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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


FORM 10-Q

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

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

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

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

|                                                               |  |               
|-------------------------------------------------------------- |  | --------------
|Exelon Corporation Common Stock, without par value             |  | 660,149,965   
|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.



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TABLE OF CONTENTS

|                                   |  |                                                                                               |   |          |     | 
|---------------------------------- |  | --------------------------------------------------------------------------------------------- | - | -------- | --- | 
|                                   |  |                                                                                               |   | Page No.
|                                   |  |                                                                                               |   |         
|FILING
    FORMAT                  |  |                                                                                               | 3 |         
|FORWARD-LOOKING
    STATEMENTS     |  |                                                                                               | 3 |         
|WHERE TO FIND MORE
    INFORMATION |  |                                                                                               | 3 |         
|                                  
|PART I.                            |  | FINANCIAL
    INFORMATION                                                                     |   |          | 5   | 
|Item 1.                            |  | Financial
    Statements                                                                      |   |          | 5   | 
|                                   |  | Exelon Corporation                                                                            |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 6   | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 7   | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 8   | 
|                                   |  | Commonwealth Edison
    Company                                                               |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 10  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 11  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 12  | 
|                                   |  | PECO Energy Company                                                                           |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 14  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 15  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 16  | 
|                                   |  | Exelon Generation Company,
    LLC                                                            |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 18  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 19  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 20  | 
|                                   |  | Combined Notes to
    Consolidated Financial Statements                                       |   |          | 22  | 
|Item 2.                            |  | Managements
    Discussion and Analysis of Financial Condition and
    Results of Operations |   |          | 70  | 
|                                   |  | Exelon Corporation                                                                            |   |          | 72  | 
|                                   |  | Commonwealth Edison
    Company                                                               |   |          | 110 | 
|                                   |  | PECO Energy Company                                                                           |   |          | 126 | 
|                                   |  | Exelon Generation Company,
    LLC                                                            |   |          | 140 | 
|Item 3.                            |  | Quantitative and
    Qualitative Disclosure About Market Risk                                 |   |          | 157 | 
|Item 4.                            |  | Controls and
    Procedures                                                                   |   |          | 165 | 
|                                  
|PART II.                           |  | OTHER
    INFORMATION                                                                         |   |          | 165 | 
|Item 1.                            |  | Legal
    Proceedings                                                                         |   |          | 165 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 165 | 
|                                   |  | Commonwealth Edison Company                                                                   |   |          | 165 | 
|                                   |  | Exelon Generation Company, LLC                                                                |   |          | 165 | 
|Item 2.                            |  | Changes in Securities and
    Use of Proceeds                                                 |   |          | 166 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 166 | 
|Item 4.                            |  | Submission of Matters to
    a Vote of Security Holders                                       |   |          | 166 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 166 | 
|                                   |  | PECO Energy Company                                                                           |   |          | 166 | 

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|           |  |                                      |     |          |     | 
|---------- |  | ------------------------------------ | --- | -------- | --- | 
|           |  |                                      |     | Page No.
|           |  |                                      |     |         
|Item 5.    |  | Other
    Information                |     |          | 167 | 
|           |  | Exelon Corporation                   |     |          | 167 | 
|           |  | Commonwealth Edison Company          |     |          | 167 | 
|           |  | PECO Energy Company                  |     |          | 167 | 
|           |  | Exelon Generation Company, LLC       |     |          | 167 | 
|Item 6.    |  | Exhibits and Reports on
    Form 8-K |     |          | 168 | 
|SIGNATURES |  |                                      | 170 |         
|           |  | Exelon Corporation                   |     |          | 170 | 
|           |  | Commonwealth Edison
    Company      |     |          | 170 | 
|           |  | PECO Energy Company                  |     |          | 171 | 
|           |  | Exelon Generation Company,
    LLC   |     |          | 171 | 



2



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FILING FORMAT

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




FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this Report
are forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, that are
subject to risks and uncertainties. The factors that could cause
actual results to differ materially from the forward-looking
statements made by a registrant include those factors discussed
herein, as well as the items discussed in (a) the
Registrants 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.

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PART I. FINANCIAL INFORMATION



Item 1.     Financial
Statements

5



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EXELON CORPORATION



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |       |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------- | ----- | -------------- | ----- | ---- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                                                                                                                                                     |                                                                                |                                         |       |               
|                                                                                                                                                                     |                                                                                | Three Months                            |       | Six Months    
|                                                                                                                                                                     |                                                                                | Ended June 30,                          |       | Ended June 30,
|                                                                                                                                                                     |                                                                                |                                         |       |               
|                                                                                                                                                                     |                                                                                | 2004                                    |       | 2003           |       | 2004 |       | 2003 
|(In millions, except per share data)                                                                                                                                 |                                                                                |                                         |       |                |       |      |       |      
|Operating revenues                                                                                                                                                   |                                                                                | $                                       | 3,550 |                |       | $    | 3,721 |       |       | $ | 7,272 |       |       | $ | 7,795 |      
|Operating expenses                                                                                                                                                   |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Purchased power                                                                |                                         |       | 673            |       |      |       | 746   |       |   |       | 1,234 |       |   |       | 1,586 |      
|                                                                                                                                                                     | Purchased power from AmerGen Energy Company, LLC                               |                                         |       |               |       |      |       | 110   |       |   |       |      |       |   |       | 177   |      
|                                                                                                                                                                     | Fuel                                                                           |                                         |       | 538            |       |      |       | 531   |       |   |       | 1,374 |       |   |       | 1,356 |      
|                                                                                                                                                                     | Operating and maintenance                                                      |                                         |       | 1,056          |       |      |       | 1,100 |       |   |       | 2,165 |       |   |       | 2,212 |      
|                                                                                                                                                                     | Depreciation and amortization                                                  |                                         |       | 315            |       |      |       | 275   |       |   |       | 616   |       |   |       | 549   |      
|                                                                                                                                                                     | Taxes other than income                                                        |                                         |       | 185            |       |      |       | 159   |       |   |       | 378   |       |   |       | 358   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     |                                                                                | Total operating expenses                |       |                | 2,767 |      |       |       | 2,921 |   |       |       | 5,767 |   |       |       | 6,238 |  
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Operating income                                                                                                                                                     |                                                                                |                                         | 783   |                |       |      | 800   |       |       |   | 1,505 |       |       |   | 1,557 |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Other income and deductions                                                                                                                                          |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Interest expense                                                               |                                         |       | (156           | )     |      |       | (217  | )     |   |       | (286  | )     |   |       | (437  | )    
|                                                                                                                                                                     | Interest expense to affiliates                                                 |                                         |       | (90            | )     |      |       | (3    | )     |   |       | (183  | )     |   |       | (6    | )    
|                                                                                                                                                                     | Distributions on preferred securities of
    subsidiaries                      |                                         |       | (1             | )     |      |       | (10   | )     |   |       | (2    | )     |   |       | (22   | )    
|                                                                                                                                                                     | Equity in earnings (losses) of unconsolidated
    affiliates                   |                                         |       | (31            | )     |      |       | 15    |       |   |       | (55   | )     |   |       | 33    |      
|                                                                                                                                                                     | Other, net                                                                     |                                         |       | 230            |       |      |       | 10    |       |   |       | 287   |       |   |       | (131  | )    
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     |                                                                                | Total other income and deductions       |       |                | (48   | )    |       |       | (205  | ) |       |       | (239  | ) |       |       | (563  | )
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Income before income taxes, minority interest
    and cumulative effect of changes in accounting
    principles                                                      |                                                                                |                                         | 735   |                |       |      | 595   |       |       |   | 1,266 |       |       |   | 994   |      
|Income taxes                                                                                                                                                         |                                                                                |                                         | 226   |                |       |      | 222   |       |       |   | 376   |       |       |   | 370   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Income before minority interest and cumulative
    effect of changes in accounting principles                                                                        |                                                                                |                                         | 509   |                |       |      | 373   |       |       |   | 890   |       |       |   | 624   |      
|Minority interest                                                                                                                                                    |                                                                                |                                         | 12    |                |       |      | (1    | )     |       |   | 11    |       |       |   | (3    | )    
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Income before cumulative effect of changes in
    accounting principles                                                                                              |                                                                                |                                         | 521   |                |       |      | 372   |       |       |   | 901   |       |       |   | 621   |      
|Cumulative effect of changes in accounting
    principles (net of income taxes of $22 and $69 for the six
    months ended June 30, 2004 and 2003,
    respectively) |                                                                                |                                         |      |                |       |      |      |       |       |   | 32    |       |       |   | 112   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Net income                                                                                                                                                           |                                                                                |                                         | 521   |                |       |      | 372   |       |       |   | 933   |       |       |   | 733   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Other comprehensive income (loss) (net of
    income taxes)                                                                                                          |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Change in net unrealized gain (loss) on cash-flow
    hedges                   |                                         |       | 50             |       |      |       | 62    |       |   |       | (154  | )     |   |       | (84   | )    
|                                                                                                                                                                     | Foreign currency translation adjustment                                        |                                         |       | (4             | )     |      |       | 1     |       |   |       | (2    | )     |   |       | 2     |      
|                                                                                                                                                                     | Unrealized gain (loss) on marketable securities                                |                                         |       | (31            | )     |      |       | 3     |       |   |       | 22    |       |   |       | (2    | )    
|                                                                                                                                                                     | SFAS No. 143 transition adjustment                                             |                                         |       |               |       |      |       |      |       |   |       |      |       |   |       | 168   |      
|                                                                                                                                                                     | Interest in other comprehensive income (loss) of
    unconsolidated affiliates |                                         |       |               |       |      |       | 17    |       |   |       | (8    | )     |   |       | 8     |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     |                                                                                | Total other comprehensive income (loss) |       |                | 15    |      |       |       | 83    |   |       |       | (142  | ) |       |       | 92    |  
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Total comprehensive income                                                                                                                                           |                                                                                | $                                       | 536   |                |       | $    | 455   |       |       | $ | 791   |       |       | $ | 825   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Average shares of common stock
    outstanding  Basic                                                                                                               |                                                                                |                                         | 661   |                |       |      | 650   |       |       |   | 660   |       |       |   | 649   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Average shares of common stock
    outstanding  Diluted                                                                                                             |                                                                                |                                         | 667   |                |       |      | 655   |       |       |   | 666   |       |       |   | 653   |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Earnings per average common share 
    Basic:                                                                                                                       |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Income before cumulative effect of changes in
    accounting principles        |                                         | $     | 0.79           |       |      | $     | 0.57  |       |   | $     | 1.36  |       |   | $     | 0.96  |      
|                                                                                                                                                                     | Cumulative effect of changes in accounting
    principles                      |                                         |       |               |       |      |       |      |       |   |       | 0.05  |       |   |       | 0.17  |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Net income                                                                     |                                         | $     | 0.79           |       |      | $     | 0.57  |       |   | $     | 1.41  |       |   | $     | 1.13  |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Earnings per average common share 
    Diluted:                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Income before cumulative effect of changes in
    accounting principles        |                                         | $     | 0.78           |       |      | $     | 0.57  |       |   | $     | 1.35  |       |   | $     | 0.95  |      
|                                                                                                                                                                     | Cumulative effect of changes in accounting
    principles                      |                                         |       |               |       |      |       |      |       |   |       | 0.05  |       |   |       | 0.17  |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|                                                                                                                                                                     | Net income                                                                     |                                         | $     | 0.78           |       |      | $     | 0.57  |       |   | $     | 1.40  |       |   | $     | 1.12  |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      
|Dividends per common share                                                                                                                                           |                                                                                | $                                       | 0.28  |                |       | $    | 0.23  |       |       | $ | 0.55  |       |       | $ | 0.46  |      
|                                                                                                                                                                     |                                                                                |                                         |       |                |       |      |       |       |       |   |       |       |       |   |       |      

See Combined Notes to Consolidated Financial
Statements

6



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EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |        |      |      |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | ---- | ---- | ------ | ------ | ---- | ---- | -
|                                                                          |                                                                                                                                       |                                                                                
|                                                                          |                                                                                                                                       | Six Months                                                                     
|                                                                          |                                                                                                                                       | Ended June 30,                                                                 
|                                                                          |                                                                                                                                       |                                                                                
|                                                                          |                                                                                                                                       | 2004                                                                            |                                                                         | 2003  
|(In millions)                                                             |                                                                                                                                       |                                                                                 |                                                                         |       
|Cash flows from operating activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|                                                                          | Net income                                                                                                                            |                                                                                 | $                                                                       | 933    |      |      | $      | 733    |     
|                                                                          | Adjustments to reconcile net income to net cash
    flows provided by operating activities                                            |                                                                                 |                                                                         |        |      |      |        |        |     
|                                                                          |                                                                                                                                       | Depreciation, amortization and accretion,
    including nuclear fuel            |                                                                         |        | 930  |      |        |        | 846  |     
|                                                                          |                                                                                                                                       | Cumulative effect of changes in accounting
    principles (net of income taxes) |                                                                         |        | (32  | )    |        |        | (112 | )   
|                                                                          |                                                                                                                                       | Impairment of investments                                                       |                                                                         |        | 1    |      |        |        | 238  |     
|                                                                          |                                                                                                                                       | Impairment of goodwill and other long-lived assets                              |                                                                         |        |     |      |        |        | 53   |     
|                                                                          |                                                                                                                                       | Deferred income taxes and amortization of
    investment tax credits            |                                                                         |        | 154  |      |        |        | (100 | )   
|                                                                          |                                                                                                                                       | Provision for uncollectible accounts                                            |                                                                         |        | 39   |      |        |        | 43   |     
|                                                                          |                                                                                                                                       | Equity in losses (earnings) of
    unconsolidated affiliates                    |                                                                         |        | 55   |      |        |        | (33  | )   
|                                                                          |                                                                                                                                       | Gains on sales of investments and wholly-owned
    subsidiaries                 |                                                                         |        | (155 | )    |        |        |     |     
|                                                                          |                                                                                                                                       | Net realized losses (gains) on nuclear
    decommissioning trust funds          |                                                                         |        | 1    |      |        |        | (12  | )   
|                                                                          |                                                                                                                                       | Other operating activities                                                      |                                                                         |        | (16  | )    |        |        | 52   |     
|                                                                          |                                                                                                                                       | Changes in assets and liabilities                                               |                                                                         |        |      |      |        |        |      |     
|                                                                          |                                                                                                                                       |                                                                                 | Receivables                                                             |        |      | 269  |        |        |      | 70   |  
|                                                                          |                                                                                                                                       |                                                                                 | Inventories                                                             |        |      | 14   |        |        |      | (16  | )
|                                                                          |                                                                                                                                       |                                                                                 | Other current assets                                                    |        |      | (66  | )      |        |      | (219 | )
|                                                                          |                                                                                                                                       |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities    |        |      | (134 | )      |        |      | (143 | )
|                                                                          |                                                                                                                                       |                                                                                 | Net realized and unrealized mark-to-market and
    hedging transactions |        |      | 54   |        |        |      | 76   |  
|                                                                          |                                                                                                                                       |                                                                                 | Pension and non-pension postretirement benefits
    obligations         |        |      | (175 | )      |        |      | (146 | )
|                                                                          |                                                                                                                                       |                                                                                 | Other noncurrent assets and liabilities                                 |        |      | 35   |        |        |      | (38  | )
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Net cash flows provided by operating activities                           |                                                                                                                                       |                                                                                 | 1,907                                                                   |        |      |      | 1,292  |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Cash flows from investing activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|                                                                          | Capital expenditures                                                                                                                  |                                                                                 |                                                                         | (844   | )    |      |        | (1,019 | )   
|                                                                          | Proceeds from liquidated damages                                                                                                      |                                                                                 |                                                                         |       |      |      |        | 86     |     
|                                                                          | Proceeds from nuclear decommissioning trust fund
    sales                                                                            |                                                                                 |                                                                         | 1,042  |      |      |        | 1,262  |     
|                                                                          | Investment in nuclear decommissioning trust funds                                                                                     |                                                                                 |                                                                         | (1,178 | )    |      |        | (1,368 | )   
|                                                                          | Note receivable from unconsolidated affiliate                                                                                         |                                                                                 |                                                                         |       |      |      |        | 35     |     
|                                                                          | Proceeds from sales of investments and
    wholly-owned subsidiaries                                                                  |                                                                                 |                                                                         | 227    |      |      |        | 6      |     
|                                                                          | Change in restricted cash                                                                                                             |                                                                                 |                                                                         | (2     | )    |      |        | (29    | )   
|                                                                          | Net cash increase from consolidation of Sithe
    Energies, Inc.                                                                      |                                                                                 |                                                                         | 19     |      |      |        |       |     
|                                                                          | Other investing activities                                                                                                            |                                                                                 |                                                                         | 67     |      |      |        | 11     |     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Net cash flows used in investing activities                               |                                                                                                                                       |                                                                                 | (669                                                                    | )      |      |      | (1,016 | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Cash flows from financing activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|                                                                          | Issuance of long-term debt                                                                                                            |                                                                                 |                                                                         | 75     |      |      |        | 1,813  |     
|                                                                          | Retirement of long-term debt                                                                                                          |                                                                                 |                                                                         | (312   | )    |      |        | (1,479 | )   
|                                                                          | Retirement of long-term debt to financing
    affiliates                                                                              |                                                                                 |                                                                         | (345   | )    |      |        |       |     
|                                                                          | Change in short-term debt                                                                                                             |                                                                                 |                                                                         | (65    | )    |      |        | (100   | )   
|                                                                          | Issuance of mandatorily redeemable preferred
    securities                                                                           |                                                                                 |                                                                         |       |      |      |        | 300    |     
|                                                                          | Retirement of mandatorily redeemable preferred
    securities                                                                         |                                                                                 |                                                                         |       |      |      |        | (300   | )   
|                                                                          | Payment on acquisition note payable to Sithe
    Energies, Inc.                                                                       |                                                                                 |                                                                         | (27    | )    |      |        | (210   | )   
|                                                                          | Dividends paid on common stock                                                                                                        |                                                                                 |                                                                         | (364   | )    |      |        | (285   | )   
|                                                                          | Proceeds from employee stock plans                                                                                                    |                                                                                 |                                                                         | 140    |      |      |        | 91     |     
|                                                                          | Purchase of treasury stock                                                                                                            |                                                                                 |                                                                         | (75    | )    |      |        |       |     
|                                                                          | Other financing activities                                                                                                            |                                                                                 |                                                                         | 36     |      |      |        | (85    | )   
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Net cash flows used in financing activities                               |                                                                                                                                       |                                                                                 | (937                                                                    | )      |      |      | (255   | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Increase in cash and cash
    equivalents                                 |                                                                                                                                       |                                                                                 | 301                                                                     |        |      |      | 21     |       
|Cash and cash equivalents at beginning of
    period                      |                                                                                                                                       |                                                                                 | 493                                                                     |        |      |      | 469    |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Cash and cash equivalents, including cash
    classified as held for sale |                                                                                                                                       |                                                                                 | 794                                                                     |        |      |      | 490    |       
|Cash classified as held for sale on the
    consolidated balance sheet    |                                                                                                                                       |                                                                                 |                                                                        |        |      |      | (26    | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Cash and cash equivalents at end of
    period                            |                                                                                                                                       | $                                                                               | 794                                                                     |        |      | $    | 464    |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Supplemental cash flow information                                        |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|Noncash investing and financing activities:                               |                                                                                                                                       |                                                                                 |                                                                         |        |      |      |        |       
|                                                                          | Consolidation of Sithe Energies, Inc. pursuant to
    FASB Interpretation No. 46-R, Consolidation of
    Variable Interest Entities |                                                                                 | $                                                                       | 85     |      |      | $      |       |     

See Combined Notes to Consolidated Financial
Statements

7



---



##### 






EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                     |                                        |        |              |        |   |        |       |        | 
|---------------------------------- | ----------------------------------- | -------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                   |                                     | June 30,                               |        | December 31,
|                                   |                                     | 2004                                   |        | 2003        
|(In millions)                      |                                     |                                        |        |             
|ASSETS                            
|Current assets                     |                                     |                                        |        |              |        |   |        |      
|                                   | Cash and cash equivalents           |                                        | $      | 794          |        |   | $      | 493   |       
|                                   | Restricted cash and investments     |                                        |        | 179          |        |   |        | 97    |       
|                                   | Accounts receivable, net            |                                        |        |              |        |   |        |       |       
|                                   |                                     | Customer                               |        |              | 1,645  |   |        |       | 1,567  | 
|                                   |                                     | Other                                  |        |              | 403    |   |        |       | 582    | 
|                                   | Mark-to-market derivative assets    |                                        |        | 433          |        |   |        | 337   |       
|                                   | Inventories, at average cost        |                                        |        |              |        |   |        |       |       
|                                   |                                     | Fossil fuel                            |        |              | 165    |   |        |       | 212    | 
|                                   |                                     | Materials and supplies                 |        |              | 318    |   |        |       | 310    | 
|                                   | Notes receivable from affiliate     |                                        |        |             |        |   |        | 92    |       
|                                   | Deferred income taxes               |                                        |        | 145          |        |   |        | 162   |       
|                                   | Assets held for sale                |                                        |        | 20           |        |   |        | 242   |       
|                                   | Other                               |                                        |        | 449          |        |   |        | 413   |       
|                                   |                                     |                                        |        |              |        |   |        |      
|                                   |                                     | Total current assets                   |        |              | 4,551  |   |        |       | 4,507  | 
|                                   |                                     |                                        |        |              |        |   |        |      
|Property, plant and equipment, net |                                     |                                        | 20,228 |              |        |   | 20,630 |      
|Deferred debits and other assets   |                                     |                                        |        |              |        |   |        |      
|                                   | Regulatory assets                   |                                        |        | 5,038        |        |   |        | 5,226 |       
|                                   | Nuclear decommissioning trust funds |                                        |        | 4,890        |        |   |        | 4,721 |       
|                                   | Investments                         |                                        |        | 922          |        |   |        | 955   |       
|                                   | Goodwill                            |                                        |        | 4,714        |        |   |        | 4,719 |       
|                                   | Mark-to-market derivative assets    |                                        |        | 391          |        |   |        | 133   |       
|                                   | Other                               |                                        |        | 1,368        |        |   |        | 991   |       
|                                   |                                     |                                        |        |              |        |   |        |      
|                                   |                                     | Total deferred debits and other assets |        |              | 17,323 |   |        |       | 16,745 | 
|                                   |                                     |                                        |        |              |        |   |        |      
|Total assets                       |                                     | $                                      | 42,102 |              |        | $ | 41,882 |      
|                                   |                                     |                                        |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

