
funds legally available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to Holders in liquidation of the Trust (in
either case, the "Liquidation Distribution").

                  "Holder" means any holder, as registered on the books and
records of the Trust, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.

                  "Indemnified Person" means the Trustee, any Affiliate of the
Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Trustee.

                  "Indenture" means the Indenture, dated as of June 24, 2003,
between the Company and Wachovia Bank, National Association, as trustee, as
heretofore supplemented and as supplemented by the Section 2.01 Certificate.

                  "Majority in liquidation amount of the Preferred Securities"
means, except as provided in the Trust Indenture Act, a vote by Holder(s) of
Preferred Securities of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all Preferred Securities outstanding at
the time of determination.

                  "Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the
Guarantor, and delivered to the Trustee. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Guarantee Agreement (other than pursuant to Section 314(d)(4) of the Trust
Indenture Act) shall include:

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                  (a) a statement that each officer signing the Officers'
         Certificate has read the covenant or condition and the definitions
         relating thereto;

                  (b) a brief statement of the nature and scope of the
         examination or investigation undertaken by each officer in rendering
         the Officers' Certificate;

                  (c) a statement that each such officer has made such
         examination or investigation as, in such officer's opinion, is
         necessary to enable such officer to express an informed opinion as to
         whether or not such covenant or condition has been complied with; and

                  (d) a statement as to whether, in the opinion of each such
         officer, such condition or covenant has been complied with.

                  "Other Guarantees" means all guarantees issued, or to be
issued, by the Guarantor with respect to the preferred or common securities
similar to the Preferred Securities and the Common Securities (as defined in the
Declaration of Trust), as the case may be, issued by other trusts established,
or to be established, by the Guarantor, in each case similar to the Trust.
"Other Guarantees" shall include: the Payment and Guarantee Agreement dated as
of April 6, 1998 executed by the Guarantor for the benefit of the holders of the
Series D Preferred Securities (as defined therein) of PECO Energy Capital, L.P.

                  "Other Indebtedness" means all subordinated debentures,
debentures or other indebtedness issued by the Guarantor from time to time and
sold to trusts established, or to be established, by the Guarantor, in each case
similar to the Trust. "Other Indebtedness" shall include the 7.38% Deferrable
Interest Subordinated Debentures due 2028.

                  "Person" means any individual, corporation, estate,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity of whatever nature.

                  "Responsible Officer" means, with respect to the Trustee, any
managing director, any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, or any other officer of the
Corporate Trust Office of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.

                  "Section 2.01 Certificate" means the officers' certificate of
the Guarantor issued pursuant to Section 2.01 of the Indenture and establishing
the Debentures.

                  "Successor Trustee" means a successor Trustee possessing the
qualifications to act as Trustee under Section 4.01.

                  "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.

                  "Trustee" means Wachovia Trust Company, National Association
until a Successor Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement and thereafter means each such
Successor Trustee.



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                                   ARTICLE II
                               TRUST INDENTURE ACT

         Section 2.01      Trust Indenture Act; Application.

         (a)   This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

         (b)   If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

         Section 2.02      Lists of Holders of Securities.

         (a)   The Guarantor shall furnish or cause to be furnished to the
Trustee a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders ("List of Holders") (i) semiannually, within 15
days before and not later than June 1 and December 1 in each year, and (ii) at
such other times as the Trustee may request in writing, within 30 days after the
receipt by the Guarantor of any such request, a List of Holders as of a date not
more than 15 days prior to the time such list is furnished; provided that, the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Trustee by the Guarantor or at any time the Trustee is the Securities
Registrar under the Declaration of Trust. The Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

         (b)   The Trustee shall comply with its obligations under Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act.

         Section 2.03 Reports by the Trustee. Within 60 days after May 15 of
each year commencing May 15, 2004, the Trustee shall provide to the Holders of
the Preferred Securities such reports as are required by Section 313(a) of the
Trust Indenture Act, if any, in the form and in the manner provided by Section
313 of the Trust Indenture Act. The Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.