8



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |        |        | 
|--------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ------ | ------ | 
|                                                                                        |                                                                                                             | June 30,                                     |        | December 31,
|                                                                                        |                                                                                                             | 2004                                         |        | 2003        
|(In millions)                                                                           |                                                                                                             |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                               
|Current liabilities                                                                     |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Commercial paper                                                                                            |                                              | $      | 261          |        |   | $      | 326    |       
|                                                                                        | Note payable to Sithe Energies, Inc.                                                                        |                                              |        |             |        |   |        | 90     |       
|                                                                                        | Long-term debt due within one year                                                                          |                                              |        | 177          |        |   |        | 1,385  |       
|                                                                                        | Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust due within one year |                                              |        | 478          |        |   |        | 470    |       
|                                                                                        | Accounts payable                                                                                            |                                              |        | 1,221        |        |   |        | 1,238  |       
|                                                                                        | Mark-to-market derivative liabilities                                                                       |                                              |        | 805          |        |   |        | 584    |       
|                                                                                        | Accrued expenses                                                                                            |                                              |        | 1,080        |        |   |        | 1,166  |       
|                                                                                        | Liabilities held for sale                                                                                   |                                              |        | 14           |        |   |        | 61     |       
|                                                                                        | Other                                                                                                       |                                              |        | 293          |        |   |        | 306    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total current liabilities                    |        |              | 4,329  |   |        |        | 5,626  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Long-term debt                                                                          |                                                                                                             |                                              | 8,672  |              |        |   | 7,889  |       
|Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust |                                                                                                             |                                              | 4,702  |              |        |   | 5,055  |       
|Long-term debt to other financing
    trusts                                            |                                                                                                             |                                              | 545    |              |        |   | 545    |       
|Deferred credits and other
    liabilities                                              |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Deferred income taxes                                                                                       |                                              |        | 4,580        |        |   |        | 4,360  |       
|                                                                                        | Unamortized investment tax credits                                                                          |                                              |        | 281          |        |   |        | 288    |       
|                                                                                        | Asset retirement obligation                                                                                 |                                              |        | 3,100        |        |   |        | 2,997  |       
|                                                                                        | Pension obligations                                                                                         |                                              |        | 1,445        |        |   |        | 1,668  |       
|                                                                                        | Non-pension postretirement benefits obligations                                                             |                                              |        | 1,102        |        |   |        | 1,053  |       
|                                                                                        | Spent nuclear fuel obligation                                                                               |                                              |        | 872          |        |   |        | 867    |       
|                                                                                        | Regulatory liabilities                                                                                      |                                              |        | 1,967        |        |   |        | 1,891  |       
|                                                                                        | Mark-to-market derivative liabilities                                                                       |                                              |        | 425          |        |   |        | 141    |       
|                                                                                        | Other                                                                                                       |                                              |        | 919          |        |   |        | 912    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total deferred credits and other liabilities |        |              | 14,691 |   |        |        | 14,177 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total liabilities                            |        |              | 32,939 |   |        |        | 33,292 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Commitments and contingencies                                                           |                                                                                                             |                                              |        |              |        |   |        |       
|Minority interest of consolidated
    subsidiaries                                      |                                                                                                             |                                              | 50     |              |        |   |       |       
|Preferred securities of subsidiaries                                                    |                                                                                                             |                                              | 87     |              |        |   | 87     |       
|Shareholders equity                                                                    |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Common stock                                                                                                |                                              |        | 7,463        |        |   |        | 7,292  |       
|                                                                                        | Treasury stock, at cost                                                                                     |                                              |        | (75          | )      |   |        |       |       
|                                                                                        | Retained earnings                                                                                           |                                              |        | 2,889        |        |   |        | 2,320  |       
|                                                                                        | Accumulated other comprehensive income (loss)                                                               |                                              |        | (1,251       | )      |   |        | (1,109 | )     
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total shareholders equity                   |        |              | 9,026  |   |        |        | 8,503  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Total liabilities and shareholders
    equity                                          |                                                                                                             | $                                            | 42,102 |              |        | $ | 41,882 |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       

See Combined Notes to Consolidated Financial
Statements

9



---



##### 






COMMONWEALTH EDISON COMPANY



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |       |       |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------- | --- | -------------- | ----- | ---- | --- | ----- | ----- | - | --- | ----- | ----- | - | --- | ----- | ----- | -
|                                                                                         |                                                                  |                                         |     |               
|                                                                                         |                                                                  | Three Months                            |     | Six Months    
|                                                                                         |                                                                  | Ended June 30,                          |     | Ended June 30,
|                                                                                         |                                                                  |                                         |     |               
|                                                                                         |                                                                  | 2004                                    |     | 2003           |       | 2004 |     | 2003 
|(In millions)                                                                            |                                                                  |                                         |     |                |       |      |     |      
|Operating revenues                                                                       |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         | Operating revenues                                               |                                         | $   | 1,397          |       |      | $   | 1,345 |       |   | $   | 2,722 |       |   | $   | 2,756 |      
|                                                                                         | Operating revenues from affiliates                               |                                         |     | 6              |       |      |     | 16    |       |   |     | 17    |       |   |     | 29    |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total operating revenues                |     |                | 1,403 |      |     |       | 1,361 |   |     |       | 2,739 |   |     |       | 2,785 |  
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Operating expenses                                                                       |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         | Purchased power                                                  |                                         |     | 60             |       |      |     | 5     |       |   |     | 65    |       |   |     | 11    |      
|                                                                                         | Purchased power from affiliate                                   |                                         |     | 514            |       |      |     | 528   |       |   |     | 1,043 |       |   |     | 1,099 |      
|                                                                                         | Operating and maintenance                                        |                                         |     | 178            |       |      |     | 197   |       |   |     | 348   |       |   |     | 431   |      
|                                                                                         | Operating and maintenance from affiliates                        |                                         |     | 45             |       |      |     | 24    |       |   |     | 90    |       |   |     | 52    |      
|                                                                                         | Depreciation and amortization                                    |                                         |     | 103            |       |      |     | 96    |       |   |     | 205   |       |   |     | 190   |      
|                                                                                         | Taxes other than income                                          |                                         |     | 72             |       |      |     | 68    |       |   |     | 151   |       |   |     | 148   |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total operating expenses                |     |                | 972   |      |     |       | 918   |   |     |       | 1,902 |   |     |       | 1,931 |  
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Operating income                                                                         |                                                                  |                                         | 431 |                |       |      | 443 |       |       |   | 837 |       |       |   | 854 |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Other income and deductions                                                              |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         | Interest expense                                                 |                                         |     | (68            | )     |      |     | (106  | )     |   |     | (144  | )     |   |     | (215  | )    
|                                                                                         | Interest expense to affiliates                                   |                                         |     | (28            | )     |      |     |      |       |   |     | (58   | )     |   |     |      |      
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                         |     |               |       |      |     | (6    | )     |   |     |      |       |   |     | (14   | )    
|                                                                                         | Equity in (losses) of unconsolidated affiliates                  |                                         |     | (6             | )     |      |     |      |       |   |     | (9    | )     |   |     |      |      
|                                                                                         | Interest income from affiliates                                  |                                         |     | 5              |       |      |     | 7     |       |   |     | 11    |       |   |     | 13    |      
|                                                                                         | Other, net                                                       |                                         |     | 2              |       |      |     | 5     |       |   |     | 6     |       |   |     | 21    |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total other income and deductions       |     |                | (95   | )    |     |       | (100  | ) |     |       | (194  | ) |     |       | (195  | )
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                         | 336 |                |       |      | 343 |       |       |   | 643 |       |       |   | 659 |      
|Income taxes                                                                             |                                                                  |                                         | 132 |                |       |      | 138 |       |       |   | 255 |       |       |   | 263 |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Income before cumulative effect of a change in
    accounting principle                  |                                                                  |                                         | 204 |                |       |      | 205 |       |       |   | 388 |       |       |   | 396 |      
|Cumulative effect of a change in accounting
    principle (net of income taxes of $0)    |                                                                  |                                         |    |                |       |      |    |       |       |   |    |       |       |   | 5   |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Net income                                                                               |                                                                  |                                         | 204 |                |       |      | 205 |       |       |   | 388 |       |       |   | 401 |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Other comprehensive income (loss) (net of
    income taxes)                              |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         | Change in net unrealized gain (loss) on cash-flow
    hedges     |                                         |     |               |       |      |     | (3    | )     |   |     |      |       |   |     | 28    |      
|                                                                                         | Unrealized gain on marketable securities                         |                                         |     |               |       |      |     | 1     |       |   |     |      |       |   |     | 1     |      
|                                                                                         | Foreign currency translation adjustment                          |                                         |     |               |       |      |     | 1     |       |   |     |      |       |   |     | 2     |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|                                                                                         |                                                                  | Total other comprehensive income (loss) |     |                |      |      |     |       | (1    | ) |     |       |      |   |     |       | 31    |  
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      
|Total comprehensive income                                                               |                                                                  | $                                       | 204 |                |       | $    | 204 |       |       | $ | 388 |       |       | $ | 432 |      
|                                                                                         |                                                                  |                                         |     |                |       |      |     |       |       |   |     |       |       |   |     |      

See Combined Notes to Consolidated Financial
Statements

10



---



##### 






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |       |     |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | --- | ---- | ----- | --- | ---- | -
|                                                              |                                                                                            |                                                                                
|                                                              |                                                                                            | Six Months                                                                     
|                                                              |                                                                                            | Ended June 30,                                                                 
|                                                              |                                                                                            |                                                                                
|                                                              |                                                                                            | 2004                                                                            |                                                                      | 2003
|(In millions)                                                 |                                                                                            |                                                                                 |                                                                      |     
|Cash flows from operating activities                          |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|                                                              | Net income                                                                                 |                                                                                 | $                                                                    | 388  |     |     | $    | 401   |    
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities |                                                                                 |                                                                      |      |     |     |      |       |    
|                                                              |                                                                                            | Depreciation and amortization                                                   |                                                                      |      | 205 |     |      |       | 190 |     
|                                                              |                                                                                            | Cumulative effect of a change in accounting
    principle (net of income taxes) |                                                                      |      |    |     |      |       | (5  | )   
|                                                              |                                                                                            | Deferred income taxes and amortization of
    investment tax credits            |                                                                      |      | 86  |     |      |       | 60  |     
|                                                              |                                                                                            | Provision for uncollectible accounts                                            |                                                                      |      | 16  |     |      |       | 20  |     
|                                                              |                                                                                            | Equity in losses of unconsolidated affiliates                                   |                                                                      |      | 9   |     |      |       |    |     
|                                                              |                                                                                            | Other operating activities                                                      |                                                                      |      | 24  |     |      |       | 25  |     
|                                                              |                                                                                            | Changes in assets and liabilities                                               |                                                                      |      |     |     |      |       |     |     
|                                                              |                                                                                            |                                                                                 | Receivables                                                          |      |     | (38 | )    |       |     | 9    |  
|                                                              |                                                                                            |                                                                                 | Inventories                                                          |      |     | (1  | )    |       |     | 2    |  
|                                                              |                                                                                            |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities |      |     | 12  |      |       |     | (115 | )
|                                                              |                                                                                            |                                                                                 | Receivables and payables to affiliates                               |      |     | 15  |      |       |     | (155 | )
|                                                              |                                                                                            |                                                                                 | Other current assets                                                 |      |     | 5   |      |       |     | (2   | )
|                                                              |                                                                                            |                                                                                 | Pension and non-pension postretirement benefits
    obligations      |      |     | (93 | )    |       |     | (72  | )
|                                                              |                                                                                            |                                                                                 | Other noncurrent assets and liabilities                              |      |     | (26 | )    |       |     | 11   |  
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Net cash flows provided by operating activities               |                                                                                            |                                                                                 | 602                                                                  |      |     |     | 369  |      
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Cash flows from investing activities                          |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|                                                              | Capital expenditures                                                                       |                                                                                 |                                                                      | (369 | )   |     |      | (355  | )  
|                                                              | Changes in Exelon intercompany money pool
    investment                                   |                                                                                 |                                                                      | 207  |     |     |      | (165  | )  
|                                                              | Change in restricted cash                                                                  |                                                                                 |                                                                      | 18   |     |     |      | (18   | )  
|                                                              | Other investing activities                                                                 |                                                                                 |                                                                      | 11   |     |     |      | 14    |    
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Net cash flows used in investing activities                   |                                                                                            |                                                                                 | (133                                                                 | )    |     |     | (524 | )    
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Cash flows from financing activities                          |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|                                                              | Issuance of long-term debt                                                                 |                                                                                 |                                                                      |     |     |     |      | 1,135 |    
|                                                              | Retirement of long-term debt                                                               |                                                                                 |                                                                      | (178 | )   |     |      | (662  | )  
|                                                              | Retirement of long-term debt to ComEd
    Transitional Funding Trust                       |                                                                                 |                                                                      | (179 | )   |     |      |      |    
|                                                              | Issuance of mandatorily redeemable preferred
    securities                                |                                                                                 |                                                                      |     |     |     |      | 200   |    
|                                                              | Retirement of mandatorily redeemable preferred
    securities                              |                                                                                 |                                                                      |     |     |     |      | (200  | )  
|                                                              | Change in short-term debt                                                                  |                                                                                 |                                                                      |     |     |     |      | (71   | )  
|                                                              | Dividends paid on common stock                                                             |                                                                                 |                                                                      | (207 | )   |     |      | (211  | )  
|                                                              | Contributions from parent                                                                  |                                                                                 |                                                                      | 62   |     |     |      | 61    |    
|                                                              | Settlement of cash-flow and fair-value hedges                                              |                                                                                 |                                                                      | 26   |     |     |      | (51   | )  
|                                                              | Other financing activities                                                                 |                                                                                 |                                                                      |     |     |     |      | (28   | )  
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Net cash flows (used in) provided by financing
    activities |                                                                                            |                                                                                 | (476                                                                 | )    |     |     | 173  |      
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|(Decrease) increase in cash and cash
    equivalents          |                                                                                            |                                                                                 | (7                                                                   | )    |     |     | 18   |      
|Cash and cash equivalents at beginning of
    period          |                                                                                            |                                                                                 | 34                                                                   |      |     |     | 16   |      
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Cash and cash equivalents at end of
    period                |                                                                                            | $                                                                               | 27                                                                   |      |     | $   | 34   |      
|                                                              |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Supplemental cash flow information                            |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|Noncash investing and financing activities:                   |                                                                                            |                                                                                 |                                                                      |      |     |     |      |      
|                                                              | Adoption of SFAS No. 143 
    adjustment to other paid in capital and goodwill            |                                                                                 | $                                                                    |     |     |     | $    | 210   |    

See Combined Notes to Consolidated Financial
Statements

11



---



##### 






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | -------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                              | June 30,                               |        | December 31,
|                                   |                                              | 2004                                   |        | 2003        
|(In millions)                      |                                              |                                        |        |             
|ASSETS                            
|Current assets                     |                                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                    |                                        | $      | 27           |       |   | $      | 34    |      
|                                   | Restricted cash                              |                                        |        | 2            |       |   |        | 20    |      
|                                   | Accounts receivable, net                     |                                        |        |              |       |   |        |       |      
|                                   |                                              | Customer                               |        |              | 720   |   |        |       | 683   | 
|                                   |                                              | Other                                  |        |              | 53    |   |        |       | 68    | 
|                                   | Inventories, at average cost                 |                                        |        | 44           |       |   |        | 43    |      
|                                   | Deferred income taxes                        |                                        |        | 5            |       |   |        | 6     |      
|                                   | Receivables from affiliates                  |                                        |        | 22           |       |   |        | 23    |      
|                                   | Investment in Exelon intercompany money pool |                                        |        | 198          |       |   |        | 405   |      
|                                   | Other                                        |                                        |        | 26           |       |   |        | 31    |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total current assets                   |        |              | 1,097 |   |        |       | 1,313 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                              |                                        | 9,288  |              |       |   | 9,096  |      
|Deferred debits and other assets   |                                              |                                        |        |              |       |   |        |      
|                                   | Investments                                  |                                        |        | 37           |       |   |        | 36    |      
|                                   | Investment in affiliates                     |                                        |        | 63           |       |   |        | 73    |      
|                                   | Goodwill                                     |                                        |        | 4,714        |       |   |        | 4,719 |      
|                                   | Receivables from affiliates                  |                                        |        | 2,300        |       |   |        | 2,271 |      
|                                   | Pension asset                                |                                        |        | 117          |       |   |        | 4     |      
|                                   | Other                                        |                                        |        | 394          |       |   |        | 453   |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total deferred debits and other assets |        |              | 7,625 |   |        |       | 7,556 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Total assets                       |                                              | $                                      | 18,010 |              |       | $ | 17,965 |      
|                                   |                                              |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

12



---



##### 



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                       |                                                                            |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------------ | -------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                       |                                                                            | June 30,                                     |        | December 31,
|                                                       |                                                                            | 2004                                         |        | 2003        
|(In millions)                                          |                                                                            |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY              
|Current liabilities                                    |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Long-term debt due within one year                                         |                                              | $      | 59           |        |   | $      | 236   |       
|                                                       | Long-term debt to ComEd Transitional Funding
    Trust due within one year |                                              |        | 307          |        |   |        | 317   |       
|                                                       | Accounts payable                                                           |                                              |        | 184          |        |   |        | 170   |       
|                                                       | Accrued expenses                                                           |                                              |        | 526          |        |   |        | 540   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 222          |        |   |        | 207   |       
|                                                       | Customer deposits                                                          |                                              |        | 80           |        |   |        | 78    |       
|                                                       | Other                                                                      |                                              |        | 12           |        |   |        | 9     |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total current liabilities                    |        |              | 1,390  |   |        |       | 1,557  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Long-term debt                                         |                                                                            |                                              | 4,158  |              |        |   | 4,167  |      
|Long-term debt to ComEd Transitional Funding
    Trust |                                                                            |                                              | 1,190  |              |        |   | 1,359  |      
|Long-term debt to other affiliates                     |                                                                            |                                              | 361    |              |        |   | 361    |      
|Deferred credits and other
    liabilities             |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Deferred income taxes                                                      |                                              |        | 1,775        |        |   |        | 1,686 |       
|                                                       | Unamortized investment tax credits                                         |                                              |        | 47           |        |   |        | 48    |       
|                                                       | Non-pension postretirement benefits obligation                             |                                              |        | 210          |        |   |        | 190   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 27           |        |   |        | 28    |       
|                                                       | Regulatory liabilities                                                     |                                              |        | 1,967        |        |   |        | 1,891 |       
|                                                       | Other                                                                      |                                              |        | 300          |        |   |        | 336   |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total deferred credits and other liabilities |        |              | 4,326  |   |        |       | 4,179  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total liabilities                            |        |              | 11,425 |   |        |       | 11,623 | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Commitments and contingencies                          |                                                                            |                                              |        |              |        |   |        |      
|Shareholders equity                                   |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Common stock                                                               |                                              |        | 1,588        |        |   |        | 1,588 |       
|                                                       | Preference stock                                                           |                                              |        | 7            |        |   |        | 7     |       
|                                                       | Other paid in capital                                                      |                                              |        | 4,115        |        |   |        | 4,115 |       
|                                                       | Receivable from parent                                                     |                                              |        | (188         | )      |   |        | (250  | )     
|                                                       | Retained earnings                                                          |                                              |        | 1,064        |        |   |        | 883   |       
|                                                       | Accumulated other comprehensive income (loss)                              |                                              |        | (1           | )      |   |        | (1    | )     
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total shareholders equity                   |        |              | 6,585  |   |        |       | 6,342  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Total liabilities and shareholders
    equity         |                                                                            | $                                            | 18,010 |              |        | $ | 17,965 |      
|                                                       |                                                                            |                                              |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

13



---



##### 






PECO ENERGY COMPANY



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |       |   |       |  
|---------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------- | --------------------------------- | -------------- | - | ----- | --- | ---- | - | --- | --- | ----- | - | ----- | --- | ----- | - | ----- | -
|                                                     |                                                                  |                                                   |                                   |               
|                                                     |                                                                  | Three Months                                      |                                   | Six Months    
|                                                     |                                                                  | Ended June 30,                                    |                                   | Ended June 30,
|                                                     |                                                                  |                                                   |                                   |               
|                                                     |                                                                  | 2004                                              |                                   | 2003           |   | 2004  |     | 2003
|(In millions)                                        |                                                                  |                                                   |                                   |                |   |       |     |     
|Operating revenues                                   |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     | Operating revenues                                               |                                                   | $                                 | 1,027          |   |       | $   | 958  |   |     | $   | 2,262 |   |       | $   | 2,173 |  
|                                                     | Operating revenues from affiliates                               |                                                   |                                   | 5              |   |       |     | 3    |   |     |     | 9     |   |       |     | 5     |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     |                                                                  |                                                   | Total operating revenues          |                |   | 1,032 |     |      |   | 961 |     |       |   | 2,271 |     |       |   | 2,178 |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Operating expenses                                   |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     | Purchased power                                                  |                                                   |                                   | 53             |   |       |     | 62   |   |     |     | 100   |   |       |     | 127   |  
|                                                     | Purchased power from affiliate                                   |                                                   |                                   | 349            |   |       |     | 324  |   |     |     | 699   |   |       |     | 681   |  
|                                                     | Fuel                                                             |                                                   |                                   | 76             |   |       |     | 67   |   |     |     | 325   |   |       |     | 257   |  
|                                                     | Fuel from affiliate                                              |                                                   |                                   | 7              |   |       |     |     |   |     |     | 7     |   |       |     |      |  
|                                                     | Operating and maintenance                                        |                                                   |                                   | 104            |   |       |     | 110  |   |     |     | 215   |   |       |     | 236   |  
|                                                     | Operating and maintenance from affiliates                        |                                                   |                                   | 28             |   |       |     | 11   |   |     |     | 51    |   |       |     | 25    |  
|                                                     | Depreciation and amortization                                    |                                                   |                                   | 125            |   |       |     | 116  |   |     |     | 250   |   |       |     | 236   |  
|                                                     | Taxes other than income                                          |                                                   |                                   | 60             |   |       |     | 47   |   |     |     | 118   |   |       |     | 110   |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     |                                                                  |                                                   | Total operating expenses          |                |   | 802   |     |      |   | 737 |     |       |   | 1,765 |     |       |   | 1,672 |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Operating income                                     |                                                                  |                                                   | 230                               |                |   |       | 224 |      |   |     | 506 |       |   |       | 506 |      
|Other income and deductions                          |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     | Interest expense                                                 |                                                   |                                   | (14            | ) |       |     | (83  | ) |     |     | (28   | ) |       |     | (168  | )
|                                                     | Interest expense to affiliates                                   |                                                   |                                   | (62            | ) |       |     |     |   |     |     | (125  | ) |       |     |      |  
|                                                     | Distributions on mandatorily redeemable preferred
    securities |                                                   |                                   |               |   |       |     | (2   | ) |     |     |      |   |       |     | (5    | )
|                                                     | Equity in losses of unconsolidated affiliates                    |                                                   |                                   | (7             | ) |       |     |     |   |     |     | (13   | ) |       |     |      |  
|                                                     | Other, net                                                       |                                                   |                                   | 3              |   |       |     | 1    |   |     |     | 5     |   |       |     | 10    |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     |                                                                  |                                                   | Total other income and deductions |                |   | (80   | )   |      |   | (84 | )   |       |   | (161  | )   |       |   | (163  | )
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Income before income taxes                           |                                                                  |                                                   | 150                               |                |   |       | 140 |      |   |     | 345 |       |   |       | 343 |      
|Income taxes                                         |                                                                  |                                                   | 50                                |                |   |       | 52  |      |   |     | 112 |       |   |       | 119 |      
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Net income                                           |                                                                  |                                                   | 100                               |                |   |       | 88  |      |   |     | 233 |       |   |       | 224 |      
|Preferred stock dividends                            |                                                                  |                                                   | 1                                 |                |   |       | 2   |      |   |     | 2   |       |   |       | 3   |      
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Net income on common stock                           |                                                                  | $                                                 | 99                                |                |   | $     | 86  |      |   | $   | 231 |       |   | $     | 221 |      
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Other comprehensive income (net of income
    taxes) |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     | Net income                                                       |                                                   | $                                 | 100            |   |       | $   | 88   |   |     | $   | 233   |   |       | $   | 224   |  
|                                                     | Other comprehensive income (net of income taxes):                |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |       |  
|                                                     |                                                                  | Change in net unrealized gain on cash-flow hedges |                                   |                | 2 |       |     |      |  |     |     |       | 3 |       |     |       |  |      
|                                                     |                                                                  | Unrealized gain on marketable securities          |                                   |                |  |       |     |      |  |     |     |       | 1 |       |     |       |  |      
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|                                                     |                                                                  |                                                   | Total other comprehensive income  |                |   | 2     |     |      |   |    |     |       |   | 4     |     |       |   |      |  
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      
|Total comprehensive income                           |                                                                  | $                                                 | 102                               |                |   | $     | 88  |      |   | $   | 237 |       |   | $     | 224 |      
|                                                     |                                                                  |                                                   |                                   |                |   |       |     |      |   |     |     |       |   |       |     |      