         Section 2.04 Periodic Reports to Trustee. The Guarantor shall provide
to the Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act, and shall provide,
within 120 days after the end of each of its fiscal years, the compliance
certificate required by Section 314(a)(4) of the Trust Indenture Act in the form
and in the manner required by such Section.

         Section 2.05 Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Trustee such evidence of compliance with the
conditions precedent, if any, provided for in this Guarantee Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.

         Section 2.06 Events of Default; Waiver. The Holders of a Majority in
liquidation amount of the Preferred Securities may, by vote, on behalf of all of
the Holders, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Guarantee


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Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.

         Section 2.07      Event of Default; Notice.

         (a)   The Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders,
notices of all Events of Default actually known to a Responsible Officer of the
Trustee, unless such defaults have been cured before the giving of such notice,
provided that the Trustee shall be protected in withholding such notice if and
so long as the board of directors, the executive committee, or a trust committee
of directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders.

         (b)   The Trustee shall not be deemed to have knowledge of any Event
of Default unless the Trustee shall have received written notice thereof from
the Guarantor or a Holder, or a Responsible Officer charged with the
administration of the Declaration of Trust shall have obtained actual knowledge,
of such Event of Default.

         Section 2.08 Conflicting Interests. The Declaration of Trust shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.

                                   ARTICLE III
                      POWERS, DUTIES AND RIGHTS OF TRUSTEE

         Section 3.01      Powers and Duties of the Trustee.

         (a)   This Guarantee Agreement shall be held by the Trustee for the
benefit of the Holders, and the Trustee shall not transfer this Guarantee
Agreement to any Person except the Trustee may assign rights hereunder to a
Holder exercising his or her rights pursuant to Section 5.04(b) or to a
Successor Trustee upon acceptance by such Successor Trustee of its appointment
to act as Successor Trustee. The right, title and interest of the Trustee shall
automatically vest in any Successor Trustee, and such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered pursuant to the appointment of such Successor Trustee.

         (b)   If an Event of Default actually known to a Responsible Officer
of the Trustee has occurred and is continuing, the Trustee shall enforce this
Guarantee Agreement for the benefit of the Holders.

         (c)   The Trustee, before the occurrence of any Event of Default and
after the curing or waiving of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06) and is
actually known to a Responsible Officer of the Trustee, the Trustee shall
exercise such of the rights and powers vested in it by this Guarantee Agreement,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

         (d)   No provision of this Guarantee Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:


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                  (i) prior to the occurrence of any Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                           (A) the duties and obligations of the Trustee shall
                  be determined solely by the express provisions of this
                  Guarantee Agreement, and the Trustee shall not be liable
                  except for the performance of such duties and obligations as
                  are specifically set forth in this Guarantee Agreement, and no
                  implied covenants or obligations shall be read into this
                  Guarantee Agreement against the Trustee; and

                           (B) in the absence of bad faith on the part of the
                  Trustee, the Trustee may conclusively rely, as to the truth of
                  the statements and the correctness of the opinions expressed
                  therein, upon any certificates or opinions furnished to the
                  Trustee and conforming to the requirements of this Guarantee
                  Agreement; but in the case of any such certificates or
                  opinions that by any provision hereof are specifically
                  required to be furnished to the Trustee, the Trustee shall be
                  under a duty to examine the same to determine whether or not
                  on their face they conform to the requirements of this
                  Guarantee Agreement;

                  (ii) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible Officer of the Trustee, unless it
         shall be proved that the Trustee was negligent in ascertaining the
         pertinent facts upon which such judgment was made;

                  (iii) the Trustee shall not be liable with respect to any
         action taken or omitted to be taken by it in good faith in accordance
         with the direction of the Holders of not less than a Majority in
         liquidation amount of the Preferred Securities relating to the time,
         method and place of conducting any proceeding for any remedy available
         to the Trustee, or exercising any trust or power conferred upon the
         Trustee under this Guarantee Agreement; and

                  (iv) no provision of this Guarantee Agreement shall require
         the Trustee to expend or risk its own funds or otherwise incur personal
         financial liability in the performance of any of its duties or in the
         exercise of any of its rights or powers, if the Trustee shall have
         reasonable grounds for believing that the repayment of such funds or
         liability is not reasonably assured to it under the terms of this
         Guarantee Agreement or adequate indemnity against such risk or
         liability is not reasonably assured to it.