See Combined Notes to Consolidated Financial
Statements

14



---



##### 






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |      |     |     |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | --- | ---- | ---- | --- | --- | -
|                                                     |                                                                                            |                                                                     
|                                                     |                                                                                            | Six Months                                                          
|                                                     |                                                                                            | Ended June 30,                                                      
|                                                     |                                                                                            |                                                                     
|                                                     |                                                                                            | 2004                                                                 |                                                                      | 2003
|(In millions)                                        |                                                                                            |                                                                      |                                                                      |     
|Cash flows from operating activities                 |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Net income                                                                                 |                                                                      | $                                                                    | 233  |     |     | $    | 224  |    
|                                                     | Adjustments to reconcile net income to net cash
    flows provided by operating activities |                                                                      |                                                                      |      |     |     |      |      |    
|                                                     |                                                                                            | Depreciation and amortization                                        |                                                                      |      | 250 |     |      |      | 236 |    
|                                                     |                                                                                            | Deferred income taxes and amortization of
    investment tax credits |                                                                      |      | (95 | )   |      |      | (28 | )  
|                                                     |                                                                                            | Provision for uncollectible accounts                                 |                                                                      |      | 19  |     |      |      | 21  |    
|                                                     |                                                                                            | Equity in losses of unconsolidated affiliates                        |                                                                      |      | 13  |     |      |      |    |    
|                                                     |                                                                                            | Other operating activities                                           |                                                                      |      | (4  | )   |      |      | 5   |    
|                                                     |                                                                                            | Changes in assets and liabilities                                    |                                                                      |      |     |     |      |      |     |    
|                                                     |                                                                                            |                                                                      | Receivables                                                          |      |     | 21  |      |      |     | 48  |  
|                                                     |                                                                                            |                                                                      | Receivables and payables to affiliates                               |      |     | 21  |      |      |     | 27  |  
|                                                     |                                                                                            |                                                                      | Inventories                                                          |      |     | 24  |      |      |     | (1  | )
|                                                     |                                                                                            |                                                                      | Accounts payable, accrued expenses and other
    current liabilities |      |     | 56  |      |      |     | 11  |  
|                                                     |                                                                                            |                                                                      | Prepaid taxes                                                        |      |     | (96 | )    |      |     | (91 | )
|                                                     |                                                                                            |                                                                      | Deferred energy costs                                                |      |     | 56  |      |      |     | (24 | )
|                                                     |                                                                                            |                                                                      | Other current assets                                                 |      |     | (2  | )    |      |     | (4  | )
|                                                     |                                                                                            |                                                                      | Pension and non-pension postretirement benefits
    obligations      |      |     | 15  |      |      |     | 16  |  
|                                                     |                                                                                            |                                                                      | Other noncurrent assets and liabilities                              |      |     | (2  | )    |      |     | (15 | )
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows provided by operating activities      |                                                                                            |                                                                      | 509                                                                  |      |     |     | 425  |     
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Cash flows from investing activities                 |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Capital expenditures                                                                       |                                                                      |                                                                      | (105 | )   |     |      | (132 | )  
|                                                     | Changes in Exelon intercompany money pool
    investment                                   |                                                                      |                                                                      | (35  | )   |     |      |     |    
|                                                     | Change in restricted cash                                                                  |                                                                      |                                                                      |     |     |     |      | 28   |    
|                                                     | Other investing activities                                                                 |                                                                      |                                                                      | 3    |     |     |      | 6    |    
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows used in investing activities          |                                                                                            |                                                                      | (137                                                                 | )    |     |     | (98  | )   
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Cash flows from financing activities                 |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Issuance of long-term debt                                                                 |                                                                      |                                                                      | 75   |     |     |      | 450  |    
|                                                     | Retirement of long-term debt                                                               |                                                                      |                                                                      | (75  | )   |     |      | (592 | )  
|                                                     | Retirement of long-term debt to PECO Energy
    Transition Trust                           |                                                                      |                                                                      | (166 | )   |     |      |     |    
|                                                     | Change in short-term debt                                                                  |                                                                      |                                                                      | (46  | )   |     |      | (30  | )  
|                                                     | Issuance of mandatorily redeemable preferred
    securities                                |                                                                      |                                                                      |     |     |     |      | 100  |    
|                                                     | Retirement of mandatorily redeemable preferred
    securities                              |                                                                      |                                                                      |     |     |     |      | (50  | )  
|                                                     | Retirement of preferred stock                                                              |                                                                      |                                                                      |     |     |     |      | (50  | )  
|                                                     | Dividends paid on preferred and common stock                                               |                                                                      |                                                                      | (182 | )   |     |      | (168 | )  
|                                                     | Contribution from parent                                                                   |                                                                      |                                                                      | 71   |     |     |      | 17   |    
|                                                     | Other financing activities                                                                 |                                                                      |                                                                      | 6    |     |     |      | (6   | )  
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows used in financing activities          |                                                                                            |                                                                      | (317                                                                 | )    |     |     | (329 | )   
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Increase (decrease) in cash and cash
    equivalents |                                                                                            |                                                                      | 55                                                                   |      |     |     | (2   | )   
|Cash and cash equivalents at beginning of
    period |                                                                                            |                                                                      | 44                                                                   |      |     |     | 63   |     
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     
|Cash and cash equivalents at end of
    period       |                                                                                            | $                                                                    | 99                                                                   |      |     | $   | 61   |     
|                                                     |                                                                                            |                                                                      |                                                                      |      |     |     |      |     

See Combined Notes to Consolidated Financial
Statements

15



---



##### 






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | -------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                              | June 30,                               |        | December 31,
|                                   |                                              | 2004                                   |        | 2003        
|(In millions)                      |                                              |                                        |        |             
|ASSETS                            
|Current assets                     |                                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                    |                                        | $      | 99           |       |   | $      | 44    |      
|                                   | Accounts receivable, net                     |                                        |        |              |       |   |        |       |      
|                                   |                                              | Customer                               |        |              | 318   |   |        |       | 363   | 
|                                   |                                              | Other                                  |        |              | 32    |   |        |       | 27    | 
|                                   | Inventories, at average cost                 |                                        |        |              |       |   |        |       |      
|                                   |                                              | Gas                                    |        |              | 76    |   |        |       | 99    | 
|                                   |                                              | Materials and supplies                 |        |              | 6     |   |        |       | 7     | 
|                                   | Investment in Exelon intercompany money pool |                                        |        | 35           |       |   |        |      |      
|                                   | Deferred income taxes                        |                                        |        | 81           |       |   |        | 64    |      
|                                   | Deferred energy costs                        |                                        |        | 25           |       |   |        | 81    |      
|                                   | Prepaid taxes                                |                                        |        | 97           |       |   |        | 1     |      
|                                   | Other                                        |                                        |        | 12           |       |   |        | 10    |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total current assets                   |        |              | 781   |   |        |       | 696   | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                              |                                        | 4,286  |              |       |   | 4,256  |      
|Deferred debits and other assets   |                                              |                                        |        |              |       |   |        |      
|                                   | Regulatory assets                            |                                        |        | 5,038        |       |   |        | 5,226 |      
|                                   | Investments                                  |                                        |        | 20           |       |   |        | 20    |      
|                                   | Investment in affiliates                     |                                        |        | 114          |       |   |        | 123   |      
|                                   | Receivables from affiliates                  |                                        |        | 35           |       |   |        | 13    |      
|                                   | Pension asset                                |                                        |        | 76           |       |   |        | 68    |      
|                                   | Other                                        |                                        |        | 10           |       |   |        | 8     |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total deferred debits and other assets |        |              | 5,293 |   |        |       | 5,458 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Total assets                       |                                              | $                                      | 10,360 |              |       | $ | 10,410 |      
|                                   |                                              |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

16



---



##### 



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                   |                                                                        |                                              |        |              |       |   |        |        |       | 
|-------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ----- | - | ------ | ------ | ----- | 
|                                                   |                                                                        | June 30,                                     |        | December 31,
|                                                   |                                                                        | 2004                                         |        | 2003        
|(In millions)                                      |                                                                        |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY          
|Current liabilities                                |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Commercial paper                                                       |                                              | $      |             |       |   | $      | 46     |      
|                                                   | Payables to affiliates                                                 |                                              |        | 170          |       |   |        | 150    |      
|                                                   | Long-term debt to PECO Energy Transition Trust
    due within one year |                                              |        | 171          |       |   |        | 153    |      
|                                                   | Accounts payable                                                       |                                              |        | 74           |       |   |        | 92     |      
|                                                   | Accrued expenses                                                       |                                              |        | 310          |       |   |        | 237    |      
|                                                   | Other                                                                  |                                              |        | 36           |       |   |        | 35     |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total current liabilities                    |        |              | 761   |   |        |        | 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                                                  |                                              |        | 2,925        |       |   |        | 2,986  |      
|                                                   | Unamortized investment tax credits                                     |                                              |        | 20           |       |   |        | 22     |      
|                                                   | Non-pension postretirement benefits obligation                         |                                              |        | 310          |       |   |        | 287    |      
|                                                   | Other                                                                  |                                              |        | 146          |       |   |        | 147    |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total deferred credits and other liabilities |        |              | 3,401 |   |        |        | 3,442 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total liabilities                            |        |              | 9,218 |   |        |        | 9,394 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Commitments and contingencies                      |                                                                        |                                              |        |              |       |   |        |       
|Shareholders equity                               |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Common stock                                                           |                                              |        | 2,000        |       |   |        | 1,999  |      
|                                                   | Receivable from parent                                                 |                                              |        | (1,553       | )     |   |        | (1,623 | )    
|                                                   | Preferred stock                                                        |                                              |        | 87           |       |   |        | 87     |      
|                                                   | Retained earnings                                                      |                                              |        | 597          |       |   |        | 546    |      
|                                                   | Accumulated other comprehensive income                                 |                                              |        | 11           |       |   |        | 7      |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total shareholders equity                   |        |              | 1,142 |   |        |        | 1,016 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Total liabilities and shareholders
    equity     |                                                                        | $                                            | 10,360 |              |       | $ | 10,410 |       
|                                                   |                                                                        |                                              |        |              |       |   |        |       

See Combined Notes to Consolidated Financial
Statements

17



---



##### 






EXELON GENERATION COMPANY, LLC



EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |       |       |    | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------------------------------------- | --------------------------------------- | -------------- | ----- | ---- | --- | ---- | ----- | -- | --- | ----- | ----- | ---- | --- | ----- | ----- | -- | 
|                                                                                                                                                                     |                                                              |                                                                         |                                         |               
|                                                                                                                                                                     |                                                              | Three Months                                                            |                                         | Six Months    
|                                                                                                                                                                     |                                                              | Ended June 30,                                                          |                                         | Ended June 30,
|                                                                                                                                                                     |                                                              |                                                                         |                                         |               
|                                                                                                                                                                     |                                                              | 2004                                                                    |                                         | 2003           |       | 2004 |     | 2003
|(In millions)                                                                                                                                                        |                                                              |                                                                         |                                         |                |       |      |     |     
|Operating revenues                                                                                                                                                   |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     | Operating revenues                                           |                                                                         | $                                       | 1,077          |       |      | $   | 990  |       |    | $   | 2,150 |       |      | $   | 1,876 |      
|                                                                                                                                                                     | Operating revenues from affiliates                           |                                                                         |                                         | 871            |       |      |     | 896  |       |    |     | 1,750 |       |      |     | 1,889 |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     |                                                              | Total operating revenues                                                |                                         |                | 1,948 |      |     |      | 1,886 |    |     |       | 3,900 |      |     |       | 3,765 |   
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Operating expenses                                                                                                                                                   |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     | Purchased power                                              |                                                                         |                                         | 560            |       |      |     | 675  |       |    |     | 1,069 |       |      |     | 1,436 |      
|                                                                                                                                                                     | Purchased power from affiliates                              |                                                                         |                                         | 3              |       |      |     | 125  |       |    |     | 12    |       |      |     | 206   |      
|                                                                                                                                                                     | Fuel                                                         |                                                                         |                                         | 462            |       |      |     | 348  |       |    |     | 1,048 |       |      |     | 706   |      
|                                                                                                                                                                     | Operating and maintenance                                    |                                                                         |                                         | 554            |       |      |     | 411  |       |    |     | 1,139 |       |      |     | 861   |      
|                                                                                                                                                                     | Operating and maintenance from affiliates                    |                                                                         |                                         | 69             |       |      |     | 40   |       |    |     | 134   |       |      |     | 82    |      
|                                                                                                                                                                     | Depreciation and amortization                                |                                                                         |                                         | 69             |       |      |     | 46   |       |    |     | 124   |       |      |     | 91    |      
|                                                                                                                                                                     | Taxes other than income                                      |                                                                         |                                         | 48             |       |      |     | 40   |       |    |     | 95    |       |      |     | 88    |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     |                                                              | Total operating expenses                                                |                                         |                | 1,765 |      |     |      | 1,685 |    |     |       | 3,621 |      |     |       | 3,470 |   
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Operating income                                                                                                                                                     |                                                              |                                                                         | 183                                     |                |       |      | 201 |      |       |    | 279 |       |       |      | 295 |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Other income and deductions                                                                                                                                          |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     | Interest expense                                             |                                                                         |                                         | (50            | )     |      |     | (16  | )     |    |     | (75   | )     |      |     | (30   | )    
|                                                                                                                                                                     | Interest expense to affiliates                               |                                                                         |                                         | (1             | )     |      |     | (4   | )     |    |     | (2    | )     |      |     | (8    | )    
|                                                                                                                                                                     | Equity in earnings (losses) of unconsolidated
    affiliates |                                                                         |                                         |               |       |      |     | 18   |       |    |     | (2    | )     |      |     | 37    |      
|                                                                                                                                                                     | Other, net                                                   |                                                                         |                                         | 134            |       |      |     | 34   |       |    |     | 183   |       |      |     | (132  | )    
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     |                                                              | Total other income and deductions                                       |                                         |                | 83    |      |     |      | 32    |    |     |       | 104   |      |     |       | (133  | ) 
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Income before income taxes, minority interest
    and cumulative effect of changes in accounting
    principles                                                      |                                                              |                                                                         | 266                                     |                |       |      | 233 |      |       |    | 383 |       |       |      | 162 |      
|Income taxes                                                                                                                                                         |                                                              |                                                                         | 100                                     |                |       |      | 91  |      |       |    | 146 |       |       |      | 71  |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Income before minority interest and cumulative
    effect of changes in accounting principles                                                                        |                                                              |                                                                         | 166                                     |                |       |      | 142 |      |       |    | 237 |       |       |      | 91  |      
|Minority interest                                                                                                                                                    |                                                              |                                                                         | 12                                      |                |       |      |    |      |       |    | 11  |       |       |      | (2  | )    
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Income before cumulative effect of changes in
    accounting principles                                                                                              |                                                              |                                                                         | 178                                     |                |       |      | 142 |      |       |    | 248 |       |       |      | 89  |      
|Cumulative effect of changes in accounting
    principles (net of income taxes of $22 and $70 for the six
    months ended June 30, 2004 and 2003,
    respectively) |                                                              |                                                                         |                                        |                |       |      |    |      |       |    | 32  |       |       |      | 108 |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Net income                                                                                                                                                           |                                                              |                                                                         | 178                                     |                |       |      | 142 |      |       |    | 280 |       |       |      | 197 |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     | Other comprehensive income (loss) (net of
    income taxes)  |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |       |      
|                                                                                                                                                                     |                                                              | Change in net unrealized gain (loss) on cash-flow
    hedges            |                                         |                | 48    |      |     |      | 64    |    |     |       | (147  | )    |     |       | (116  | ) 
|                                                                                                                                                                     |                                                              | Unrealized gain (loss) on marketable securities                         |                                         |                | (31   | )    |     |      | 2     |    |     |       | 8     |      |     |       | (3    | ) 
|                                                                                                                                                                     |                                                              | Foreign currency translation adjustment                                 |                                         |                | (4    | )    |     |      |      |    |     |       | (4    | )    |     |       |      |   
|                                                                                                                                                                     |                                                              | SFAS No. 143 transition adjustment                                      |                                         |                |      |      |     |      |      |    |     |       |      |      |     |       | 168   |   
|                                                                                                                                                                     |                                                              | Interest in other comprehensive income of
    unconsolidated affiliates |                                         |                |      |      |     |      | 17    |    |     |       | 2     |      |     |       | 8     |   
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|                                                                                                                                                                     |                                                              |                                                                         | Total other comprehensive income (loss) |                |       | 13   |     |      |       | 83 |     |       |       | (141 | )   |       |       | 57 | 
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      
|Total comprehensive income                                                                                                                                           |                                                              | $                                                                       | 191                                     |                |       | $    | 225 |      |       | $  | 139 |       |       | $    | 254 |      
|                                                                                                                                                                     |                                                              |                                                                         |                                         |                |       |      |     |      |       |    |     |       |       |      |     |      

See Combined Notes to Consolidated Financial
Statements

18



---



##### 






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |        |      |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | --- | ---- | ---- | ------ | ---- | ---- | -
|                                                              |                                                                                                                                       |                                                                                
|                                                              |                                                                                                                                       | Six Months                                                                     
|                                                              |                                                                                                                                       | Ended June 30,                                                                 
|                                                              |                                                                                                                                       |                                                                                
|                                                              |                                                                                                                                       | 2004                                                                            |                                                                         | 2003  
|(In millions)                                                 |                                                                                                                                       |                                                                                 |                                                                         |       
|Cash flows from operating activities                          |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|                                                              | Net income                                                                                                                            |                                                                                 | $                                                                       | 280    |     |      | $    | 197    |     
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities                                            |                                                                                 |                                                                         |        |     |      |      |        |     
|                                                              |                                                                                                                                       | Depreciation, amortization and accretion,
    including nuclear fuel            |                                                                         |        | 438 |      |      |        | 388  |     
|                                                              |                                                                                                                                       | Cumulative effect of changes in accounting
    principles (net of income taxes) |                                                                         |        | (32 | )    |      |        | (108 | )   
|                                                              |                                                                                                                                       | Gain on sale of investment                                                      |                                                                         |        | (90 | )    |      |        |     |     
|                                                              |                                                                                                                                       | Impairment of investment                                                        |                                                                         |        |    |      |      |        | 200  |     
|                                                              |                                                                                                                                       | Impairment of long-lived assets                                                 |                                                                         |        |    |      |      |        | 5    |     
|                                                              |                                                                                                                                       | Deferred income taxes and amortization of
    investment tax credits            |                                                                         |        | 148 |      |      |        | (107 | )   
|                                                              |                                                                                                                                       | Provision for uncollectible accounts                                            |                                                                         |        | 2   |      |      |        | 1    |     
|                                                              |                                                                                                                                       | Equity in (earnings) losses of
    unconsolidated affiliates                    |                                                                         |        | 2   |      |      |        | (37  | )   
|                                                              |                                                                                                                                       | Net realized losses (gains) on nuclear
    decommissioning trust funds          |                                                                         |        | 1   |      |      |        | (12  | )   
|                                                              |                                                                                                                                       | Other operating activities                                                      |                                                                         |        | 15  |      |      |        | 1    |     
|                                                              |                                                                                                                                       | Changes in assets and liabilities                                               |                                                                         |        |     |      |      |        |      |     
|                                                              |                                                                                                                                       |                                                                                 | Receivables                                                             |        |     | (108 | )    |        |      | (112 | )
|                                                              |                                                                                                                                       |                                                                                 | Receivables and payables to affiliates, net                             |        |     | (35  | )    |        |      | 238  |  
|                                                              |                                                                                                                                       |                                                                                 | Inventories                                                             |        |     | (10  | )    |        |      | (19  | )
|                                                              |                                                                                                                                       |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities    |        |     | 24   |      |        |      | 10   |  
|                                                              |                                                                                                                                       |                                                                                 | Other current assets                                                    |        |     | (15  | )    |        |      | (104 | )
|                                                              |                                                                                                                                       |                                                                                 | Net realized and unrealized mark-to-market and
    hedging transactions |        |     | 39   |      |        |      | 76   |  
|                                                              |                                                                                                                                       |                                                                                 | Pension and non-pension postretirement benefits
    obligations         |        |     | (59  | )    |        |      | (59  | )
|                                                              |                                                                                                                                       |                                                                                 | Other noncurrent assets and liabilities                                 |        |     | 16   |      |        |      | (19  | )
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Net cash flows provided by operating activities               |                                                                                                                                       |                                                                                 | 616                                                                     |        |     |      | 539  |       
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Cash flows from investing activities                          |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|                                                              | Capital expenditures                                                                                                                  |                                                                                 |                                                                         | (366   | )   |      |      | (510   | )   
|                                                              | Proceeds from liquidated damages                                                                                                      |                                                                                 |                                                                         |       |     |      |      | 86     |     
|                                                              | Proceeds from nuclear decommissioning trust fund
    sales                                                                            |                                                                                 |                                                                         | 1,042  |     |      |      | 1,262  |     
|                                                              | Investment in nuclear decommissioning trust funds                                                                                     |                                                                                 |                                                                         | (1,178 | )   |      |      | (1,368 | )   
|                                                              | Note receivable from affiliate                                                                                                        |                                                                                 |                                                                         |       |     |      |      | 35     |     
|                                                              | Net cash increase from consolidation of Sithe
    Energies, Inc. and Exelon Energy Company                                            |                                                                                 |                                                                         | 24     |     |      |      |       |     
|                                                              | Change in restricted cash                                                                                                             |                                                                                 |                                                                         | (18    | )   |      |      | (38    | )   
|                                                              | Other investing activities                                                                                                            |                                                                                 |                                                                         | 58     |     |      |      | (1     | )   
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Net cash flows used in investing activities                   |                                                                                                                                       |                                                                                 | (438                                                                    | )      |     |      | (534 | )     
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Cash flows from financing activities                          |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|                                                              | Issuance of long-term debt                                                                                                            |                                                                                 |                                                                         |       |     |      |      | 211    |     
|                                                              | Retirement of long-term debt                                                                                                          |                                                                                 |                                                                         | (4     | )   |      |      | (3     | )   
|                                                              | Change in short-term debt                                                                                                             |                                                                                 |                                                                         | 211    |     |      |      |       |     
|                                                              | Payment on acquisition note payable to Sithe
    Energies, Inc.                                                                       |                                                                                 |                                                                         | (27    | )   |      |      | (210   | )   
|                                                              | Changes in Exelon intercompany money pool
    borrowings                                                                              |                                                                                 |                                                                         | (218   | )   |      |      | 165    |     
|                                                              | Change in note payable, affiliate                                                                                                     |                                                                                 |                                                                         |       |     |      |      | (107   | )   
|                                                              | Distribution to member                                                                                                                |                                                                                 |                                                                         | (109   | )   |      |      | (45    | )   
|                                                              | Other financing activities                                                                                                            |                                                                                 |                                                                         | 6      |     |      |      |       |     
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Net cash flows (used in) provided by
    financing activities |                                                                                                                                       |                                                                                 | (141                                                                    | )      |     |      | 11   |       
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Increase in cash and cash
    equivalents                     |                                                                                                                                       |                                                                                 | 37                                                                      |        |     |      | 16   |       
|Cash and cash equivalents at beginning of
    period          |                                                                                                                                       |                                                                                 | 158                                                                     |        |     |      | 58   |       
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Cash and cash equivalents at end of
    period                |                                                                                                                                       | $                                                                               | 195                                                                     |        |     | $    | 74   |       
|                                                              |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Supplemental cash flow information                            |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|Noncash investing and financing activities:                   |                                                                                                                                       |                                                                                 |                                                                         |        |     |      |      |       
|                                                              | Consolidation of Sithe Energies, Inc. pursuant to
    FASB Interpretation No. 46-R, Consolidation of
    Variable Interest Entities |                                                                                 | $                                                                       | 85     |     |      | $    |       |     
|                                                              | Contribution of Exelon Energy Company from Exelon
    Corporation                                                                     |                                                                                 |                                                                         | (9     | )   |      |      |       |     
|                                                              | Distribution to member                                                                                                                |                                                                                 |                                                                         |       |     |      |      | 17     |     

See Combined Notes to Consolidated Financial
Statements

19



---



##### 






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                     |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | ----------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                     | June 30,                               |        | December 31,
|                                   |                                     | 2004                                   |        | 2003        
|(In millions)                      |                                     |                                        |        |             
|ASSETS                            
|Current assets                     |                                     |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents           |                                        | $      | 195          |       |   | $      | 158   |      
|                                   | Restricted cash                     |                                        |        | 173          |       |   |        | 75    |      
|                                   | Accounts receivable, net            |                                        |        |              |       |   |        |       |      
|                                   |                                     | Customer                               |        |              | 575   |   |        |       | 389   | 
|                                   |                                     | Other                                  |        |              | 444   |   |        |       | 402   | 
|                                   | Mark-to-market derivative assets    |                                        |        | 433          |       |   |        | 322   |      
|                                   | Receivables from affiliates         |                                        |        | 335          |       |   |        | 421   |      
|                                   | Inventories, at average cost        |                                        |        |              |       |   |        |       |      
|                                   |                                     | Fossil fuel                            |        |              | 90    |   |        |       | 98    | 
|                                   |                                     | Materials and supplies                 |        |              | 267   |   |        |       | 259   | 
|                                   | Notes receivable                    |                                        |        | 6            |       |   |        | 5     |      
|                                   | Deferred income taxes               |                                        |        | 43           |       |   |        | 40    |      
|                                   | Assets held for sale                |                                        |        | 9            |       |   |        | 36    |      
|                                   | Other                               |                                        |        | 222          |       |   |        | 233   |      
|                                   |                                     |                                        |        |              |       |   |        |      
|                                   |                                     | Total current assets                   |        |              | 2,792 |   |        |       | 2,438 | 
|                                   |                                     |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                     |                                        | 6,493  |              |       |   | 7,106  |      
|Deferred debits and other assets   |                                     |                                        |        |              |       |   |        |      
|                                   | Nuclear decommissioning trust funds |                                        |        | 4,890        |       |   |        | 4,721 |      
|                                   | Investments                         |                                        |        | 98           |       |   |        | 65    |      
|                                   | Receivable from affiliate           |                                        |        | 22           |       |   |        | 22    |      
|                                   | Pension asset                       |                                        |        | 173          |       |   |        | 79    |      
|                                   | Mark-to-market derivative asset     |                                        |        | 390          |       |   |        | 100   |      
|                                   | Other                               |                                        |        | 544          |       |   |        | 118   |      
|                                   |                                     |                                        |        |              |       |   |        |      
|                                   |                                     | Total deferred debits and other assets |        |              | 6,117 |   |        |       | 5,105 | 
|                                   |                                     |                                        |        |              |       |   |        |      
|Total assets                       |                                     | $                                      | 15,402 |              |       | $ | 14,649 |      
|                                   |                                     |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

20



---



##### 



EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                 |                                                |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------ | ---------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                 |                                                | June 30,                                     |        | 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                               |                                              |        | 211          |        |   |        |      |       
|                                                 | Accounts payable                               |                                              |        | 906          |        |   |        | 848   |       
|                                                 | Mark-to-market derivative liabilities          |                                              |        | 805          |        |   |        | 581   |       
|                                                 | Payables to affiliates                         |                                              |        | 32           |        |   |        | 1     |       
|                                                 | Notes payable to affiliates                    |                                              |        | 198          |        |   |        | 506   |       
|                                                 | Accrued expenses                               |                                              |        | 401          |        |   |        | 423   |       
|                                                 | Liabilities held for sale                      |                                              |        | 3            |        |   |        |      |       
|                                                 | Other                                          |                                              |        | 99           |        |   |        | 126   |       
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total current liabilities                    |        |              | 2,716  |   |        |       | 3,553  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Long-term debt                                   |                                                |                                              | 2,469  |              |        |   | 1,649  |      
|Deferred credits and other
    liabilities       |                                                |                                              |        |              |        |   |        |      
|                                                 | Deferred income taxes                          |                                              |        | 378          |        |   |        | 195   |       
|                                                 | Unamortized investment tax credits             |                                              |        | 214          |        |   |        | 218   |       
|                                                 | Asset retirement obligation                    |                                              |        | 3,099        |        |   |        | 2,996 |       
|                                                 | Pension obligation                             |                                              |        | 20           |        |   |        | 21    |       
|                                                 | Non-pension postretirement benefits obligation |                                              |        | 592          |        |   |        | 555   |       
|                                                 | Spent nuclear fuel obligation                  |                                              |        | 872          |        |   |        | 867   |       
|                                                 | Payable to affiliates                          |                                              |        | 1,247        |        |   |        | 1,195 |       
|                                                 | Mark-to-market derivative liabilities          |                                              |        | 425          |        |   |        | 133   |       
|                                                 | Other                                          |                                              |        | 331          |        |   |        | 308   |       
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total deferred credits and other liabilities |        |              | 7,178  |   |        |       | 6,488  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total liabilities                            |        |              | 12,363 |   |        |       | 11,690 | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Commitments and contingencies                    |                                                |                                              |        |              |        |   |        |      
|Minority interest of consolidated
    subsidiary |                                                |                                              | 52     |              |        |   | 3      |      
|Members equity                                  |                                                |                                              |        |              |        |   |        |      
|                                                 | Membership interest                            |                                              |        | 2,495        |        |   |        | 2,490 |       
|                                                 | Undistributed earnings                         |                                              |        | 773          |        |   |        | 602   |       
|                                                 | Accumulated other comprehensive loss           |                                              |        | (281         | )      |   |        | (136  | )     
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total members equity                        |        |              | 2,987  |   |        |       | 2,956  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Total liabilities and members
    equity        |                                                | $                                            | 15,402 |              |        | $ | 14,649 |      
|                                                 |                                                |                                              |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

21



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES




COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


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


1.     Basis of
Presentation (Exelon, ComEd, PECO and Generation)

Exelon Corporation (Exelon) is a utility services
holding company engaged, through its subsidiaries, in the energy
delivery, wholesale generation and enterprises businesses
discussed below (see Note 17  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 by PECO Energy Company (PECO) in
southeastern Pennsylvania and the purchase and sale of natural
gas and related distribution services by PECO in the
Pennsylvania counties surrounding the City of Philadelphia. The
generation business 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, referred to herein as Sithe. Effective
January 1, 2004, Enterprises competitive retail sales
business, Exelon Energy Company, became part of Generation. As
of June 30, 2004, the enterprises business segment consists
of the energy, infrastructure and electrical contracting
services of Exelon Enterprises Company, LLC (Enterprises) and
other investments related to the communications, energy services
and retail services industries. See Note 3 
Acquisitions and Dispositions for further information regarding
the disposition of businesses within the Enterprises segment.

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

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

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

22



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

These reclassifications had no effect on net
income or shareholders or members equity. These
notes should be read in conjunction with the Notes to
Consolidated Financial Statements of Exelon, ComEd, PECO and
Generation included in or incorporated by reference in ITEM 8 of
their Annual Reports on Form 10-K for the year ended
December 31, 2003.



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



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



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

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

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

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

|       |  |               |       |                   |  |   |       | 
|------ |  | ------------- | ----- | ----------------- |  | - | ----- | 
|       |  | June 30, 2004 |       | December 31, 2003
|       |  |               |       |                  
|Exelon |  | $             | 5,725 |                   |  | $ | 6,070 | 
|ComEd  |  |               | 1,858 |                   |  |   | 2,037 | 
|PECO   |  |               | 3,867 |                   |  |   | 4,033 | 

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



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

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

23



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

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

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

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



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



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

In July 2003, the Emerging Issues Task Force
(EITF) of the FASB reached a consensus on EITF Issue
No. 03-11, Reporting Realized Gains and Losses on
Derivative Instruments That Are Subject to FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities, and Not Held for Trading
Purposes as Defined in EITF Issue No. 02-3,
Issues Involved in Accounting for Derivative Contracts
Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities 
(EITF 03-11), which was ratified by the FASB in
August 2003. The EITF concluded that determining whether
realized gains and losses on physically settled derivative
contracts not held for trading purposes should be
reported in the income statement on a gross or net basis is a
matter of judgment that depends on the relevant facts and
circumstances. Exelon and Generation adopted EITF 03-11 as
of January 1, 2004 and presented $239 million of
revenue, $238 million of purchased power and
$1 million of fuel expense net within revenues during the
three months ended June 30, 2004 and $452 million of
revenue, $444 million of purchased power and
$8 million of fuel expense net within revenues during the
six months ended June 30, 2004. Prior periods were not
reclassified. The adoption of EITF 03-11 had no effect on
the net income of Exelon or Generation. Had EITF 03-11 been
retroactively applied to 2003, operating revenues, purchased
power and fuel expense would have been affected as follows:



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

|                                         |  |             |       |            |  |           |      |   |  |   |       | 
|---------------------------------------- |  | ----------- | ----- | ---------- |  | --------- | ---- | - |  | - | ----- | 
|                                         |  |             |       | EITF 03-11 |  |          
|For the Three Months Ended June 30, 2003 |  | As Reported |       | Impact     |  | Pro Forma
|                                         |  |             |       |            |  |          
|Operating revenue                        |  | $           | 3,721 |            |  | $         | (234 | ) |  | $ | 3,487 | 
|Purchased power                          |  |             | 856   |            |  |           | (216 | ) |  |   | 640   | 
|Fuel expense                             |  |             | 531   |            |  |           | (18  | ) |  |   | 513   | 

24



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                       |  |             |       |            |  |           |      |   |  |   |       | 
|-------------------------------------- |  | ----------- | ----- | ---------- |  | --------- | ---- | - |  | - | ----- | 
|                                       |  |             |       | EITF 03-11 |  |          
|For the Six Months Ended June 30, 2003 |  | As Reported |       | Impact     |  | Pro Forma
|                                       |  |             |       |            |  |          
|Operating revenue                      |  | $           | 7,795 |            |  | $         | (485 | ) |  | $ | 7,310 | 
|Purchased power                        |  |             | 1,763 |            |  |           | (448 | ) |  |   | 1,315 | 
|Fuel expense                           |  |             | 1,356 |            |  |           | (37  | ) |  |   | 1,319 | 



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

|                                         |  |             |       |            |  |           |      |   |  |   |       | 
|---------------------------------------- |  | ----------- | ----- | ---------- |  | --------- | ---- | - |  | - | ----- | 
|                                         |  |             |       | EITF 03-11 |  |          
|For the Three Months Ended June 30, 2003 |  | As Reported |       | Impact     |  | Pro Forma
|                                         |  |             |       |            |  |          
|Operating revenue                        |  | $           | 1,886 |            |  | $         | (234 | ) |  | $ | 1,652 | 
|Purchased power                          |  |             | 800   |            |  |           | (216 | ) |  |   | 584   | 
|Fuel expense                             |  |             | 348   |            |  |           | (18  | ) |  |   | 330   | 

|                                       |  |             |       |            |  |           |      |   |  |   |       | 
|-------------------------------------- |  | ----------- | ----- | ---------- |  | --------- | ---- | - |  | - | ----- | 
|                                       |  |             |       | EITF 03-11 |  |          
|For the Six Months Ended June 30, 2003 |  | As Reported |       | Impact     |  | Pro Forma
|                                       |  |             |       |            |  |          
|Operating revenue                      |  | $           | 3,765 |            |  | $         | (485 | ) |  | $ | 3,280 | 
|Purchased power                        |  |             | 1,642 |            |  |           | (448 | ) |  |   | 1,194 | 
|Fuel expense                           |  |             | 706   |            |  |           | (37  | ) |  |   | 669   | 



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

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

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

25



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                              |  |                    |   |                  |  |   |   | 
|--------------------------------------------- |  | ------------------ | - | ---------------- |  | - | - | 
|                                              |  | Three Months Ended |   | Six Months Ended
|                                              |  | June 30, 2004      |   | June 30, 2004   
|                                              |  |                    |   |                 
|Amortization of the actuarial experience gain |  | $                  | 4 |                  |  | $ | 8 | 
|Reduction in current period service cost      |  |                    | 1 |                  |  |   | 2 | 
|Reduction in interest cost on the APBO        |  |                    | 3 |                  |  |   | 6 | 

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

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



---



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

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

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



---



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



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



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

26



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

will be applied in other-than-temporary
impairment evaluations made by Exelon beginning in the third
quarter of 2004. Exelon adopted the disclosure requirements of
EITF 03-01 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, ComEd, PECO and Generation are still
evaluating the potential impact of the adoption 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, ComEd, PECO and Generation are
still evaluating the potential impact of the adoption of
EITF 03-16.



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



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

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

The sale was pursuant to a settlement agreement
reached with Boston Generatings lenders on
February 23, 2004. The Federal Energy Regulatory Commission
(FERC) approved the sale of Boston Generating in
May 2004. Responsibility for plant operations and power
marketing activities will be transferred to the lenders
special purpose entity in a separate transaction. Certain
aspects of the transfer of operations and marketing are also
subject to approval of the FERC. On June 24, 2004, the
parties filed an application with the FERC for an order
authorizing the transfer of responsibility for plant operations
and power marketing, and the parties expect to complete that
transfer during the third quarter of 2004. Pending completion of
the transfer of operations and marketing activities, Generation
affiliates will continue to operate and market power from the
plants on behalf of the owners. Due to ongoing power marketing
agreements between Generation and Boston Generating, the results
of Boston Generating have not been classified as a discontinued
operation within the Consolidated Statements of Income and
Comprehensive Income of Exelon and Generation. Exelon and
Generation are hedged to eliminate the financial effects of
these power-marketing-agreements from their results of
operations.

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

27



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In connection with the decision to transition out
of Boston Generating and the generating units, Generation
recorded during the third quarter of 2003 an impairment charge
of its long-lived assets pursuant to SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144), of $945 million
($573 million net of income taxes) in operating expenses
within its Consolidated Statements of Income and Comprehensive
Income. As a result of Boston Generatings liabilities
being greater than its assets at the time of the sale, transfer
and assignment of ownership, Exelon and Generation recorded a
gain of $85 million ($52 million net of income taxes)
in other income and deductions within the Consolidated
Statements of Income and Comprehensive Income in the second
quarter of 2004. In connection with the sale, Exelon and
Generation recorded a liability associated with a guarantee by
their subsidiary Exelon New England Holdings, LLC (Exelon New
England) of fuel purchase obligations of Boston Generating. See
Note 15  Commitments and Contingencies for
further information regarding the guarantee.

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

|                        |  |                |     |                |  |      |     |      |  |   |     |   |  |   |     | 
|----------------------- |  | -------------- | --- | -------------- |  | ---- | --- | ---- |  | - | --- | - |  | - | --- | 
|                        |  |                |     |               
|                        |  | Three Months   |     | Six Months    
|                        |  | Ended June 30, |     | Ended June 30,
|                        |  |                |     |               
|                        |  | 2004           |     | 2003           |  | 2004 |     | 2003
|                        |  |                |     |                |  |      |     |     
|Operating revenues      |  | $              | 89  |                |  | $    | 130 |      |  | $ | 248 |   |  | $ | 183 | 
|Operating income (loss) |  |                | (15 | )              |  |      | (10 | )    |  |   | (47 | ) |  |   | 8   | 
|Net income (loss)(a)    |  |                | 42  |                |  |      | (8  | )    |  |   | 24  |   |  |   | 3   | 



---



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

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



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

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

Exelon Services,
Inc.During the six months ended
June 30, 2004, Enterprises disposed of certain businesses
of Exelon Services, Inc. (Services), including Exelon Solutions
and certain businesses of the Mechanical and Integrated
Technology Group. Total expected proceeds and the net gain on
sale (before income taxes) recorded during the six months ended
June 30, 2004 related to the disposition of these Services
businesses were $34 million and $9 million,
respectively. The gain was recorded in other income and
deductions on Exelons Consolidated Statements of Income
and Comprehensive Income. As of June 30, 2004,

28



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Services had assets and liabilities of
$58 million and $90 million, respectively, which
primarily represented the corporate operations and the remaining
businesses of the Mechanical and Integrated Technology Group.
See Assets and Liabilities Held for Sale below for information
regarding the classification of the assets and liabilities of
the remaining business of Services as held for sale as of
June 30, 2004.

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

InfraSource, Inc.On
September 24, 2003, Enterprises sold the electric
construction and services, underground and telecom businesses of
InfraSource, Inc. (InfraSource). See the Notes to Consolidated
Financial Statements in Exelons 2003 Form 10-K for
further information regarding this sale. Enterprises
results of operations for the three and six months ended
June 30, 2004 compared to the same periods in 2003 were
significantly affected by the sale of InfraSource.

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



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

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

The following summary represents the assets 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   |  

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



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

On December 22, 2003, Generation purchased
British Energy plcs (British Energy) 50% interest in
AmerGen Energy Company, LLC (AmerGen) for $277 million. The
allocation of fair value related to the

29



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

valuation of long-lived assets will be affected
by the finalization of the purchase price based on the
completion of the review of the closing AmerGen balances at
December 31, 2003.

Prior to the purchase, Generation was a 50% owner
of AmerGen and had accounted for the investment as an
unconsolidated equity method investment. For the three and six
months ended June 30, 2003, Generation recorded
$20 million and $84 million, respectively, of equity
in earnings of unconsolidated affiliates related to its
investment in AmerGen and recorded $110 million and
$177 million, respectively, of purchased power from
AmerGen. The book value of Generations investment in
AmerGen prior to the purchase was $311 million. For the six
months ended June 30, 2004, AmerGens assets and
liabilities and results of operations are included in
Generations financial statements.

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



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

In November 2003, Exelon purchased interests
in two synthetic fuel-producing facilities. The purchase price
for these facilities included a combination of cash, notes
payable and contingent consideration dependent upon the
production level of the facilities. These facilities are not
consolidated within Exelons financial statements because
Exelon does not have a controlling financial interest in these
facilities. The notes payable recorded for the purchase of the
facilities was $238 million. Exelons right to acquire
its share of tax credits generated by the facilities was
recorded as an intangible asset and will be amortized as the tax
credits are earned. 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. See Note 19  Subsequent
Events for information regarding investments in synthetic
fuel-producing facilities that occurred in July 2004.



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

The major classes of assets and liabilities
classified as held for sale within Exelons and
Generations Consolidated Balance Sheets as of
June 30, 2004 consisted of the following:

|                                   |  |            |   |             |  |        |    |  |  |   |    | 
|---------------------------------- |  | ---------- | - | ----------- |  | ------ | -- |  |  | - | -- | 
|                                   |  | Generation |   | Enterprises |  | Exelon
|                                   |  |            |   |             |  |       
|Accounts receivable, net           |  | $          |  |             |  | $      | 8  |  |  | $ | 8  | 
|Other current assets               |  |            |  |             |  |        | 2  |  |  |   | 2  | 
|Property, plant and equipment, net |  |            | 9 |             |  |        | 1  |  |  |   | 10 | 
|                                   |  |            |   |             |  |        |    |  |  |   |    | 
|Assets classified as held for sale |  | $          | 9 |             |  | $      | 11 |  |  | $ | 20 | 
|                                   |  |            |   |             |  |        |    |  |  |   |    | 

|                                                                     |  |            |   |             |  |        |    |  |  |   |    | 
|-------------------------------------------------------------------- |  | ---------- | - | ----------- |  | ------ | -- |  |  | - | -- | 
|                                                                     |  | Generation |   | Enterprises |  | Exelon
|                                                                     |  |            |   |             |  |       
|Accounts payable, accrued expenses and other
    current liabilities |  | $          |  |             |  | $      | 11 |  |  | $ | 11 | 
|Debt                                                                 |  |            | 3 |             |  |        |   |  |  |   | 3  | 
|                                                                     |  |            |   |             |  |        |    |  |  |   |    | 
|Liabilities classified as held for sale                              |  | $          | 3 |             |  | $      | 11 |  |  | $ | 14 | 
|                                                                     |  |            |   |             |  |        |    |  |  |   |    | 

Generation.Generation classified certain assets and liabilities of Sithe as
held for sale as of June 30, 2004. Sithe is consolidated
within the financial statements of Generation pursuant to FIN
No. 46-R. During

30



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the three months ended June 30, 2004, Sithe
completed the sale of its gas and Australian businesses, which
represented $151 million and $140 million of assets
and liabilities held for sale, respectively, at March 31,
2004.

Enterprises.Enterprises classified the assets and liabilities of certain
Services businesses as held for sale as of June 30, 2004
due to ongoing efforts to dispose of these businesses. These
businesses are expected to be sold in 2004. See
Disposition of Enterprises Entities above for
further information.



|   |                              
|-- | -----------------------------
|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 June 30, 2004,
excluding assets held for sale, Sithe operated nine power plants
with total average net capacity of 1,323 megawatts (MW). Sithe
also has 49.5% interests in two 230-MW projects in Mexico, which
commenced commercial operations during the second quarter of
2004.

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

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 its interest in 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 for further discussion.

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 were 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 with respect to Sithes Independence
Station. The Tolling Agreement commenced on July 1, 2001
and runs through 2014. Additionally, Sithe has entered into an
energy purchase agreement (Energy Purchase Agreement) with
Consolidated Edison Company relating to the Independence
Station, which continues through 2014. As a result of the
acquisition accounting described above, values were assigned to
the Tolling Agreement and the Energy Purchase Agreement on
March 31, 2004 of approximately $91 million and
$282 million, respectively, which have been recorded as
intangible assets on Exelons and Generations
Consolidated Balance Sheets in deferred debits and other assets.
These amounts were determined based on fair value techniques
utilizing the contract terms and various other estimates
including forward power prices, discount rates and option
pricing models. The intangible assets representing the Tolling
Agreement and the Energy Purchase Agreement are being amortized
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
(SFAS No. 142), not to exceed the

31



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

terms of the related contracts. The allocation of
fair value related to the valuation of long-lived assets is
preliminary and is anticipated to be finalized in the third
quarter of 2004.

Sithes intangible assets are subject to
amortization and are included in other non-current assets on
Generations Consolidated Balance Sheet. Amortization
expense for intangible assets was $15 million for the three
months ended June 30, 2004. The components of Sithes
intangible assets at June 30, 2004 were as follows:

|                          |  |                |     |               |  |            |    |  |  |   |     | 
|------------------------- |  | -------------- | --- | ------------- |  | ---------- | -- |  |  | - | --- | 
|                          |  |                |     | Accumulated   |  |           
|                          |  | Gross Carrying |     | Amortization  |  | Intangible
|Agreement Type            |  | Amount         |     | June 30, 2004 |  | Asset, net
|                          |  |                |     |               |  |           
|Energy Purchase Agreement |  | $              | 376 |               |  | $          | 13 |  |  | $ | 363 | 
|Tolling Agreement         |  |                | 71  |               |  |            | 2  |  |  |   | 69  | 
|                          |  |                |     |               |  |            |    |  |  |   |     | 
|Total                     |  | $              | 447 |               |  | $          | 15 |  |  | $ | 432 | 
|                          |  |                |     |               |  |            |    |  |  |   |     | 

Annual amortization expense for intangible assets
is estimated to be $43 million for 2004, $58 million
for 2005, $56 million for 2006, $50 million for 2007,
and $44 million for 2008.