         Section 3.02      Certain Rights of Trustee.

         (a)   Subject to the provisions of Section 3.01:

                  (i) the Trustee may conclusively rely and shall be fully
         protected in acting or refraining from acting upon any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         direction, consent, order, bond, debenture, note, other evidence of
         indebtedness or other paper or document believed by it to be genuine
         and to have been signed, sent or presented by the proper party or
         parties;

                  (ii) any direction or act of the Guarantor contemplated by
         this Guarantee Agreement shall be sufficiently evidenced by an
         Officers' Certificate;

                  (iii) whenever, in the administration of this Guarantee
         Agreement, the Trustee shall deem it desirable that a matter be proved
         or established before taking, suffering or omitting any action
         hereunder, the Trustee (unless other evidence is herein specifically
         prescribed) may, in the


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          absence of bad faith on its part, request and conclusively rely upon
          an Officers' Certificate which, upon receipt of such request, shall be
          promptly delivered by the Guarantor;

                  (iv) the Trustee shall have no duty to see to any recording,
         filing or registration of any instrument (or any rerecording, refiling
         or registration thereof);

                  (v) the Trustee may consult with counsel of its choice, and
         the advice or opinion of such counsel with respect to legal matters
         shall be full and complete authorization and protection in respect of
         any action taken, suffered or omitted by it hereunder in good faith and
         in accordance with such advice or opinion; such counsel may be counsel
         to the Guarantor or any of its Affiliates and may include any of its
         employees; the Trustee shall have the right at any time to seek
         instructions concerning the administration of this Guarantee Agreement
         from any court of competent jurisdiction;

                  (vi) the Trustee shall be under no obligation to exercise any
         of the rights or powers vested in it by this Guarantee Agreement at the
         request or direction of any Holder, unless such Holder shall have
         provided to the Trustee reasonable security and indemnity satisfactory
         to the Trustee against the costs, expenses (including attorneys' fees
         and expenses) and liabilities that might be incurred by it in complying
         with such request or direction, including such reasonable advances as
         may be requested by the Trustee; provided that nothing contained in
         this Section 3.02(a)(vi) shall be taken to relieve the Trustee, upon
         the occurrence of an Event of Default, of its obligation to exercise
         the rights and powers vested in it by this Guarantee Agreement;

                  (vii) the Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice, request, direction,
         consent, order, bond, debenture, note, other evidence of indebtedness
         or other paper or document, but the Trustee, in its discretion, may
         make such further inquiry or investigation into such facts or matters
         as it may see fit;

                  (viii) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, nominees, custodians or attorneys, and the Trustee
         shall not be responsible for any misconduct or negligence on the part
         of any agent, nominee, custodian or attorney appointed with due care by
         it hereunder;

                  (ix) any action taken by the Trustee or its agents, nominees,
         custodians or attorneys hereunder shall bind the Holders, and the
         signature of the Trustee or its agents, nominees, custodians or
         attorneys alone shall be sufficient and effective to perform any such
         action; no third party shall be required to inquire as to the authority
         of the Trustee to so act or as to its compliance with any of the terms
         and provisions of this Guarantee Agreement, both of which shall be
         conclusively evidenced by the Trustee's or its agent's, nominee's,
         custodian's or attorney's taking such action;

                  (x) whenever in the administration of this Guarantee Agreement
         the Trustee shall deem it desirable to receive instructions with
         respect to enforcing any remedy or right or taking any other action
         hereunder, the Trustee (A) may request instructions from the Holders of
         a Majority in liquidation amount of the Preferred Securities, (B) may
         refrain from enforcing such remedy or right or taking such other action
         until such instructions are received, and (C) shall be protected in
         relying on or acting in accordance with such instructions; and


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                  (xi) the Trustee shall not be liable for any action taken,
         suffered, or omitted to be taken by it in good faith, without
         negligence, and reasonably believed by it to be authorized or within
         the discretion or rights or powers conferred upon it by this Guarantee
         Agreement.

         (b)   No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Trustee shall be construed to be
a duty.