In connection with the consolidation of Sithe,
certain indemnification guarantees, which were previously
recorded in accordance with the provisions of FASB
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN No. 45), at
Generation on November 25, 2003 pursuant to the series of
transactions referred to above, were reversed in accordance with
FIN No. 45 as Generation can no longer record liabilities
associated with guarantees for the performance of a consolidated
entity. The reversal of the guarantees resulted in Exelon and
Generation recording income of $32 million (net of income
taxes) as a cumulative effect of a change in accounting
principle. The condensed consolidating financial information
included in Note 5  Selected Pro Forma and
Consolidating Financial Information presents the financial
position of Exelon, Generation and Sithe, as well as
consolidating entries related primarily to acquisition notes
payables and receivables between Generation and Sithe.

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

Substantially all of Sithes property, plant
and equipment and project agreements secure Sithes
outstanding long-term debt, which consists primarily of project
debt. During 2003, Sithe entered into an agreement with Exelon
and Generation under which Exelon would obtain letters of credit
to support contractual obligations of Sithe and its
subsidiaries. As of June 30, 2004, Exelon has obtained
$60 million of letters of credit in support of Sithes
obligations not including a $50 million letter of credit
which is not guaranteed by Exelon. With the exception of the
issuance of letters of credit to support contractual
obligations, the creditors of Sithe have no recourse against the
general credit of Exelon or Generation.

32



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                                |                                                  |   |      |      |  
|----------------------------------------------- | ------------------------------------------------ | - | ---- | ---- | -
|Current assets                                  |                                                  | $ | 24   |     
|Noncurrent assets                               |                                                  |   | 232  |     
|                                                |                                                  |   |      |     
|                                                | Total mark-to-market energy contract assets      |   |      | 256  |  
|                                                |                                                  |   |      |     
|Current liabilities                             |                                                  |   | (16  | )   
|Noncurrent liabilities                          |                                                  |   | (140 | )   
|                                                |                                                  |   |      |     
|                                                | Total mark-to-market energy contract liabilities |   |      | (156 | )
|                                                |                                                  |   |      |     
|Total mark-to-market energy contract net assets |                                                  | $ | 100  |     
|                                                |                                                  |   |      |     



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



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

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

|                                                                               |  |             |       |             |  |            |     |             |  |              |     |   |  |   |      |   |  |   |       | 
|------------------------------------------------------------------------------ |  | ----------- | ----- | ----------- |  | ---------- | --- | ----------- |  | ------------ | --- | - |  | - | ---- | - |  | - | ----- | 
|                                                                               |  |             |       | Acquisition |  | Sale of    |     |             |  | Pro Forma   
|                                                                               |  | Exelon      |       | of 50% of   |  | Boston     |     | Eliminating |  | Exelon      
|Three Months Ended June 30, 2003                                               |  | As Reported |       | AmerGen     |  | Generating |     | Entries     |  | Consolidated
|                                                                               |  |             |       |             |  |            |     |             |  |             
|Total operating revenue                                                        |  | $           | 3,721 |             |  | $          | 159 |             |  | $            | 130 |   |  | $ | (110 | ) |  | $ | 3,640 | 
|Operating income (loss)                                                        |  |             | 800   |             |  |            | 21  |             |  |              | (10 | ) |  |   |     |   |  |   | 831   | 
|Income (loss) before cumulative effect of changes
    in accounting principles |  |             | 372   |             |  |            | 38  |             |  |              | (8  | ) |  |   | (20  | ) |  |   | 398   | 

|                                                                        |  |             |       |             |  |            |     |             |  |              |     |  |  |   |      |   |  |   |       | 
|----------------------------------------------------------------------- |  | ----------- | ----- | ----------- |  | ---------- | --- | ----------- |  | ------------ | --- |  |  | - | ---- | - |  | - | ----- | 
|                                                                        |  |             |       | Acquisition |  | Sale of    |     |             |  | Pro Forma   
|                                                                        |  | Exelon      |       | of 50% of   |  | Boston     |     | Eliminating |  | Exelon      
|Six Months Ended June 30, 2003                                          |  | As Reported |       | AmerGen     |  | Generating |     | Entries     |  | Consolidated
|                                                                        |  |             |       |             |  |            |     |             |  |             
|Total operating revenue                                                 |  | $           | 7,795 |             |  | $          | 307 |             |  | $            | 183 |  |  | $ | (177 | ) |  | $ | 7,742 | 
|Operating income                                                        |  |             | 1,557 |             |  |            | 59  |             |  |              | 8   |  |  |   |     |   |  |   | 1,608 | 
|Income before cumulative effect of changes in
    accounting principles |  |             | 621   |             |  |            | 72  |             |  |              | 3   |  |  |   | (37  | ) |  |   | 653   | 

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

33



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|------------------------------------------ |  | ------ | ------ | ----- |  | ----------- | ----- | ------------- |  | - | ---- | - |  | - | ------ | 
|                                           |  |        |        |       |  |             |       | Exelon       
|                                           |  |        |        |       |  | Eliminating |       | Consolidated 
|June 30, 2004                              |  | Exelon |        | Sithe |  | Entries     |       | (As Reported)
|                                           |  |        |        |       |  |             |       |              
|Assets                                     |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Current assets                             |  | $      | 4,317  |       |  | $           | 370   |               |  | $ | (156 | ) |  | $ | 4,531  | 
|Assets held for sale(a)                    |  |        | 11     |       |  |             | 9     |               |  |   |     |   |  |   | 20     | 
|Property, plant and equipment, net         |  |        | 19,954 |       |  |             | 274   |               |  |   |     |   |  |   | 20,228 | 
|Other noncurrent assets                    |  |        | 16,589 |       |  |             | 770   |               |  |   | (36  | ) |  |   | 17,323 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Total assets                               |  | $      | 40,871 |       |  | $           | 1,423 |               |  | $ | (192 | ) |  | $ | 42,102 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|                                          
|Liabilities and stockholders
    equity   |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Current liabilities                        |  | $      | 4,150  |       |  | $           | 321   |               |  | $ | (156 | ) |  | $ | 4,315  | 
|Liabilities held for sale(a)               |  |        | 11     |       |  |             | 3     |               |  |   |     |   |  |   | 14     | 
|Long-term debt                             |  |        | 13,100 |       |  |             | 819   |               |  |   |     |   |  |   | 13,919 | 
|Other long-term liabilities(b)             |  |        | 14,497 |       |  |             | 195   |               |  |   | 49   |   |  |   | 14,741 | 
|Stockholders equity(c)                    |  |        | 9,113  |       |  |             | 85    |               |  |   | (85  | ) |  |   | 9,113  | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Total liabilities and stockholders equity |  | $      | 40,871 |       |  | $           | 1,423 |               |  | $ | (192 | ) |  | $ | 42,102 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 



---



|    |                                               
|--- | ----------------------------------------------
|(a) | Excludes assets and liabilities held for sale.



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



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

34



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                                                               |  |             |       |             |  |             |     |             |  |              |     |   |  |   |      |   |  |   |       | 
|------------------------------------------------------------------------------ |  | ----------- | ----- | ----------- |  | ----------- | --- | ----------- |  | ------------ | --- | - |  | - | ---- | - |  | - | ----- | 
|                                                                               |  |             |       |             |  |             |     |             |  | Pro Forma   
|                                                                               |  | Generation  |       | Businesses  |  | Businesses  |     | Eliminating |  | Generation  
|Three Months Ended June 30, 2003                                               |  | As Reported |       | Acquired(a) |  | Disposed(b) |     | Entries     |  | Consolidated
|                                                                               |  |             |       |             |  |             |     |             |  |             
|Total operating revenue                                                        |  | $           | 1,886 |             |  | $           | 333 |             |  | $            | 130 |   |  | $ | (154 | ) |  | $ | 1,935 | 
|Operating income (loss)                                                        |  |             | 201   |             |  |             | 23  |             |  |              | (10 | ) |  |   |     |   |  |   | 234   | 
|Income (loss) before cumulative effect of changes
    in accounting principles |  |             | 142   |             |  |             | 38  |             |  |              | (8  | ) |  |   | (20  | ) |  |   | 168   | 



---



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



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

|                                                                        |  |             |       |             |  |             |     |             |  |              |     |  |  |   |      |   |  |   |       | 
|----------------------------------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | --- | ----------- |  | ------------ | --- |  |  | - | ---- | - |  | - | ----- | 
|                                                                        |  |             |       |             |  |             |     |             |  | Pro Forma   
|                                                                        |  | Generation  |       | Businesses  |  | Businesses  |     | Eliminating |  | Generation  
|Six Months Ended June 30, 2003                                          |  | As Reported |       | Acquired(a) |  | Disposed(b) |     | Entries     |  | Consolidated
|                                                                        |  |             |       |             |  |             |     |             |  |             
|Total operating revenue                                                 |  | $           | 3,765 |             |  | $           | 811 |             |  | $            | 183 |  |  | $ | (285 | ) |  | $ | 4,108 | 
|Operating income                                                        |  |             | 295   |             |  |             | 45  |             |  |              | 8   |  |  |   |     |   |  |   | 332   | 
|Income before cumulative effect of changes in
    accounting principles |  |             | 89    |             |  |             | 62  |             |  |              | 3   |  |  |   | (37  | ) |  |   | 111   | 



---



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



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

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 January 1, 2003, nor
of the results that might be obtained in the future.

35



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|------------------------------------- |  | ---------- | ------ | ----- |  | ------ | ----- | ----------- |  | ------------- | -- |  |  | - | ---- | - |  | - | ------ | 
|                                      |  |            |        |       |  |        |       |             |  | Generation   
|                                      |  |            |        |       |  | Exelon |       | Eliminating |  | Consolidated 
|June 30, 2004                         |  | Generation |        | Sithe |  | Energy |       | Entries     |  | (As Reported)
|                                      |  |            |        |       |  |        |       |             |  |              
|Assets                                |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Current assets(a)                     |  | $          | 2,515  |       |  | $      | 370   |             |  | $             | 68 |  |  | $ | (170 | ) |  | $ | 2,783  | 
|Assets held for sale                  |  |            |       |       |  |        | 9     |             |  |               |   |  |  |   |     |   |  |   | 9      | 
|Property, plant and equipment, net    |  |            | 6,218  |       |  |        | 274   |             |  |               | 1  |  |  |   |     |   |  |   | 6,493  | 
|Other noncurrent assets               |  |            | 5,367  |       |  |        | 770   |             |  |               | 16 |  |  |   | (36  | ) |  |   | 6,117  | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Total assets                          |  | $          | 14,100 |       |  | $      | 1,423 |             |  | $             | 85 |  |  | $ | (206 | ) |  | $ | 15,402 | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|                                     
|Liabilities and members equity       |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Current liabilities(a)                |  | $          | 2,496  |       |  | $      | 321   |             |  | $             | 66 |  |  | $ | (170 | ) |  | $ | 2,713  | 
|Liabilities held for sale             |  |            |       |       |  |        | 3     |             |  |               |   |  |  |   |     |   |  |   | 3      | 
|Long-term debt                        |  |            | 1,650  |       |  |        | 819   |             |  |               |   |  |  |   |     |   |  |   | 2,469  | 
|Other long-term liabilities(b)        |  |            | 6,981  |       |  |        | 195   |             |  |               | 5  |  |  |   | 49   |   |  |   | 7,230  | 
|Members equity                       |  |            | 2,973  |       |  |        | 85    |             |  |               | 14 |  |  |   | (85  | ) |  |   | 2,987  | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Total liabilities and members equity |  | $          | 14,100 |       |  | $      | 1,423 |             |  | $             | 85 |  |  | $ | (206 | ) |  | $ | 15,402 | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 



---



|    |                                               
|--- | ----------------------------------------------
|(a) | Excludes assets and liabilities held for sale.



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



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

Exelon accounts for its stock-based compensation
plans under the intrinsic method prescribed by Accounting
Principles Board No. 25, Accounting for Stock Issued
to Employees and related interpretations and follows the
disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation
(SFAS No. 123), and SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB
Statement No. 123. The tables below show the effect
on net income

36



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and earnings per share for Exelon had Exelon
elected to account for its stock-based compensation plans using
the fair-value method under SFAS No. 123 for the three
and six months ended June 30, 2004 and 2003:



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

|                                                                                                                              |                       |                |     |      |  |   |     |      | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | -------------- | --- | ---- |  | - | --- | ---- | 
|                                                                                                                              |                       |               
|                                                                                                                              |                       | Three Months  
|                                                                                                                              |                       | Ended June 30,
|                                                                                                                              |                       |               
|                                                                                                                              |                       | 2004           |     | 2003
|                                                                                                                              |                       |                |     |     
|Net income  as reported                                                                                                      |                       | $              | 521 |      |  | $ | 372 |     
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |                       |                | (5  | )    |  |   | (5  | )   
|                                                                                                                              |                       |                |     |      |  |   |     |     
|Pro forma net income                                                                                                          |                       | $              | 516 |      |  | $ | 367 |     
|                                                                                                                              |                       |                |     |      |  |   |     |     
|Earnings per share:                                                                                                           |                       |                |     |      |  |   |     |     
|                                                                                                                              | Basic  as reported   |                | $   | 0.79 |  |   | $   | 0.57 | 
|                                                                                                                              | Basic  pro forma     |                | $   | 0.78 |  |   | $   | 0.56 | 
|                                                                                                                              | Diluted  as reported |                | $   | 0.78 |  |   | $   | 0.57 | 
|                                                                                                                              | Diluted  pro forma   |                | $   | 0.77 |  |   | $   | 0.56 | 

|                                                                                                                              |                       |                |     |      |  |   |     |      | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | -------------- | --- | ---- |  | - | --- | ---- | 
|                                                                                                                              |                       |               
|                                                                                                                              |                       | Six Months    
|                                                                                                                              |                       | Ended June 30,
|                                                                                                                              |                       |               
|                                                                                                                              |                       | 2004           |     | 2003
|                                                                                                                              |                       |                |     |     
|Net income  as reported                                                                                                      |                       | $              | 933 |      |  | $ | 733 |     
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |                       |                | (10 | )    |  |   | (10 | )   
|                                                                                                                              |                       |                |     |      |  |   |     |     
|Pro forma net income                                                                                                          |                       | $              | 923 |      |  | $ | 723 |     
|                                                                                                                              |                       |                |     |      |  |   |     |     
|Earnings per share:                                                                                                           |                       |                |     |      |  |   |     |     
|                                                                                                                              | Basic  as reported   |                | $   | 1.41 |  |   | $   | 1.13 | 
|                                                                                                                              | Basic  pro forma     |                | $   | 1.40 |  |   | $   | 1.11 | 
|                                                                                                                              | Diluted  as reported |                | $   | 1.40 |  |   | $   | 1.12 | 
|                                                                                                                              | Diluted  pro forma   |                | $   | 1.38 |  |   | $   | 1.11 | 

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



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



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

PJM Integration.On
April 1, 2003, ComEd received approval from the FERC to
transfer control of its transmission assets to PJM
Interconnection (PJM). The FERC also accepted for filing
the amended PJM Tariff to reflect the inclusion of the
transmission assets of ComEd and other new members, subject to a
compliance filing and 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. 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

37



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

PJM and Midwest ISO reliability plans to assure
no adverse effects. The NERC granted the required approval on
April 2, 2004. On April 27, 2004, the FERC issued its
order approving ComEds application, subject to certain
stipulations, including a provision to hold certain other
utilities harmless from the impacts of ComEd joining PJM. ComEd
agreed to these stipulations and fully integrated into PJM on
May 1, 2004.

Open Access Transmission
Tariff.On November 10, 2003, the
FERC issued an order allowing ComEd to put into effect, 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, the increase is not expected to have a significant
effect on operating revenues until after December 31, 2006.
ComEd began charging the new rates May 1, 2004.
ComEds management believes an adequate reserve for any
required refunds has been established in the event that the new
rates are adjusted based on rehearing or settlement negotiations.



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

Service Life
Extension.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 extensions are subject to approval by the Nuclear
Regulatory Commission (NRC) extensions of the existing NRC
operating licenses. Generation has not applied for license
extensions at the AmerGen facilities, but has announced its plan
to file an extension request for the Oyster Creek Nuclear
Generating Station (Oyster Creek), and is planning on filing for
license extensions at Unit 1 at the Three Mile Island Nuclear
Station (TMI) and the Clinton Nuclear Power Station
(Clinton) on a timeline consistent and integrated with the other
planned extension filings for the Generation nuclear fleet.

38



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                            
|-- | ---------------------------
|8. | Goodwill (Exelon and ComEd)



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

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

|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |      |  
|--------------------------------- | ------------------------------------------------------- | -------- | ----- | ----------- | - | ----- | --- | - |  | - | ----- | ---- | -
|                                  |                                                         | Energy   |       |             |   |      
|                                  |                                                         | Delivery |       | Enterprises |   | Total
|                                  |                                                         |          |       |             |   |      
|Balances as of January 1, 2003    |                                                         | $        | 4,916 |             |   | $     | 76  |   |  | $ | 4,992 |     
|Impairment losses                 |                                                         |          |      |             |   |       | (72 | ) |  |   | (72   | )   
|Adoption of SFAS No. 143(a):      |                                                         |          |       |             |   |       |     |   |  |   |       |     
|                                  | Reduction of asset retirement obligation                |          |       | (210        | ) |       |     |  |  |   |       | (210 | )
|                                  | Cumulative effect of change in accounting
    principle |          |       | 5           |   |       |     |  |  |   |       | 5    |  
|Resolution of certain tax matters |                                                         |          | 8     |             |   |       |    |   |  |   | 8     |     
|Other                             |                                                         |          |      |             |   |       | (4  | ) |  |   | (4    | )   
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     
|Balances as of December 31, 2003  |                                                         |          | 4,719 |             |   |       |    |   |  |   | 4,719 |     
|Resolution of certain tax matters |                                                         |          | (5    | )           |   |       |    |   |  |   | (5    | )   
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     
|Balances as of June 30, 2004      |                                                         | $        | 4,714 |             |   | $     |    |   |  | $ | 4,714 |     
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     



---



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



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

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

|                                  |                                                         |   |       |      |  
|--------------------------------- | ------------------------------------------------------- | - | ----- | ---- | -
|Balance as of January 1, 2003     |                                                         | $ | 4,916 |     
|Adoption of SFAS No. 143(a):      |                                                         |   |       |     
|                                  | Reduction of asset retirement obligation                |   |       | (210 | )
|                                  | Cumulative effect of change in accounting
    principle |   |       | 5    |  
|Resolution of certain tax matters |                                                         |   | 8     |     
|                                  |                                                         |   |       |     
|Balance as of December 31, 2003   |                                                         |   | 4,719 |     
|Resolution of certain tax matters |                                                         |   | (5    | )   
|                                  |                                                         |   |       |     
|Balance as of June 30, 2004       |                                                         | $ | 4,714 |     
|                                  |                                                         |   |       |     



---



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

39



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



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

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

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



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

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

|                |  |                                    |    |          |       |          |  |        |             |  |  |   |    | 
|--------------- |  | ---------------------------------- | -- | -------- | ----- | -------- |  | ------ | ----------- |  |  | - | -- | 
|                |  |                                    |    | Interest |       |          |  |       
|Company         |  | Type                               |    | Rate     |       | Maturity |  | Amount
|                |  |                                    |    |          |       |          |  |       
|PECO            |  | First and Refunding Mortgage Bonds |    |          | 5.90% |          |  |        | May 1, 2034 |  |  | $ | 75 | 
|                |  |                                    |    |          |       |          |  |        |             |  |  |   |    | 
|Total issuances |  | $                                  | 75 |         
|                |  |                                    |    |         

Debt Retirements and
Redemptions.During the six months
ended June 30, 2004, the following debt was retired or
redeemed:

|                                  |  |                                    |     |          |        |          |  |        |                   |  |  |   |     | 
|--------------------------------- |  | ---------------------------------- | --- | -------- | ------ | -------- |  | ------ | ----------------- |  |  | - | --- | 
|                                  |  |                                    |     | Interest |        |          |  |       
|Company                           |  | Type                               |     | Rate     |        | Maturity |  | Amount
|                                  |  |                                    |     |          |        |          |  |       
|PECO                              |  | First and Refunding Mortgage Bonds |     |          | 6.375% |          |  |        | August 15, 2005   |  |  | $ | 75  | 
|ComEd                             |  | Note                               |     |          | 7.375% |          |  |        | January 15, 2004  |  |  |   | 150 | 
|ComEd                             |  | Pollution Control Revenue Bonds    |     |          | 5.30%  |          |  |        | January 15, 2004  |  |  |   | 26  | 
|ComEd                             |  | Sinking Fund Debentures            |     |          | 3.125% |          |  |        | April 1, 2004     |  |  |   | 1   | 
|ComEd                             |  | Sinking Fund Debentures            |     |          | 4.750% |          |  |        | June 1, 2004      |  |  |   | 1   | 
|Enterprises                       |  | Note                               |     |          | 7.68%  |          |  |        | June 30, 2023     |  |  |   | 11  | 
|Enterprises                       |  | Note                               |     |          | 9.09%  |          |  |        | January, 31, 2020 |  |  |   | 26  | 
|                                  |  |                                    |     |          |        |          |  |        |                   |  |  |   |     | 
|Total retirements and redemptions |  | $                                  | 290 |         
|                                  |  |                                    |     |         

During the three and six months ended
June 30, 2004, ComEd made payments of $86 million and
$179 million, respectively, related to its obligation to
the ComEd Transitional Funding Trust, and PECO made payments of
$78 million and $166 million, respectively, related to
its obligation to the PETT. Additionally, Exelon made payments
on other long-term debt obligations of $22 million.

40



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                           |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |     |     | 
|-------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------------------------- |  | -------- | ------ | ------- |  |  | ---- | - | --- | --- | --- | 
|                           |                                                              | Stated                                                                            |  |          |        | Face   
|                           |                                                              | Interest                                                                          |  |          |        | Amount 
|                           |                                                              | Rate                                                                              |  | Maturity |        | of Debt
|                           |                                                              |                                                                                   |  |          |        |        
|Non-recourse project debt: |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |    
|                           | Independence notes and bonds:                                |                                                                                   |  |          |        |         |  |  |      |   |     |     |    
|                           |                                                              | Secured bonds payable in semiannual installments
    commencing June 2003         |  |          | 8.50%  | (a)     |  |  | 2007 |   |     | $   | 122 | 
|                           |                                                              | Secured bonds payable in semiannual installments
    commencing December 2007     |  |          | 9.00%  | (a)     |  |  | 2013 |   |     |     | 409 | 
|                           | Term loan repayable primarily in quarterly
    installments: |                                                                                   |  |          |        |         |  |  |      |   |     |     |    
|                           |                                                              | Batavia                                                                           |  |          | 18.00% |         |  |  | 2007 |   |     |     | 1   | 
|Subordinated debt:         |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |    
|                           |                                                              | Tracking account loan payable in semiannual
    installments commencing June 2015 |  |          | 7.00%  | (a)     |  |  | 2035 |   |     |     | 419 | 
|                           |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |    
|Total face amount of debt  |                                                              |                                                                                   |  |          |        |         |  |  |      | $ | 951 |    
|                           | Unamortized debt discount and premium, net                   |                                                                                   |  |          |        |         |  |  |      |   |     | (99 | )  
|                           | Long-term debt due within one year                           |                                                                                   |  |          |        |         |  |  |      |   |     | (33 | )  
|                           |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |    
|Total long-term debt       |                                                              |                                                                                   |  |          |        |         |  |  |      | $ | 819 |    
|                           |                                                              |                                                                                   |  |          |        |         |  |  |      |   |     |    



---



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

Additionally, $3 million of Sithes
long-term debt was classified as liabilities held for sale at
June 30, 2004.