         Section 3.03 Not Responsible for Recitals or Issuance of Preferred
Securities. The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor, and the Trustee does not assume any
responsibility for their correctness. The Trustee makes no representation as to
the validity or sufficiency of this Guarantee Agreement.

                                   ARTICLE IV
                                     TRUSTEE

         Section 4.01      Trustee; Eligibility.

         (a)   There shall at all times be a Trustee which shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a corporation organized and doing business under the
         laws of the United States of America or any State or Territory thereof
         or of the District of Columbia, or a corporation or Person permitted by
         the Securities and Exchange Commission to act as an institutional
         trustee under the Trust Indenture Act, authorized under such laws to
         exercise corporate trust powers, having a combined capital and surplus
         of at least Fifty Million U.S. dollars ($50,000,000), and subject to
         supervision or examination by Federal, State, Territorial or District
         of Columbia authority. If such corporation publishes reports of
         condition at least annually, pursuant to law or to the requirements of
         the supervising or examining authority referred to above, then, for the
         purposes of this Section 4.01(a)(ii), the combined capital and surplus
         of such corporation shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.

         (b)   If at any time the Trustee shall cease to be eligible to so
act under Section 4.01(a), the Trustee shall immediately resign in the manner
and with the effect set out in Section 4.02(c).

         (c)   If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
Guarantor shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act, subject to the rights of the Trustee under the
penultimate paragraph thereof.

         Section 4.02      Appointment, Removal and Resignation of Trustee.

         (a)   Subject to Section 4.02(b), the Trustee may be appointed or
removed without cause at any time by the Guarantor except during an Event of
Default.



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         (b)   The Trustee shall not be removed in accordance with Section
4.02(a) until a Successor Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Trustee and
delivered to the Guarantor.

         (c)   The Trustee appointed to office shall hold office until a
Successor Trustee shall have been appointed or until its removal or resignation.
The Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Trustee and delivered to
the Guarantor, which resignation shall not take effect until a Successor Trustee
has been appointed and has accepted such appointment by instrument in writing
executed by such Successor Trustee and delivered to the Guarantor and the
resigning Trustee.

         (d)   If no Successor Trustee shall have been appointed and accepted
appointment as provided in this Section 4.02 within 60 days after delivery to
the Guarantor of an instrument of resignation, the resigning Trustee may
petition any court of competent jurisdiction for appointment of a Successor
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Trustee.

         (e)   No Trustee shall be liable for the acts or omissions to act of
any Successor Trustee.

         (f)   Upon termination of this Guarantee Agreement or removal or
resignation of the Trustee pursuant to this Section 4.02, the Guarantor shall
pay to the Trustee all amounts due to the Trustee that have accrued to the date
of such termination, removal or resignation and all other amounts then due to
the Trustee hereunder.

                                    ARTICLE V
                                    GUARANTEE

         Section 5.01 Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert against any Person. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Trust to pay such amounts to the
Holders.

         Section 5.02 Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before proceeding against
the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

         Section 5.03 Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:

         (a)   the release or waiver, by operation of law or otherwise, of
the performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;

         (b)   the extension of time for the payment by the Trust of all or
any portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising



                                       9
<PAGE>


out of, or in connection with, the Preferred Securities (other than an extension
of time for payment of Distributions, Redemption Price, Liquidation Distribution
or other sum payable that results from the extension of any interest payment
period on the Debentures permitted by the Indenture);

         (c)   any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;

         (d)   the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Trust or any of the assets of
the Trust;

          (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;

          (f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or

         (g)   any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.03 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

                  There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

          Section 5.04 Rights of Holders. The Guarantor expressly acknowledges:

         (a)   The Guarantee Agreement will be deposited with the Trustee to
be held for the benefit of the Holders. The Trustee has the right to enforce
this Guarantee Agreement on behalf of the Holders. The Holders of a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee in respect of this Guarantee Agreement or exercising any trust or
power conferred upon the Trustee under this Guarantee Agreement; provided,
however, that, subject to the duties and responsibilities of the Indenture
Trustee pursuant to the Indenture, the Trustee shall have the right to decline
to follow any such direction if the Trustee shall determine that the action so
directed would be unjustly prejudicial to the Holders not taking part in such
direction or if the Trustee being advised by counsel determines that the action
or proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or Responsible Officers shall determine
that the action or proceedings so directed would involve the Trustee in personal
liability.