Aggregate maturities of Sithes long-term
debt relating to continuing operations are as follows:

|                                                          |  |   |     |  
|--------------------------------------------------------- |  | - | --- | -
|2004                                                      |  | $ | 33  |  
|2005                                                      |  |   | 34  |  
|2006                                                      |  |   | 37  |  
|2007                                                      |  |   | 40  |  
|2008                                                      |  |   | 44  |  
|2009 and thereafter                                       |  |   | 763 |  
|                                                          |  |   |     |  
|Total minimum payments                                    |  |   | 951 |  
|Net debt discount to be amortized to interest
    expense |  |   | (99 | )
|                                                          |  |   |     |  
|Present value of minimum payments                         |  | $ | 852 |  
|                                                          |  |   |     |  

41



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

In conjunction with The Exelon Way, a
company-wide effort to define how Exelon will conduct business
in years to come, Exelon, ComEd, PECO and Generation have
collectively identified 1,650 positions for elimination through
June 30, 2004. Exelon, ComEd, PECO and Generation based
their estimates of the number of positions to be eliminated on
managements current plans and ability to determine the
appropriate staffing levels to effectively operate the
businesses. Exelon, ComEd, PECO and Generation may incur further
severance costs associated with The Exelon Way if additional
positions are identified for elimination. These costs will be
recorded in the period in which the costs can be first
reasonably estimated.

The following table presents, by segment,
Exelons total salary continuance severance costs for the
three and six months ended June 30, 2004. There were no
significant salary continuance severance costs recorded during
the three and six months ended June 30, 2003.

|                                                                      |  |          |    |            |  |             |    |           |  |              |    |   |  |   |   |  |  |   |   | 
|--------------------------------------------------------------------- |  | -------- | -- | ---------- |  | ----------- | -- | --------- |  | ------------ | -- | - |  | - | - |  |  | - | - | 
|                                                                      |  | Energy   |    |            |  |             |    |           |  | Exelon      
|Salary continuance severance                                          |  | Delivery |    | Generation |  | Enterprises |    | Corporate |  | Consolidated
|                                                                      |  |          |    |            |  |             |    |           |  |             
|Expense (income) recorded for three months ended
    June 30, 2004    |  | $        | (1 | )          |  | $           | 1  |           |  | $            | (1 | ) |  | $ | 4 |  |  | $ | 3 | 
|Expense (income) recorded for six months ended
    June 30, 2004(a,b) |  |          | 4  |            |  |             | (5 | )         |  |              |   |   |  |   | 5 |  |  |   | 4 | 



---



|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(a) | In 2004, PECO recorded a charge of
    $4 million for new positions identified.



|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | In 2004, Generation recorded a charge of
    $2 million for new positions identified and reversed
    $7 million to reduce accruals for individuals previously
    identified under The Exelon Way.

The following table provides total salary
continuance severance costs for ComEd, PECO and Generation for
the three and six months ended June 30, 2004. There were no
significant salary continuance severance costs recorded during
the three and six months ended June 30, 2003.

|                                                                      |  |       |   |      |  |            |    |   |  |   |    |  
|--------------------------------------------------------------------- |  | ----- | - | ---- |  | ---------- | -- | - |  | - | -- | -
|Salary continuance severance                                          |  | ComEd |   | PECO |  | Generation
|                                                                      |  |       |   |      |  |           
|Expense (income) recorded for three months ended
    June 30, 2004    |  | $     |  |      |  | $          | (1 | ) |  | $ | 1  |  
|Expense (income) recorded for six months ended
    June 30, 2004(a,b) |  |       |  |      |  |            | 4  |   |  |   | (5 | )



---



|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(a) | In 2004, PECO recorded a charge of
    $4 million for new positions identified.



|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | In 2004, Generation recorded a charge of
    $2 million for new positions identified and reversed
    $7 million to reduce accruals for individuals previously
    identified under The Exelon Way.

42



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|------------------------------ |  | ------------ | --- | ----- |  | ---- | --- | ---------- |  | - | -- | - |  | - | --- | -
|                               |  | Exelon       |     |       |  |      |     |           
|Salary continuance obligations |  | Consolidated |     | ComEd |  | PECO |     | Generation
|                               |  |              |     |       |  |      |     |           
|Balance at January 1, 2003     |  | $            | 39  |       |  | $    | 15  |            |  | $ |   |   |  | $ | 11  |  
|Additions                      |  |              | 135 |       |  |      | 61  |            |  |   | 16 |   |  |   | 38  |  
|Payments                       |  |              | (39 | )     |  |      | (21 | )          |  |   | (2 | ) |  |   | (9  | )
|Other adjustments              |  |              | 4   |       |  |      |    |            |  |   |   |   |  |   | 3   |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|Balance at January 1, 2004     |  |              | 139 |       |  |      | 55  |            |  |   | 14 |   |  |   | 43  |  
|Additions (reductions)(a)(b)   |  |              | 4   |       |  |      |    |            |  |   | 4  |   |  |   | (5  | )
|Payments                       |  |              | (42 | )     |  |      | (13 | )          |  |   | (4 | ) |  |   | (16 | )
|Other adjustments(c)           |  |              | (3  | )     |  |      |    |            |  |   |   |   |  |   |    |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|Balance at June 30, 2004       |  | $            | 98  |       |  | $    | 42  |            |  | $ | 14 |   |  | $ | 22  |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  



---



|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In 2004, Generation recorded a charge of
    $2 million for new positions identified and reversed
    $7 million to reduce accruals for individuals previously
    identified under The Exelon Way.



|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(b) | In 2004, PECO recorded a charge of
    $4 million for new positions identified.



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



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

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

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

43



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

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

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

44



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following tables present the components of
Exelons net periodic benefit costs recognized for the
three and six months ended June 30, 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
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 Months     |      | Three Months  
|                                       |                               | Ended June 30,   |      | Ended June 30,
|                                       |                               |                  |      |               
|                                       |                               | 2004             |      | 2003           |   | 2004  |      | 2003
|                                       |                               |                  |      |                |   |       |      |     
|Service cost                           |                               | $                | 33   |                |   | $     | 27   |      |   | $ | 20  |     |   | $ | 17  |    
|Interest cost                          |                               |                  | 134  |                |   |       | 130  |      |   |   | 44  |     |   |   | 41  |    
|Expected return on assets              |                               |                  | (153 | )              |   |       | (146 | )    |   |   | (23 | )   |   |   | (19 | )  
|Amortization of:                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|                                       | Transition obligation (asset) |                  |      | (1             | ) |       |      | (1   | ) |   |     | 2   |   |   |     | 3   |  
|                                       | Prior service cost            |                  |      | 4              |   |       |      | 4    |   |   |     | (19 | ) |   |     | (14 | )
|                                       | Actuarial loss                |                  |      | 15             |   |       |      | 5    |   |   |     | 15  |   |   |     | 12  |  
|Curtailment charge(a)                  |                               |                  | 5    |                |   |       |     |      |   |   | 3   |     |   |   |    |    
|Special termination benefits charge(b) |                               |                  |     |                |   |       |     |      |   |   | 8   |     |   |   |    |    
|                                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|Net periodic benefit cost              |                               | $                | 37   |                |   | $     | 19   |      |   | $ | 50  |     |   | $ | 40  |    
|                                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    



---



|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | ComEd, PECO and Generation were allocated
    curtailment charges for pension and other postretirement
    benefits of $3 million, $2 million and
    $3 million, respectively.



|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | ComEd, PECO and Generation were allocated special
    termination benefit charges related to other postretirement
    benefits of $3 million, $2 million and
    $2 million, respectively.

45



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |     |  
|-------------------------------------- | ----------------------------- | ---------------- | ---- | -------------- | - | ----- | ---- | ---- | - | - | --- | --- | - | - | --- | --- | -
|                                       |                               |                  |      |                |   |      
|                                       |                               |                  |      |                |   | Other
|                                       |                               |                  |      | Postretirement
|                                       |                               | Pension Benefits |      | Benefits      
|                                       |                               |                  |      |               
|                                       |                               |                  |      |               
|                                       |                               | Six Months       |      | Six Months    
|                                       |                               | Ended June 30,   |      | Ended June 30,
|                                       |                               |                  |      |               
|                                       |                               | 2004             |      | 2003           |   | 2004  |      | 2003
|                                       |                               |                  |      |                |   |       |      |     
|Service cost                           |                               | $                | 66   |                |   | $     | 54   |      |   | $ | 40  |     |   | $ | 34  |    
|Interest cost                          |                               |                  | 268  |                |   |       | 260  |      |   |   | 89  |     |   |   | 83  |    
|Expected return on assets              |                               |                  | (307 | )              |   |       | (292 | )    |   |   | (46 | )   |   |   | (38 | )  
|Amortization of:                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|                                       | Transition obligation (asset) |                  |      | (2             | ) |       |      | (2   | ) |   |     | 4   |   |   |     | 5   |  
|                                       | Prior service cost            |                  |      | 8              |   |       |      | 8    |   |   |     | (38 | ) |   |     | (27 | )
|                                       | Actuarial loss                |                  |      | 30             |   |       |      | 11   |   |   |     | 30  |   |   |     | 24  |  
|Curtailment charge(a)                  |                               |                  | 5    |                |   |       |     |      |   |   | 3   |     |   |   |    |    
|Special termination benefits charge(b) |                               |                  |     |                |   |       |     |      |   |   | 8   |     |   |   |    |    
|                                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|Net periodic benefit cost              |                               | $                | 68   |                |   | $     | 39   |      |   | $ | 90  |     |   | $ | 81  |    
|                                       |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    



---



|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | ComEd, PECO and Generation were allocated
    curtailment charges for pension and other postretirement
    benefits of $3 million, $2 million and
    $3 million, respectively.



|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | ComEd, PECO and Generation were allocated special
    termination benefit charges related to other postretirement
    benefits of $3 million, $2 million and
    $2 million, respectively.

The following table presents the allocation by
registrant of Exelons pension and post-retirement benefit
costs, excluding curtailment and special termination benefits
costs, during the three and six months ended June 30, 2004
and 2003:

|                                         |  |                |    |                |  |      |    |      |  |   |    |  |  |   |    | 
|---------------------------------------- |  | -------------- | -- | -------------- |  | ---- | -- | ---- |  | - | -- |  |  | - | -- | 
|                                         |  |                |    |               
|                                         |  | Three Months   |    | Six Months    
|                                         |  | Ended June 30, |    | Ended June 30,
|                                         |  |                |    |               
|Pension and Postretirement Benefit Costs |  | 2004           |    | 2003           |  | 2004 |    | 2003
|                                         |  |                |    |                |  |      |    |     
|ComEd                                    |  | $              | 23 |                |  | $    | 23 |      |  | $ | 47 |  |  | $ | 46 | 
|PECO                                     |  |                | 8  |                |  |      | 13 |      |  |   | 16 |  |  |   | 28 | 
|Generation                               |  |                | 30 |                |  |      | 24 |      |  |   | 59 |  |  |   | 48 | 

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

|                                    |  |                |    |                |  |      |    |      |  |   |    |  |  |   |    | 
|----------------------------------- |  | -------------- | -- | -------------- |  | ---- | -- | ---- |  | - | -- |  |  | - | -- | 
|                                    |  |                |    |               
|                                    |  | Three Months   |    | Six Months    
|                                    |  | Ended June 30, |    | Ended June 30,
|                                    |  |                |    |               
|Savings plan matching contributions |  | 2004           |    | 2003           |  | 2004 |    | 2003
|                                    |  |                |    |                |  |      |    |     
|Exelon                              |  | $              | 14 |                |  | $    | 15 |      |  | $ | 28 |  |  | $ | 27 | 
|ComEd                               |  |                | 4  |                |  |      | 5  |      |  |   | 8  |  |  |   | 9  | 
|PECO                                |  |                | 1  |                |  |      | 2  |      |  |   | 3  |  |  |   | 4  | 
|Generation                          |  |                | 6  |                |  |      | 6  |      |  |   | 13 |  |  |   | 12 | 

46



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



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

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

|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | -------------- | ---- | -------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |                |      |               
|                            |                                                           | Three Months   |      | Six Months    
|                            |                                                           | Ended June 30, |      | Ended June 30,
|                            |                                                           |                |      |               
|                            |                                                           | 2004           |      | 2003           |   | 2004 |      | 2003
|                            |                                                           |                |      |                |   |      |      |     
|U.S. Federal statutory rate |                                                           |                | 35.0 | %              |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|                            | Synthetic fuel-producing facilities credit(a)             |                |      | (6.5           | ) |      |      |     |   |  |      | (7.2 | ) |  |      |     |  
|                            | Low income housing credit                                 |                |      | (0.5           | ) |      |      | (0.6 | ) |  |      | (0.5 | ) |  |      | (0.7 | )
|                            | Plant basis differences                                   |                |      | (0.4           | ) |      |      | (0.6 | ) |  |      | (0.4 | ) |  |      | (0.6 | )
|                            | Amortization of investment tax credit                     |                |      | (0.4           | ) |      |      | (0.4 | ) |  |      | (0.4 | ) |  |      | (0.5 | )
|                            | Tax exempt interest income                                |                |      | (0.3           | ) |      |      | (0.2 | ) |  |      | (0.4 | ) |  |      | (0.4 | )
|                            | State income taxes, net of Federal income tax
    benefit |                |      | 2.7            |   |      |      | 3.4  |   |  |      | 2.7  |   |  |      | 3.6  |  
|                            | Nontaxable employee benefits                              |                |      | (0.3           | ) |      |      |     |   |  |      | (0.3 | ) |  |      |     |  
|                            | Other, net                                                |                |      | 1.4            |   |      |      | 0.7  |   |  |      | 1.2  |   |  |      | 0.8  |  
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |                | 30.7 | %              |   |      | 37.3 | %    |   |  | 29.7 | %    |   |  | 37.2 | %   
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     



---



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



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

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

|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | -------------- | ---- | -------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |                |      |               
|                            |                                                           | Three Months   |      | Six Months    
|                            |                                                           | Ended June 30, |      | Ended June 30,
|                            |                                                           |                |      |               
|                            |                                                           | 2004           |      | 2003           |   | 2004 |      | 2003
|                            |                                                           |                |      |                |   |      |      |     
|U.S. Federal statutory rate |                                                           |                | 35.0 | %              |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|                            | State income taxes, net of Federal income tax
    benefit |                |      | 4.7            |   |      |      | 4.8  |   |  |      | 4.8  |   |  |      | 4.8  |  
|                            | Amortization of regulatory asset                          |                |      | 0.5            |   |      |      | 0.5  |   |  |      | 0.5  |   |  |      | 0.5  |  
|                            | Amortization of investment tax credit                     |                |      | (0.2           | ) |      |      | (0.2 | ) |  |      | (0.2 | ) |  |      | (0.2 | )
|                            | Nontaxable employee benefits                              |                |      | (0.3           | ) |      |      |     |   |  |      | (0.2 | ) |  |      |     |  
|                            | Other                                                     |                |      | (0.4           | ) |      |      | 0.1  |   |  |      | (0.2 | ) |  |      | (0.2 | )
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |                | 39.3 | %              |   |      | 40.2 | %    |   |  | 39.7 | %    |   |  | 39.9 | %   
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     

47



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |     
| | ----
| | PECO

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

|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | -------------- | ---- | -------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |                |      |               
|                            |                                                           | Three Months   |      | Six Months    
|                            |                                                           | Ended June 30, |      | Ended June 30,
|                            |                                                           |                |      |               
|                            |                                                           | 2004           |      | 2003           |   | 2004 |      | 2003
|                            |                                                           |                |      |                |   |      |      |     
|U.S. Federal statutory rate |                                                           |                | 35.0 | %              |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|                            | Plant basis differences                                   |                |      | (1.4           | ) |      |      | (1.5 | ) |  |      | (1.2 | ) |  |      | (1.0 | )
|                            | State income taxes, net of Federal income tax
    benefit |                |      | (0.7           | ) |      |      | (0.2 | ) |  |      | 0.3  |   |  |      | 0.9  |  
|                            | Amortization of investment tax credit                     |                |      | (0.4           | ) |      |      | (0.4 | ) |  |      | (0.4 | ) |  |      | (0.4 | )
|                            | Nontaxable employee benefits                              |                |      | (0.5           | ) |      |      |     |   |  |      | (0.2 | ) |  |      |     |  
|                            | Other                                                     |                |      | 1.3            |   |      |      | 4.2  |   |  |      | (1.0 | ) |  |      | 0.2  |  
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |                | 33.3 | %              |   |      | 37.1 | %    |   |  | 32.5 | %    |   |  | 34.7 | %   
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     



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

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

|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | -------------- | ---- | -------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |                |      |               
|                            |                                                           | Three Months   |      | Six Months    
|                            |                                                           | Ended June 30, |      | Ended June 30,
|                            |                                                           |                |      |               
|                            |                                                           | 2004           |      | 2003           |   | 2004 |      | 2003
|                            |                                                           |                |      |                |   |      |      |     
|U.S. Federal statutory rate |                                                           |                | 35.0 | %              |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|                            | State income taxes, net of Federal income tax
    benefit |                |      | 3.1            |   |      |      | 3.4  |   |  |      | 3.5  |   |  |      | 8.0  |  
|                            | Tax exempt interest income                                |                |      | (0.9           | ) |      |      | (0.5 | ) |  |      | (1.3 | ) |  |      | (2.2 | )
|                            | Nontaxable employee benefits                              |                |      | (0.6           | ) |      |      |     |   |  |      | (0.5 | ) |  |      |     |  
|                            | Amortization of investment tax credit                     |                |      | (0.4           | ) |      |      | (0.6 | ) |  |      | (0.6 | ) |  |      | (1.6 | )
|                            | Nuclear decommissioning trust income                      |                |      | 1.3            |   |      |      | 1.7  |   |  |      | 2.0  |   |  |      | 4.2  |  
|                            | Other                                                     |                |      | 0.1            |   |      |      | 0.1  |   |  |      |     |   |  |      | 0.4  |  
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |                | 37.6 | %              |   |      | 39.1 | %    |   |  | 38.1 | %    |   |  | 43.8 | %   
|                            |                                                           |                |      |                |   |      |      |      |   |  |      |      |   |  |      |     



|    |                                                         
|--- | --------------------------------------------------------
|13. | 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. Liabilities for
SFAS No. 143 asset retirement obligations (AROs) have
been recorded at Generation in connection with its obligation to
decommission its nuclear power plants as well as legal
obligations associated with the closing of its fossil power
plants. Based on the extended license lives of the nuclear
plants, decommissioning expenditures are expected to occur
primarily during the period 2029 through 2056. Exelon, through
its regulated subsidiary utility companies, ComEd and PECO,
currently recovers costs for decommissioning Generations
nuclear generating stations, excluding the AmerGen plants,
through regulated rates. The amounts recovered from

48



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

customers are deposited into trust accounts and
invested for funding the future decommissioning costs of the
nuclear generating stations.

Exelon and Generation had $4,890 million and
$4,721 million as of June 30, 2004 and
December 31, 2003, respectively, recorded as nuclear
decommissioning trust funds on Exelons and
Generations Consolidated Balance Sheets which represent
decommissioning assets in trust accounts. Generation anticipates
that all trust fund assets will ultimately be used to
decommission Generations nuclear plants.

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

|                                                             |  |            |       |        |  |   |       |  
|------------------------------------------------------------ |  | ---------- | ----- | ------ |  | - | ----- | -
|                                                             |  | Generation |       | Exelon
|                                                             |  |            |       |       
|Asset retirement obligation at January 1,
    2003           |  | $          | 2,363 |        |  | $ | 2,366 |  
|Consolidation of AmerGen                                     |  |            | 487   |        |  |   | 487   |  
|Accretion expense                                            |  |            | 160   |        |  |   | 161   |  
|Expenditures to decommission retired plants                  |  |            | (14   | )      |  |   | (14   | )
|Reclassification of Thermal ARO as held for
    sale(a)      |  |            |      |        |  |   | (3    | )
|                                                             |  |            |       |        |  |   |       |  
|Asset retirement obligation at December 31,
    2003         |  |            | 2,996 |        |  |   | 2,997 |  
|Accretion expense for the six months ended
    June 30, 2004 |  |            | 102   |        |  |   | 102   |  
|Additional liabilities incurred(b)                           |  |            | 6     |        |  |   | 6     |  
|Expenditures to decommission retired plants                  |  |            | (5    | )      |  |   | (5    | )
|                                                             |  |            |       |        |  |   |       |  
|Asset retirement obligation at June 30, 2004                 |  | $          | 3,099 |        |  | $ | 3,100 |  
|                                                             |  |            |       |        |  |   |       |  



---



|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(a) | The ARO of Thermal was removed from the balance
    sheet upon its sale in the second quarter of 2004.



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(b) | Additional liabilities incurred are primarily due
    to the consolidation of Sithe.

Generation is currently evaluating changes in
estimated future cash flows related to the decommissioning of
its nuclear units that will impact the recorded amount of the
ARO. This evaluation is expected to be completed by the end of
2004.



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



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

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

49



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | Earnings per Share

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

|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |      | 
|----------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------- | --- | -------------- |  | ---- | --- | ---- |  | - | --- | ---- |  | - | --- | ---- | 
|                                                                        |                                                                         |                |     |               
|                                                                        |                                                                         | Three Months   |     | Six Months    
|                                                                        |                                                                         | Ended June 30, |     | Ended June 30,
|                                                                        |                                                                         |                |     |               
|                                                                        |                                                                         | 2004           |     | 2003           |  | 2004 |     | 2003
|                                                                        |                                                                         |                |     |                |  |      |     |     
|Income before cumulative effect of changes in
    accounting principles |                                                                         | $              | 521 |                |  | $    | 372 |      |  | $ | 901 |      |  | $ | 621 |     
|Cumulative effect of changes in accounting
    principles               |                                                                         |                |    |                |  |      |    |      |  |   | 32  |      |  |   | 112 |     
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|Net income                                                              |                                                                         | $              | 521 |                |  | $    | 372 |      |  | $ | 933 |      |  | $ | 733 |     
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|Average common shares outstanding 
    basic                           |                                                                         |                | 661 |                |  |      | 650 |      |  |   | 660 |      |  |   | 649 |     
|Assumed exercise of stock options                                       |                                                                         |                | 6   |                |  |      | 5   |      |  |   | 6   |      |  |   | 4   |     
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|Average common shares outstanding 
    diluted                         |                                                                         |                | 667 |                |  |      | 655 |      |  |   | 666 |      |  |   | 653 |     
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|Earnings per average common share 
    Basic:                          |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|                                                                        | Income before cumulative effect of changes in
    accounting principles |                | $   | 0.79           |  |      | $   | 0.57 |  |   | $   | 1.36 |  |   | $   | 0.96 | 
|                                                                        | Cumulative effect of changes in accounting
    principles               |                |     |               |  |      |     |     |  |   |     | 0.05 |  |   |     | 0.17 | 
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|                                                                        | Net income                                                              |                | $   | 0.79           |  |      | $   | 0.57 |  |   | $   | 1.41 |  |   | $   | 1.13 | 
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|Earnings per average common share 
    Diluted:                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|                                                                        | Income before cumulative effect of changes in
    accounting principles |                | $   | 0.78           |  |      | $   | 0.57 |  |   | $   | 1.35 |  |   | $   | 0.95 | 
|                                                                        | Cumulative effect of changes in
    accounting principles               |                |     |               |  |      |     |     |  |   |     | 0.05 |  |   |     | 0.17 | 
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     
|                                                                        | Net income                                                              |                | $   | 0.78           |  |      | $   | 0.57 |  |   | $   | 1.40 |  |   | $   | 1.12 | 
|                                                                        |                                                                         |                |     |                |  |      |     |      |  |   |     |      |  |   |     |     

The number of stock options not included in the
calculation of diluted common shares outstanding due to their
antidilutive effect was 1 million and 10 million for
the three months ended June 30, 2004 and 2003,
respectively, and 1 million and 10 million for the six
months ended June 30, 2004 and 2003, respectively.