         (b)   If the Trustee fails to enforce this Guarantee Agreement, any
Holder may institute a legal proceeding directly against the Guarantor to
enforce the Trustee's rights under this Guarantee Agreement, without first
instituting a legal proceeding against the Trust, the Trustee or any other
Person. The Guarantor waives any right or remedy to require that any action be
brought first against the Trust or any other Person before proceeding directly
against the Guarantor; it being understood and intended that no one or more of
such Holders shall have any right in any manner whatsoever by virtue of, or by
availing of, any provision of this Guarantee Agreement to affect, disturb or
prejudice the rights of any other of such Holders or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Guarantee Agreement, except in the manner herein provided and
for the equal and ratable benefit of all such Holders.


                                       10
<PAGE>


         Section 5.05 Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection.

         Section 5.06 Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Trust in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts of Guarantee Payments are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.

         Section 5.07 Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Trust with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

         Section 6.01 Limitation of Transactions. So long as any Preferred
Securities remain outstanding, if the Guarantor shall be in default with respect
to its payment of any obligations under this Guarantee Agreement, then the
Guarantor shall not (i) declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase or make a liquidation payment with respect
to, any of the Guarantor's capital stock, (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities (including guarantees) of the Guarantor that rank pari passu with or
junior in right of payment to the Debentures or (iii) make any guarantee
payments with respect to the foregoing (except with respect to this Guarantee
Agreement).

         Section 6.02 Subordination. The obligations of the Guarantor under this
Guarantee Agreement will constitute unsecured obligations of the Guarantor and
will rank (i) subordinate and junior in right of payment to the Senior
Indebtedness (as defined in the Indenture) to the same extent and in the same
manner as the Debentures are subordinated to Senior Indebtedness pursuant to the
Section 2.01 Certificate, it being understood that the terms of Sections (o)
through (v) of the Section 2.01 Certificate shall apply to the obligations of
the Guarantor under this Guarantee Agreement as if such Sections (o) through (v)
of the Section 2.01 Certificate were set forth herein in full and such
obligations were substituted for the term "Debentures" appearing in such Article
VI, (ii) subordinate and junior in right of payment to the Debentures and any
Other Indebtedness, (iii) pari passu with any Other Guarantees and any guarantee
in respect of any preferred stock of any affiliate of the Guarantor and (iv)
senior to all preferred and common stock of the Guarantor.

                                   ARTICLE VII
                                   TERMINATION

         Section 7.01 Termination. This Guarantee Agreement shall terminate and
be of no further force and effect upon: (i) full payment of the Redemption Price
of all Preferred Securities, (ii) the distribution of Debentures to the Holders
in exchange for all of the Preferred Securities, or (iii) full payment of the
amounts payable in accordance with the Declaration of Trust upon liquidation of
the Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue
to be effective or will be


                                       11
<PAGE>


reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to Preferred Securities or under this Guarantee
Agreement.

                                  ARTICLE VIII
                                 INDEMNIFICATION

         Section 8.01      Exculpation.

         (a)   No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee Agreement and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Guarantee Agreement or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim to the extent incurred by
reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.

         (b)   An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who, if selected by such
Indemnified Person, has been selected with reasonable care, including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders might
properly be paid.

         Section 8.02 Indemnification. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any and all loss, liability, damage, claim or expense to the extent incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify and hold harmless as set forth in this
Section 8.02 shall survive the termination of this Guarantee Agreement and the
resignation or removal of the Trustee.

         Section 8.03      Compensation and Fees.

         The Guarantor agrees:

         (a)    to pay to the Trustee from time to time reasonable
compensation for all services rendered by the Trustee hereunder in such amounts
as the Guarantor and the Trustee shall agree from time to time (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and

         (b)   except as otherwise expressly provided herein, to reimburse
the Trustee upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Guarantee Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance determined to be attributable to its negligence or bad faith.