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

In April 2004, Exelons Board of
Directors approved a discretionary share repurchase program that
allows Exelon to repurchase shares of its common stock on a
periodic basis in the open market. The share repurchase program
is intended to mitigate, in part, the dilutive effect of shares
issued under Exelons employee stock option plan and
Exelons Employee Stock Purchase Plan (ESPP). The aggregate
value of the shares of common stock repurchased pursuant to the
program cannot exceed the economic benefit received after
January 1, 2004 due to stock option exercises and share
purchases pursuant to Exelons ESPP. The economic benefit
consists of the direct cash proceeds from purchases of stock and
the tax benefits associated with exercises of stock options. The
share repurchase program has no specified limit on the number of
shares that may be repurchased and no specified termination
date. Any shares repurchased are held as treasury shares

50



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

unless cancelled or reissued at the discretion of
Exelons management. Treasury shares are recorded at cost.
During the three and six months ended June 30, 2004,
2.3 million shares of common stock were purchased under the
share repurchase program for $75 million.



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

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

|                                         |  |        |         |        |  |          |       |          |  |          |       |               |  |               |     |   |  |   |       |   |  |   |        |   |  |   |       |  
|---------------------------------------- |  | ------ | ------- | ------ |  | -------- | ----- | -------- |  | -------- | ----- | ------------- |  | ------------- | --- | - |  | - | ----- | - |  | - | ------ | - |  | - | ----- | -
|                                         |  |        |         |        |  |          |       |          |  |          |       | Accumulated   |  |              
|                                         |  |        |         |        |  |          |       |          |  |          |       | Other         |  |              
|                                         |  |        |         |        |  |          |       |          |  |          |       | Comprehensive |  | Total        
|                                         |  | Issued |         | Common |  | Treasury |       | Treasury |  | Retained |       | Income        |  | Shareholders
|Dollars in millions, shares in thousands |  | Shares |         | Stock  |  | Shares   |       | Stock    |  | Earnings |       | (Loss)        |  | Equity       
|                                         |  |        |         |        |  |          |       |          |  |          |       |               |  |              
|Balance, December 31, 2003               |  |        | 656,366 |        |  | $        | 7,292 |          |  |          |      |               |  | $             |    |   |  | $ | 2,320 |   |  | $ | (1,109 | ) |  | $ | 8,503 |  
|Net income                               |  |        |         |        |  |          |      |          |  |          |      |               |  |               |    |   |  |   | 933   |   |  |   |       |   |  |   | 933   |  
|Long-term incentive plan activity        |  |        | 5,956   |        |  |          | 166   |          |  |          |      |               |  |               |    |   |  |   |      |   |  |   |       |   |  |   | 166   |  
|Employee stock purchase plan issuances   |  |        | 155     |        |  |          | 5     |          |  |          |      |               |  |               |    |   |  |   |      |   |  |   |       |   |  |   | 5     |  
|Treasury stock purchases                 |  |        |        |        |  |          |      |          |  |          | 2,327 |               |  |               | (75 | ) |  |   |      |   |  |   |       |   |  |   | (75   | )
|Common stock dividends declared          |  |        |        |        |  |          |      |          |  |          |      |               |  |               |    |   |  |   | (364  | ) |  |   |       |   |  |   | (364  | )
|Other comprehensive income (loss)        |  |        |        |        |  |          |      |          |  |          |      |               |  |               |    |   |  |   |      |   |  |   | (142   | ) |  |   | (142  | )
|                                         |  |        |         |        |  |          |       |          |  |          |       |               |  |               |     |   |  |   |       |   |  |   |        |   |  |   |       |  
|Balance, June 30, 2004                   |  |        | 662,477 |        |  | $        | 7,463 |          |  |          | 2,327 |               |  | $             | (75 | ) |  | $ | 2,889 |   |  | $ | (1,251 | ) |  | $ | 9,026 |  
|                                         |  |        |         |        |  |          |       |          |  |          |       |               |  |               |     |   |  |   |       |   |  |   |        |   |  |   |       |  



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

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



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

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



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sithe has power-only sales commitments of
    $46 million, transmission rights of $27 million and
    minimum fuel purchase commitments of $109 million.



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

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



| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

51



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generation acquired a $50 million letter of
    credit to support the contractual obligations of Sithe and its
    subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Mystic Development LLC (Mystic) a former
    affiliate of Exelon New England has a long-term agreement
    through January 2020 with Distrigas of Massachusetts
    Corporation (Distrigas) for gas supply, primarily for the Boston
    Generating units. Under the agreement, gas purchase prices from
    Distrigas are indexed to the New England gas markets. Exelon New
    England has guaranteed Mystics financial obligations to
    Distrigas under the long-term supply agreement. Exelon New
    Englands guarantee to Distrigas remained in effect
    following the transfer of ownership interest in Boston
    Generating in May 2004. Under FIN No. 45,
    approximately $17 million is included as a liability within
    the Consolidated Balance Sheets of Exelon and Generation as of
    June 30, 2004 related to this guarantee. The terms of the
    guarantee do not limit the potential future payments that Exelon
    New England could be required to make under the guarantee.



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

Exelon, ComEd, PECO and Generation accrue amounts
for environmental investigation and remediation costs that can
be reasonably estimated, including amounts for manufactured gas
plant (MGP) investigation and remediation. Exelon has
identified 69 sites where former MGP activities have or may have
resulted in actual site contamination. Of these 69 sites, the
Illinois Environmental Protection Agency has approved the clean
up of 4 sites and the Pennsylvania Department of Environmental
Protection has approved the clean up of 8 sites. Pursuant to a
Pennsylvania Public Utility Commission (PUC) order, PECO is
currently recovering a provision for environmental costs
annually for the remediation of former MGP facility sites, for
which PECO has recorded a regulatory asset (see
Note 16  Supplemental Financial Information). As
of June 30, 2004 and December 31, 2003, Exelon, ComEd,
PECO and Generation had accrued the following amounts for
environmental liabilities:

|              |  |                     |     |                          |  |   |     | 
|------------- |  | ------------------- | --- | ------------------------ |  | - | --- | 
|              |  | Total environmental |     | Portion of total related
|              |  | investigation and   |     | to MGP investigation    
|June 30, 2004 |  | remediation reserve |     | and remediation(a)      
|              |  |                     |     |                         
|Exelon        |  | $                   | 130 |                          |  | $ | 101 | 
|ComEd         |  |                     | 66  |                          |  |   | 61  | 
|PECO          |  |                     | 50  |                          |  |   | 40  | 
|Generation    |  |                     | 14  |                          |  |   |    | 



---



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

|                  |  |                     |     |                          |  |   |     | 
|----------------- |  | ------------------- | --- | ------------------------ |  | - | --- | 
|                  |  | Total environmental |     | Portion of total related
|                  |  | investigation and   |     | to MGP investigation    
|December 31, 2003 |  | remediation reserve |     | and remediation(a)      
|                  |  |                     |     |                         
|Exelon            |  | $                   | 129 |                          |  | $ | 105 | 
|ComEd             |  |                     | 69  |                          |  |   | 64  | 
|PECO              |  |                     | 50  |                          |  |   | 41  | 
|Generation        |  |                     | 10  |                          |  |   |    | 



---



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

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

52



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



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

Retail Rate Law.In
1996, three developers of non-utility generating facilities
filed litigation against various Illinois officials claiming
that the enforcement against those facilities of an amendment to
Illinois law removing the entitlement of those facilities to
state-subsidized payments for electricity sold to ComEd after
March 15, 1996 violated their rights under federal and
state constitutions. The developers also filed suit against
ComEd for a declaratory judgment that their rights under their
contracts with ComEd were not affected by the amendment and for
breach of contract. On November 25, 2002, the court granted
the developers motions for summary judgment. The judge
also entered a permanent injunction enjoining ComEd from
refusing to pay the retail rate on the grounds of the amendment
and Illinois from denying ComEd a tax credit on account of such
purchases. ComEd and Illinois each appealed the ruling. On
March 9, 2004, the Illinois Appellate Court reversed the
trial court. The Appellate Court held that the 1996 law does
apply to the developers facilities and, therefore, they
are not entitled to subsidized payments. The Court expressly
ruled that the breach of contract claims against ComEd are
dismissed with prejudice. Two of the developers sought review of
the Appellate Courts decision by the Illinois Supreme
Court. On May 26, 2004, the Supreme Court declined to hear
the earlier-filed of the two appeals. There is no set date by
which the Court must decide if it will hear the remaining
appeal. While ComEd cannot currently predict the ultimate
outcome of this action, it does not believe that the action will
have a material adverse effect on its results of operations or
its cash flows.



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

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

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



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

Cotter Corporation
Litigation.During 1989 and 1991,
actions were brought in federal and state courts in Colorado
against ComEd and its subsidiary, Cotter Corporation (Cotter),
seeking unspecified damages and injunctive relief based on
allegations that Cotter permitted radioactive and other
hazardous material to be released from its mill into areas owned
or occupied by the plaintiffs, resulting in property damage and
potential adverse health effects. Several of these actions
resulted in nominal jury verdicts or were settled or dismissed.
One action resulted in an award for the plaintiffs of a more
substantial amount, but was reversed on April 22, 2003 by
the Tenth Circuit Court of Appeals and remanded for retrial. An
appeal by the plaintiffs to the United States Supreme Court was
denied on November 10, 2003. No date has been set for a new
trial.

53



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 the anticipated remediation
strategy for the site may range up to $22 million. Once a
remedy is selected, it is expected that the PRPs will agree on
an allocation of responsibility for the costs. Generation has
accrued what it believes to be an adequate amount to cover its
anticipated share of the liability.

Raytheon and Mitsubishi
Litigation.In connection with the
February 2004 settlement among Exelon, Generation and the
lenders under the Boston Generating Credit Facility more fully
described in Note 3  Acquisitions and
Dispositions, Exelon, Generation, 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
Mitsubishi Heavy Industries, LTD (MHI) and Mitsubishi Heavy
Industries of America (MHIA) claims relating to work
performed on the projects prior to the settlement, and 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. Raytheon has also
ceased all construction activities related to the Mystic 8 and 9
and Fore River generating facilities and assigned subcontracts
to the project companies, and will cooperate with the transition
of construction to a new contractor. In the event that the
transfer of plant operations and power marketing activities are
not completed by September 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.

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



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

Exelon, ComEd, PECO and Generation are involved
in various other litigation matters that are being defended and
handled in the ordinary course of business. Exelon, ComEd, PECO
and Generation maintain accruals for such costs that are
probable of being incurred and subject to reasonable estimation.
The ultimate

54



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

outcomes of such matters, as well as the matters
discussed above, are uncertain and may have a material adverse
effect on their respective financial condition, results of
operations or cash flows.



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

Dynegy.Generation
is counterparty to Dynegy, Inc. (Dynegy) in various energy
transactions. The credit ratings of Dynegy are below investment
grade. As of June 30, 2004, Generation has credit risk
associated with Dynegy through Generations investment in
Sithe. Sithe is a 100% owner of the Independence generating
station, a 1,028-MW gas-fired facility that has an energy-only
long-term tolling agreement with Dynegy, with a related
financial swap arrangement. As of March 31, 2004,
Generation consolidated the assets and liabilities of Sithe in
accordance with the provisions of FIN No. 46-R. As a
result, Generation has recorded an asset of $114 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 the financial swap
agreement, Generation would be required to impair the related
asset. Exelon estimates, as a 50% owner of Sithe, that the
impairment would result in an after-tax reduction of its net
income of approximately $21 million.

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

During the three months ended June 30, 2004,
the IRS granted preliminary approval for one of ComEds
refund claims. As such, ComEd believes that it is probable that
a fee will ultimately be paid to the tax consultant. Therefore,
ComEd has recorded an expense of $5 million (pretax), which
resulted in a decrease to the prepayment from $11 million
to $6 million. The charge represents an estimate of the fee
to the tax

55



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consultant which may be adjusted upward or
downward depending on the IRS final calculation of the tax
and interest benefit. ComEd has not reflected the tax benefit
associated with the refund claim pending final approval of the
IRS. However, as described above, the net income statement
impact for ComEd is not anticipated to be material.



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

On January 28, 2004, the NRC issued a letter
requesting PSE&G to conduct a review of its Salem facility,
of which Generation owns 42.59%, to assess the workplace
environment for raising and addressing safety issues. PSE&G
responded to the letter on February 28, 2004, and had
independent assessments of the work environment at the facility
performed. Assessment results were provided to the NRC in May.
The assessments concluded that Salem was safe for continued
operation, but also identified issues that need to be addressed.
At an NRC public meeting on June 16, 2004, PSE&G
outlined its action plans to address these issues, which focus
on safety conscious work environment, the corrective action
program, and work management. A letter documenting these plans
and commitments was sent to the NRC on June 25, 2004.

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

56



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                                             |  |          |        |              |  |   |        |  
|------------------------------------------------------------ |  | -------- | ------ | ------------ |  | - | ------ | -
|                                                             |  | June 30, |        | December 31,
|ComEd                                                        |  | 2004     |        | 2003        
|                                                             |  |          |        |             
|Regulatory Assets (Liabilities)                              |  |          |        |              |  |   |        |  
|Nuclear decommissioning                                      |  | $        | (1,212 | )            |  | $ | (1,183 | )
|Removal costs                                                |  |          | (992   | )            |  |   | (973   | )
|Recoverable transition costs                                 |  |          | 109    |              |  |   | 131    |  
|Reacquired debt costs and interest-rate swap
    settlements |  |          | 162    |              |  |   | 172    |  
|Deferred income taxes                                        |  |          | (60    | )            |  |   | (61    | )
|Other                                                        |  |          | 26     |              |  |   | 23     |  
|                                                             |  |          |        |              |  |   |        |  
|Total                                                        |  | $        | (1,967 | )            |  | $ | (1,891 | )
|                                                             |  |          |        |              |  |   |        |  

|                                                                       |  |          |       |              |  |   |       |  
|---------------------------------------------------------------------- |  | -------- | ----- | ------------ |  | - | ----- | -
|                                                                       |  | June 30, |       | December 31,
|PECO                                                                   |  | 2004     |       | 2003        
|                                                                       |  |          |       |             
|Regulatory Assets (Liabilities)                                        |  |          |       |              |  |   |       |  
|Competitive transition charge                                          |  | $        | 4,129 |              |  | $ | 4,303 |  
|Deferred income taxes                                                  |  |          | 775   |              |  |   | 762   |  
|Non-pension postretirement benefits                                    |  |          | 55    |              |  |   | 58    |  
|Reacquired debt costs                                                  |  |          | 45    |              |  |   | 49    |  
|MGP regulatory asset (see
    Note 15  Commitments and Contingencies) |  |          | 30    |              |  |   | 34    |  
|U.S. Department of Energy facility
    decommissioning                 |  |          | 23    |              |  |   | 26    |  
|Nuclear decommissioning                                                |  |          | (35   | )            |  |   | (12   | )
|Other                                                                  |  |          | 16    |              |  |   | 6     |  
|                                                                       |  |          |       |              |  |   |       |  
|Long-term regulatory assets                                            |  |          | 5,038 |              |  |   | 5,226 |  
|Deferred energy costs (current asset)                                  |  |          | 25    |              |  |   | 81    |  
|                                                                       |  |          |       |              |  |   |       |  
|Total                                                                  |  | $        | 5,063 |              |  | $ | 5,307 |  
|                                                                       |  |          |       |              |  |   |       |  

57



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following tables provide supplemental balance
sheet information as of June 30, 2004 and December 31,
2003:

|                               |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |       | 
|------------------------------ | ------------------------------------ | ------ | - | ----- |  | ---- | - | ---------- |  |  | - | ----- |  |  | - | ----- | 
|June 30, 2004                  |                                      | Exelon |   | ComEd |  | PECO |   | Generation
|                               |                                      |        |   |       |  |      |   |           
|Property, plant and equipment: |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Accumulated depreciation             |        | $ | 6,472 |  |      | $ | 879        |  |  | $ | 2,105 |  |  | $ | 3,370 | 
|Accounts receivable:           |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Allowance for uncollectible accounts |        |   | 101   |  |      |   | 16         |  |  |   | 61    |  |  |   | 18    | 

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



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

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

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

58



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

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

|                                                             |  |          |       |            |  |             |       |               |  |              |     |      |  |   |      |   |  |   |       | 
|------------------------------------------------------------ |  | -------- | ----- | ---------- |  | ----------- | ----- | ------------- |  | ------------ | --- | ---- |  | - | ---- | - |  | - | ----- | 
|                                                             |  |          |       |            |  |             |       | Corporate and |  |             
|                                                             |  | Energy   |       |            |  |             |       | Intersegment  |  |             
|                                                             |  | Delivery |       | Generation |  | Enterprises |       | Eliminations  |  | Consolidated
|                                                             |  |          |       |            |  |             |       |               |  |             
|Total revenues(a):                                           |  |          |       |            |  |             |       |               |  |              |     |      |  |   |      |   |  |   |       | 
|2004                                                         |  | $        | 2,435 |            |  | $           | 1,948 |               |  | $            | 43  |      |  | $ | (876 | ) |  | $ | 3,550 | 
|2003                                                         |  |          | 2,322 |            |  |             | 2,058 | (b)           |  |              | 269 | (b)  |  |   | (928 | ) |  |   | 3,721 | 
|Intersegment revenues:                                       |  |          |       |            |  |             |       |               |  |              |     |      |  |   |      |   |  |   |       | 
|2004                                                         |  | $        | 11    |            |  | $           | 871   |               |  | $            | (4  | )    |  | $ | (878 | ) |  | $ |      | 
|2003                                                         |  |          | 19    |            |  |             | 896   |               |  |              | 14  | (b)  |  |   | (929 | ) |  |   |      | 
|Income (loss) before income taxes and minority
    interest: |  |          |       |            |  |             |       |              
|2004                                                         |  | $        | 485   |            |  | $           | 266   |               |  | $            | 51  |      |  | $ | (67  | ) |  | $ | 735   | 
|2003                                                         |  |          | 481   |            |  |             | 234   | (b)           |  |              | (96 | )(b) |  |   | (24  | ) |  |   | 595   | 
|Income taxes:                                                |  |          |       |            |  |             |       |               |  |              |     |      |  |   |      |   |  |   |       | 
|2004                                                         |  | $        | 182   |            |  | $           | 100   |               |  | $            | 24  |      |  | $ | (80  | ) |  | $ | 226   | 
|2003                                                         |  |          | 190   |            |  |             | 92    | (b)           |  |              | (35 | )(b) |  |   | (25  | ) |  |   | 222   | 
|Net income (loss):                                           |  |          |       |            |  |             |       |               |  |              |     |      |  |   |      |   |  |   |       | 
|2004                                                         |  | $        | 303   |            |  | $           | 178   |               |  | $            | 27  |      |  | $ | 13   |   |  | $ | 521   | 
|2003                                                         |  |          | 291   |            |  |             | 142   | (b)           |  |              | (61 | )(b) |  |   |     |   |  |   | 372   | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | $57 million and $51 million in utility
    taxes are included in the revenues and expenses for the three
    months ended June 30, 2004 and 2003, respectively, for
    ComEd. $50 million and $47 million in utility taxes
    are included in the revenues and expenses for the three months
    ended June 30, 2004 and 2003, respectively, for PECO.                                                                       
|   
|(b) | Effective January 1, 2004, Enterprises
    competitive retail sales business, Exelon Energy Company, was
    transferred to Generation. Segment information for the three
    months ended June 30, 2003 included in the table above has
    been adjusted to reflect Exelon Energy Company as part of the
    Generation segment. For the three months ended June 30,
    2003, Exelon Energy Company reported the following:

|                                  |  |   |     |  |  |                       |  |   |   | 
|--------------------------------- |  | - | --- |  |  | --------------------- |  | - | - | 
|Total revenues                    |  | $ | 174 |  |  | Intersegment revenues |  | $ | 2 | 
|Income (loss) before income taxes |  | $ | 1   |  |  | Income taxes          |  | $ | 1 | 
|Net income (loss)                 |  | $ |    |  |  |                       |  |   |   | 

59



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Six Months Ended June 30, 2004 and 2003,
    June 30, 2004 and December 31, 2003

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

|                                                                                                                        |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|----------------------------------------------------------------------------------------------------------------------- |  | -------- | ------ | ---------- |  | ----------- | ------ | ------------- |  | ------------ | ---- | ---- |  | - | ------ | - |  | - | ------ | 
|                                                                                                                        |  |          |        |            |  |             |        | Corporate and |  |             
|                                                                                                                        |  | Energy   |        |            |  |             |        | Intersegment  |  |             
|                                                                                                                        |  | Delivery |        | Generation |  | Enterprises |        | Eliminations  |  | Consolidated
|                                                                                                                        |  |          |        |            |  |             |        |               |  |             
|Total
    revenues(a):                                                                                                  |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 5,010  |            |  | $           | 3,900  |               |  | $            | 133  |      |  | $ | (1,771 | ) |  | $ | 7,272  | 
|2003                                                                                                                    |  |          | 4,964  |            |  |             | 4,260  | (b)           |  |              | 518  | (b)  |  |   | (1,947 | ) |  |   | 7,795  | 
|Intersegment revenues:                                                                                                  |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 26     |            |  | $           | 1,750  |               |  | $            |     |      |  | $ | (1,776 | ) |  | $ |       | 
|2003                                                                                                                    |  |          | 35     |            |  |             | 1,889  |               |  |              | 26   | (b)  |  |   | (1,950 | ) |  |   |       | 
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in
    accounting principles:
|2004                                                                                                                    |  | $        | 986    |            |  | $           | 383    |               |  | $            | 26   |      |  | $ | (129   | ) |  | $ | 1,266  | 
|2003                                                                                                                    |  |          | 998    |            |  |             | 146    | (b)           |  |              | (109 | )(b) |  |   | (41    | ) |  |   | 994    | 
|Income taxes:                                                                                                           |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 367    |            |  | $           | 146    |               |  | $            | 15   |      |  | $ | (152   | ) |  | $ | 376    | 
|2003                                                                                                                    |  |          | 382    |            |  |             | 65     | (b)           |  |              | (41  | )(b) |  |   | (36    | ) |  |   | 370    | 
|Cumulative effect of change in
    accounting principle:                                                               
|2004                                                                                                                    |  | $        |       |            |  | $           | 32     |               |  | $            |     |      |  | $ |       |   |  | $ | 32     | 
|2003                                                                                                                    |  |          | 5      |            |  |             | 108    |               |  |              | (1)  |      |  |   |       |   |  |   | 112    | 
|Net income (loss):                                                                                                      |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 619    |            |  | $           | 280    |               |  | $            | 11   |      |  | $ | 23     |   |  | $ | 933    | 
|2003                                                                                                                    |  |          | 621    |            |  |             | 187    | (b)           |  |              | (69  | )(b) |  |   | (6     | ) |  |   | 733    | 
|Total assets:                                                                                                           |  |          |        |            |  |             |        |               |  |              |      |      |  |   |        |   |  |   |        | 
|June 30, 2004                                                                                                           |  | $        | 28,370 |            |  | $           | 15,402 | (c)           |  | $            | 592  |      |  | $ | (2,262 | ) |  | $ | 42,102 | 
|December 31, 2003                                                                                                       |  |          | 28,369 |            |  |             | 14,753 | (b)           |  |              | 727  | (b)  |  |   | (1,967 | ) |  |   | 41,882 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | $119 million and $113 million in
    utility taxes are included in the revenues and expenses for the
    six months ended June 30, 2004 and 2003, respectively, for
    ComEd. $100 million and $98 million in utility taxes
    are included in the revenues and expenses for the six months
    ended June 30, 2004 and 2003, respectively, for PECO.                                                                                                                                                                                           
|   
|(b) | Effective January 1, 2004, Enterprises
    competitive retail sales business, Exelon Energy Company, was
    transferred to Generation. Segment information for the six
    months ended June 30, 2003 and as of December 31, 2003
    included in the table above has been adjusted to reflect Exelon
    Energy Company as part of the Generation segment. Exelon Energy
    Companys total assets as of December 31, 2003 were
    $104 million and for the six months ended June 30,
    2003, Exelon Energy Company reported the following:

|                                  |  |   |     |   |  |                       |  |   |    |  
|--------------------------------- |  | - | --- | - |  | --------------------- |  | - | -- | -
|Total revenues                    |  | $ | 504 |   |  | Intersegment revenues |  | $ | 9  |  
|Income (loss) before income taxes |  | $ | (16 | ) |  | Income taxes          |  | $ | (6 | )
|Net income (loss)                 |  | $ | (10 | ) |  |                       |  |   |    |  



|    |                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Includes $1,423 million of Sithe
    consolidated assets under the provisions of FIN No. 46-R.
    See Note 4  Sithe for further information
    regarding the consolidation of Sithe.