                  The provisions of this Section 8.03 shall survive the
resignation or removal of the Trustee or the termination of this Guarantee
Agreement.


                                       12
<PAGE>


                  To secure the Guarantor's payment obligations in this Section
8.03 and in Section 8.02, the Guarantor and the Holders agree that the Trustee
shall have a lien prior to the Preferred Securities on all money or property
held or collected by the Trustee. Such lien shall survive the termination of
this Guarantee Agreement.

                                   ARTICLE IX
                                  MISCELLANEOUS

         Section 9.01 Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding.

         Section 9.02 Amendments. Except with respect to any changes which do
not materially and adversely affect the rights of Holders (in which case no
consent of Holders will be required), this Guarantee Agreement may only be
amended with the prior approval of the Holders of a Majority in liquidation
amount of the Preferred Securities. The provisions of Article 6 of the
Declaration of Trust concerning meetings of and voting by Holders shall apply to
the giving of such approval. No amendment of this Guarantee Agreement that
affects the rights, duties or immunities of the Trustee shall be binding on the
Trustee without its prior written consent thereto.

         Section 9.03 Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:

         (a)   if given to the Trustee, to the address set forth below or
such other address as the Trustee may give notice of to the Guarantor and the
Holders:

                      Wachovia Trust Company, National Association
                      One Rodney Square
                      920 King Street, Suite 102
                      Wilmington, Delaware  19801
                      Attention:  Rita Marie Ritrovato, Trust Officer
                      Telecopy: (302) 888-7544

         (b)   if given to the Guarantor, to the address set forth below or
such other address as the Guarantor may give notice of to the Trustee and the
Holders:

                      PECO Energy Company
                      2301 Market Street
                      Philadelphia, Pennsylvania 19101
                      Attention:  Treasurer
                      Telecopy:  (215) 841-4474

         (c)   if given to the Trust, in care of the Trustee, or to the
Trustee at the Trust's (and the Trustee's) address set forth below (above) or
such other address as the Trustee on behalf of the Trust may give notice to the
Holders:



                                       13
<PAGE>





                         PECO Energy Capital Trust IV
                         c/o PECO Energy Company
                         2301 Market Street
                         Philadelphia, Pennsylvania 19101
                         Attention:  Treasurer
                         Telecopy:  (215) 841-4474

      with a copy, in the case of a notice to the Trust (other than a notice
from the Guarantor), to the Guarantor; and

      (d) if given to any Holder, at the address set forth on the books and
records of the Trust.

                  All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

         Section 9.04 Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and, subject to Section 3.01(a), is not separately
transferable from the Preferred Securities.

      Section 9.05 Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:

         (a)   capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them in
Section 1.01;

         (b)   a term defined anywhere in this Guarantee Agreement has the
same meaning throughout; all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;

         (c)   all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;

         (d)   a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;

         (e)   a reference to the singular includes the plural and vice versa;
and

         (f)   the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.

         Section 9.06 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA AND ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA LOCATED IN THE
CITY AND COUNTY OF PHILADELPHIA IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND


                                       14
<PAGE>



RELATED TO OR IN CONNECTION WITH THIS GUARANTEE AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTEE AGREEMENT OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURTS. THE GUARANTOR AGREES THAT SERVICE OF
PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR
NOTICES SET FORTH IN THIS GUARANTEE AGREEMENT OR ANY METHOD AUTHORIZED BY THE
LAWS OF PENNSYLVANIA.

         Section 9.07 Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.



                                       15
<PAGE>




         THIS PREFERRED SECURITIES GUARANTEE AGREEMENT is executed as of the day
and year first above written.



                                  PECO ENERGY COMPANY


                              By:      /s/ J. Barry Mitchell
                                       -----------------------------
                                       J. Barry Mitchell
                                       Vice President and Treasurer


                                 WACHOVIA TRUST COMPANY, NATIONAL
                                 ASSOCIATION, as Trustee


                              By:      /s/ Rita Marie Ritrovato
                                       -----------------------------
                                       Name:  Rita M. Ritrovato
                                       Title:   Trust Officer


                                       16