60



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



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

Effective December 31, 2003, ComEd
Financing II, ComEd Financing III, ComEd Funding, LLC
and ComEd Transitional Funding Trust were deconsolidated from
the financial statements of Exelon and ComEd in conjunction with
the adoption of FIN No. 46-R. 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 presented in the tables below.

|                                                |                                  |                |   |                  |   |      |   |      |  |  |   |    |   |  |   |   | 
|----------------------------------------------- | -------------------------------- | -------------- | - | ---------------- | - | ---- | - | ---- |  |  | - | -- | - |  | - | - | 
|                                                |                                  |                |   |                 
|                                                |                                  | Three Months   |   | Six Months Ended
|                                                |                                  | Ended June 30, |   | June 30,        
|                                                |                                  |                |   |                 
|                                                |                                  | 2004           |   | 2003             |   | 2004 |   | 2003
|                                                |                                  |                |   |                  |   |      |   |     
|Interest expense to affiliates                  |                                  |                |   |                  |   |      |   |      |  |  |   |    |   |  |   |  
|                                                | ComEd Transitional Funding Trust |                | $ | 21               |   |      | $ |     |  |  | $ | 45 |   |  | $ |  | 
|                                                | ComEd Financing II               |                |   | 4                |   |      |   |     |  |  |   | 7  |   |  |   |  | 
|                                                | ComEd Financing III              |                |   | 3                |   |      |   |     |  |  |   | 6  |   |  |   |  | 
|Equity in losses from unconsolidated affiliates |                                  |                |   |                  |   |      |   |      |  |  |   |    |   |  |   |  
|                                                | ComEd Funding LLC                |                |   | (6               | ) |      |   |     |  |  |   | (9 | ) |  |   |  | 

|                                                                 |                                  |          |   |              |  |  |   |       | 
|---------------------------------------------------------------- | -------------------------------- | -------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                                  | June 30, |   | December 31,
|                                                                 |                                  | 2004     |   | 2003        
|                                                                 |                                  |          |   |             
|Receivables from affiliates (current)                            |                                  |          |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |          | $ | 13           |  |  | $ | 9     | 
|Investment in affiliates                                         |                                  |          |   |              |  |  |   |      
|                                                                 | ComEd Funding, LLC               |          |   | 47           |  |  |   | 45    | 
|                                                                 | ComEd Financing II               |          |   | 10           |  |  |   | 8     | 
|                                                                 | ComEd Financing III              |          |   | 6            |  |  |   | 6     | 
|Receivable from affiliates (noncurrent)                          |                                  |          |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |          |   | 10           |  |  |   | 9     | 
|Payables to affiliates (current)                                 |                                  |          |   |              |  |  |   |      
|                                                                 | ComEd Financing II               |          |   | 6            |  |  |   | 6     | 
|                                                                 | ComEd Financing III              |          |   | 4            |  |  |   | 4     | 
|Long-term debt to affiliates (including due
    within one year) |                                  |          |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |          |   | 1,497        |  |  |   | 1,676 | 
|                                                                 | ComEd Financing II               |          |   | 155          |  |  |   | 155   | 
|                                                                 | ComEd Financing III              |          |   | 206          |  |  |   | 206   | 

61



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                         |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |       | 
|---------------------------------------- | --------------------------------- | -------------- | --- | -------------- | - | ---- | -- | ---- |  |  | --- | ----- |  |  | --- | ----- | 
|                                         |                                   |                |     |               
|                                         |                                   | Three Months   |     | Six Months    
|                                         |                                   | Ended June 30, |     | Ended June 30,
|                                         |                                   |                |     |               
|                                         |                                   | 2004           |     | 2003           |   | 2004 |    | 2003
|                                         |                                   |                |     |                |   |      |    |     
|Operating revenues from affiliates       |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |      
|                                         | Generation(a)                     |                | $   | 5              |   |      | $  | 15   |  |  | $   | 16    |  |  | $   | 26    | 
|                                         | Enterprises(a)                    |                |     | 1              |   |      |    | 1    |  |  |     | 1     |  |  |     | 3     | 
|Purchased power from affiliate           |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |      
|                                         | PPA with Generation(b)            |                |     | 514            |   |      |    | 528  |  |  |     | 1,043 |  |  |     | 1,099 | 
|Operations & maintenance from affiliates |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |      
|                                         | BSC(c)                            |                |     | 49             |   |      |    | 21   |  |  |     | 89    |  |  |     | 46    | 
|                                         | Enterprises(d,e)                  |                |     | (4             | ) |      |    | 3    |  |  |     | 1     |  |  |     | 6     | 
|Interest income from affiliates          |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |      
|                                         | UII(f)                            |                |     | 4              |   |      |    | 6    |  |  |     | 9     |  |  |     | 12    | 
|                                         | Exelon intercompany money pool(j) |                |     | 1              |   |      |    | 1    |  |  |     | 2     |  |  |     | 1     | 
|Capitalized costs                        |                                   |                |     |                |   |      |    |      |  |  |     |       |  |  |     |      
|                                         | BSC(c)                            |                |     | 16             |   |      |    | 5    |  |  |     | 28    |  |  |     | 8     | 
|                                         | Enterprises(e)                    |                |     |               |   |      |    | 6    |  |  |     |      |  |  |     | 12    | 
|Cash dividends paid to parent            |                                   |                | 104 |                |   |      | 91 |      |  |  | 207 |       |  |  | 211 |      

62



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                     |                                   |          |     |              |  |  |     |       | 
|---------------------------------------------------- | --------------------------------- | -------- | --- | ------------ |  |  | --- | ----- | 
|                                                     |                                   | June 30, |     | December 31,
|                                                     |                                   | 2004     |     | 2003        
|                                                     |                                   |          |     |             
|Receivables from affiliates (current)                |                                   |          |     |              |  |  |     |      
|                                                     | UII(f)                            |          | $   | 9            |  |  | $   | 3     | 
|                                                     | PECO(h)                           |          |     |             |  |  |     | 6     | 
|                                                     | Exelon intercompany money pool(j) |          |     | 198          |  |  |     | 405   | 
|                                                     | Other                             |          |     |             |  |  |     | 5     | 
|Receivables from affiliates (noncurrent)             |                                   |          |     |              |  |  |     |      
|                                                     | UII(f)                            |          |     | 1,071        |  |  |     | 1,071 | 
|                                                     | Generation(k)                     |          |     | 1,212        |  |  |     | 1,183 | 
|                                                     | Other                             |          |     | 7            |  |  |     | 8     | 
|Payables to affiliates (current)                     |                                   |          |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |          |     | 11           |  |  |     | 11    | 
|                                                     | Generation(a,b)                   |          |     | 182          |  |  |     | 171   | 
|                                                     | BSC(c)                            |          |     | 19           |  |  |     | 13    | 
|                                                     | Other                             |          |     |             |  |  |     | 2     | 
|Payables to affiliates (noncurrent)                  |                                   |          |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |          |     | 22           |  |  |     | 22    | 
|                                                     | Other                             |          |     | 5            |  |  |     | 6     | 
|Shareholders equity  receivable
    from parent(i) |                                   |          | 188 |              |  |  | 250 |      



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | ComEd provides electric, transmission and other
    ancillary services to Generation and Enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(b) |  | Effective January 1, 2001, ComEd entered
    into a full-requirements 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 Services (an
    Enterprises company) to provide energy conservation services to
    ComEd customers. During the three months ended June 30,
    2004, ComEd recorded a true-up of prior billings resulting in a
    credit balance.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(e) |  | ComEd received substation and transmission
    engineering and construction services under contracts with
    InfraSource, Inc. (InfraSource). A portion of such services is
    capitalized. Exelon sold InfraSource in September 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(f) |  | ComEd has a note and interest receivable with a
    variable rate of the one month forward LIBOR rate plus
    50 basis points from Unicom Investments Inc.
    (UII) relating to ComEds December 1999 fossil plant
    sale. This note matures in December 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(g) |  | ComEd has a short-term and long-term payable to
    Generation, primarily representing ComEds legal
    requirements to remit collections of nuclear decommissioning
    costs from its customers to Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(h) |  | In 2003, ComEd provided hurricane restoration
    assistance to PECO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

63



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 long-term receivable from Generation
    related to a regulatory liability as a result of the adoption of
    SFAS No. 143.               



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

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

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

|                                  |                |                |   |                |  |      |   |      |  |  |   |     |  |  |   |   | 
|--------------------------------- | -------------- | -------------- | - | -------------- |  | ---- | - | ---- |  |  | - | --- |  |  | - | - | 
|                                  |                |                |   |               
|                                  |                | Three Months   |   | Six Months    
|                                  |                | Ended June 30, |   | Ended June 30,
|                                  |                |                |   |               
|                                  |                | 2004           |   | 2003           |  | 2004 |   | 2003
|                                  |                |                |   |                |  |      |   |     
|Operating revenues from affiliate |                |                |   |                |  |      |   |      |  |  |   |     |  |  |   |  
|                                  | PETT(a)        |                | $ | 3              |  |      | $ |     |  |  | $ | 5   |  |  | $ |  | 
|Interest expense to affiliates    |                |                |   |                |  |      |   |      |  |  |   |     |  |  |   |  
|                                  | PETT           |                |   | 59             |  |      |   |     |  |  |   | 119 |  |  |   |  | 
|                                  | PECO Trust III |                |   | 1              |  |      |   |     |  |  |   | 3   |  |  |   |  | 
|                                  | PECO Trust IV  |                |   | 2              |  |      |   |     |  |  |   | 3   |  |  |   |  | 

|                                                                 |                          |          |   |              |  |  |   |       | 
|---------------------------------------------------------------- | ------------------------ | -------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                          | June 30, |   | December 31,
|                                                                 |                          | 2004     |   | 2003        
|                                                                 |                          |          |   |             
|Investment in affiliates                                         |                          |          |   |              |  |  |   |      
|                                                                 | PETT                     |          | $ | 94           |  |  | $ | 104   | 
|                                                                 | PECO Energy Capital Corp |          |   | 16           |  |  |   | 16    | 
|                                                                 | PECO Trust IV            |          |   | 4            |  |  |   | 3     | 
|Receivables from affiliates (non-current)                        |                          |          |   |              |  |  |   |      
|                                                                 | PECO Trust IV            |          |   |             |  |  |   | 1     | 
|Payables to affiliates                                           |                          |          |   |              |  |  |   |      
|                                                                 | PECO Trust III           |          |   | 10           |  |  |   | 10    | 
|                                                                 | PECO Energy Capital Corp |          |   | 1            |  |  |   | 1     | 
|Long-term debt to affiliates (including due
    within one year) |                          |          |   |              |  |  |   |      
|                                                                 | PETT                     |          |   | 3,683        |  |  |   | 3,849 | 
|                                                                 | PECO Trust III           |          |   | 81           |  |  |   | 81    | 
|                                                                 | PECO Trust IV            |          |   | 103          |  |  |   | 103   | 



---



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

64



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                          |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |     | 
|----------------------------------------- | -------------- | -------------- | -- | ---------------- |  | ---- | -- | ---- |  |  | --- | --- |  |  | --- | --- | 
|                                          |                |                |    |                 
|                                          |                | Three Months   |    | Six Months Ended
|                                          |                | Ended June 30, |    | June 30,        
|                                          |                |                |    |                 
|                                          |                | 2004           |    | 2003             |  | 2004 |    | 2003
|                                          |                |                |    |                  |  |      |    |     
|Operating revenues from affiliate         |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |    
|                                          | Generation(a)  |                | $  | 2                |  |      | $  | 3    |  |  | $   | 4   |  |  | $   | 5   | 
|Purchased power from affiliate            |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |    
|                                          | Generation(b)  |                |    | 349              |  |      |    | 324  |  |  |     | 699 |  |  |     | 681 | 
|Fuel from affiliate                       |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |    
|                                          | Generation(c)  |                |    | 7                |  |      |    |     |  |  |     | 7   |  |  |     |    | 
|Operating and maintenance from affiliates |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |    
|                                          | BSC(d)         |                |    | 28               |  |      |    | 10   |  |  |     | 51  |  |  |     | 22  | 
|                                          | Enterprises(e) |                |    |                 |  |      |    | 1    |  |  |     |    |  |  |     | 3   | 
|Capitalized costs                         |                |                |    |                  |  |      |    |      |  |  |     |     |  |  |     |    
|                                          | Enterprises(e) |                |    |                 |  |      |    | 7    |  |  |     |    |  |  |     | 13  | 
|                                          | BSC(d)         |                |    | 5                |  |      |    | 2    |  |  |     | 9   |  |  |     | 3   | 
|Cash dividends paid to parent             |                |                | 90 |                  |  |      | 76 |      |  |  | 180 |     |  |  | 165 |    

|                                                     |                                   |          |       |              |  |  |       |     | 
|---------------------------------------------------- | --------------------------------- | -------- | ----- | ------------ |  |  | ----- | --- | 
|                                                     |                                   | June 30, |       | December 31,
|                                                     |                                   | 2004     |       | 2003        
|                                                     |                                   |          |       |             
|Receivable from affiliate (current)                  |                                   |          |       |              |  |  |       |    
|                                                     | Exelon intercompany money pool(i) |          | $     | 35           |  |  | $     |    | 
|Receivable from affiliate (noncurrent)               |                                   |          |       |              |  |  |       |    
|                                                     | Generation decommissioning(f)     |          |       | 35           |  |  |       | 12  | 
|Payables to affiliates (current)                     |                                   |          |       |              |  |  |       |    
|                                                     | Generation(b)                     |          |       | 135          |  |  |       | 115 | 
|                                                     | BSC(d)                            |          |       | 24           |  |  |       | 15  | 
|                                                     | ComEd(g)                          |          |       |             |  |  |       | 6   | 
|                                                     | Other                             |          |       |             |  |  |       | 3   | 
|Shareholders equity  receivable
    from parent(h) |                                   |          | 1,553 |              |  |  | 1,623 |    



---



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

65



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |  |                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) |  | PECO has a long-term receivable from Generation
    related to a regulatory liability as a result of the adoption of
    SFAS No. 143.                                                    
|   
|(g) |  | In 2003, PECO received assistance from ComEd
    workers during Hurricane Isabel.                                                                                                         
|   
|(h) |  | 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.
|   
|(i) |  | PECO participates in Exelons intercompany
    money pool. PECO earns interest on its investment in the money
    pool at a market rate of interest.                                      



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

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

|                                          |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |       | 
|----------------------------------------- | --------------------------------- | -------------- | --- | -------------- |  | ---- | -- | ---- |  |  | --- | ----- |  |  | -- | ----- | 
|                                          |                                   |                |     |               
|                                          |                                   | Three Months   |     | Six Months    
|                                          |                                   | Ended June 30, |     | Ended June 30,
|                                          |                                   |                |     |               
|                                          |                                   | 2004           |     | 2003           |  | 2004 |    | 2003
|                                          |                                   |                |     |                |  |      |    |     
|Operating revenues from affiliates        |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |      
|                                          | ComEd(a)                          |                | $   | 514            |  |      | $  | 528  |  |  | $   | 1,043 |  |  | $  | 1,099 | 
|                                          | PECO(a)                           |                |     | 356            |  |      |    | 324  |  |  |     | 706   |  |  |    | 681   | 
|                                          | Exelon Energy Company(b)          |                |     |               |  |      |    | 44   |  |  |     |      |  |  |    | 109   | 
|                                          | BSC                               |                |     | 1              |  |      |    |     |  |  |     | 1     |  |  |    |      | 
|Purchased power from affiliates           |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |      
|                                          | AmerGen(c)                        |                |     |               |  |      |    | 110  |  |  |     |      |  |  |    | 177   | 
|                                          | ComEd(a)                          |                |     | 3              |  |      |    | 13   |  |  |     | 12    |  |  |    | 20    | 
|                                          | Exelon Energy Company(b)          |                |     |               |  |      |    | 2    |  |  |     |      |  |  |    | 9     | 
|Operating and maintenance from affiliates |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |      
|                                          | Sithe(d)                          |                |     |               |  |      |    | 2    |  |  |     |      |  |  |    | 6     | 
|                                          | ComEd(a)                          |                |     | 2              |  |      |    | 2    |  |  |     | 4     |  |  |    | 6     | 
|                                          | PECO(a)                           |                |     | 2              |  |      |    | 3    |  |  |     | 4     |  |  |    | 6     | 
|                                          | BSC(e)                            |                |     | 65             |  |      |    | 35   |  |  |     | 126   |  |  |    | 70    | 
|Interest expense to affiliates            |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |      
|                                          | Sithe(d)                          |                |     |               |  |      |    | 3    |  |  |     |      |  |  |    | 6     | 
|                                          | Exelon(f)                         |                |     |               |  |      |    |     |  |  |     |      |  |  |    | 1     | 
|                                          | Exelon intercompany money pool(f) |                |     | 1              |  |      |    | 1    |  |  |     | 2     |  |  |    | 1     | 
|Services provided to affiliates           |                                   |                |     |                |  |      |    |      |  |  |     |       |  |  |    |      
|                                          | AmerGen(c)                        |                |     |               |  |      |    | 18   |  |  |     |      |  |  |    | 35    | 
|Cash distribution paid to member          |                                   |                | 109 |                |  |      | 45 |      |  |  | 109 |       |  |  | 45 |      

66



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                     |                                   |          |   |              |  |  |   |       | 
|------------------------------------ | --------------------------------- | -------- | - | ------------ |  |  | - | ----- | 
|                                     |                                   | June 30, |   | December 31,
|                                     |                                   | 2004     |   | 2003        
|                                     |                                   |          |   |             
|Receivables from affiliates          |                                   |          |   |              |  |  |   |      
|                                     | ComEd(a)                          |          | $ | 182          |  |  | $ | 171   | 
|                                     | ComEd decommissioning(g)          |          |   | 11           |  |  |   | 11    | 
|                                     | PECO(a)                           |          |   | 135          |  |  |   | 115   | 
|                                     | BSC(e)                            |          |   |             |  |  |   | 3     | 
|                                     | Exelon Energy Company(b)          |          |   |             |  |  |   | 18    | 
|                                     | Sithe(d)                          |          |   |             |  |  |   | 3     | 
|                                     | Other                             |          |   | 6            |  |  |   | 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     | 
|                                     | BSC(e)                            |          |   | 28           |  |  |   |      | 
|                                     | Other                             |          |   | 4            |  |  |   |      | 
|Payables to affiliates (non-current) |                                   |          |   |              |  |  |   |      
|                                     | ComEd decommissioning(h)          |          |   | 1,212        |  |  |   | 1,183 | 
|                                     | PECO decommissioning(h)           |          |   | 35           |  |  |   | 12    | 
|Notes payable to affiliates          |                                   |          |   |              |  |  |   |      
|                                     | Exelon(f)                         |          |   |             |  |  |   | 115   | 
|                                     | Exelon intercompany money pool(f) |          |   | 198          |  |  |   | 301   | 
|                                     | Sithe(d)                          |          |   |             |  |  |   | 90    | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Effective January 1, 2001, Generation
    entered into full-requirements 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.
    Prior to May 1, 2004, Generation purchased excess power
    from Exelon Energy Company. Prior to the transfer of Exelon
    Energy Companys assets to Generation from Enterprises
    effective January 1, 2004, Exelon Energy Company was an
    intercompany affiliate of Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(c) |  | Prior to Generations purchase of British
    Energys 50% interest in AmerGen in December 2003, AmerGen
    was an unconsolidated affiliate of Exelon and Generation and was
    considered to be a related party of Exelon and Generation.
    Generation entered into PPAs dated June 26, 2003,
    December 18, 2001 and November 22, 1999 with AmerGen.
    Under the 2003 PPA, Generation agreed to purchase from AmerGen
    all the energy from Oyster Creek through April 9, 2009.
    Under the 2001 PPA, Generation agreed to purchase from AmerGen
    all the energy from TMI from January 1, 2002 through
    December 31, 2014. Under the 1999 PPA, Generation agreed to
    purchase from AmerGen all of the residual energy from Clinton
    through December 31, 2004. Currently, the residual output
    is approximately 31% of the total output of Clinton. Under a
    service agreement dated March 1, 1999, Generation provides
    AmerGen with certain operation and support services to the
    nuclear facilities owned by AmerGen. This service agreement has

67



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

an indefinite term and may be terminated by
Generation or AmerGen with 90 days notice. Generation is
compensated for these services at cost.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) |  | Under a service agreement dated December 18,
    2000, Sithe provides Generation certain fuel and project
    development services. Sithe is compensated for these services at
    cost. In December 2003, Sithe received letter of credit proceeds
    of $3 million, which Generation was billed on behalf of
    Sithe. Under the terms of the agreement to acquire Exelon New
    England dated November 1, 2002, Generation issued a note to
    Sithe which was subsequently modified and increased to
    $536 million. During 2003, Generation repaid
    $446 million of this note. In the first quarter of 2004,
    Generation repaid $27 million prior to consolidation of
    Sithe in accordance with the provisions of FIN No. 46-R.
    The balance of the note is to be paid on the earlier of
    December 1, 2004, certain Sithe liquidity requirements, or
    upon a change of control of Generation. The note bears interest
    at the rate equal to LIBOR plus 0.875%. In connection with a
    series of transactions in November 2003 that restructured the
    ownership of Sithe (see Note 4  Sithe for
    additional information), Generation received a $92 million
    note receivable from EXRES SHC, Inc., which holds the common
    stock of Sithe. Generation owns 50% of EXRES SHC, Inc and
    consolidated its investment pursuant to FIN No. 46-R
    effective March 31, 2004. Prior to the consolidation of
    Sithe in connection with FIN No. 46-R, Sithe was an
    unconsolidated affiliate of Exelon and Generation and was
    considered to be a related party of Exelon and Generation.
|   
|(e) |  | Generation receives a variety of corporate
    support services from BSC, including legal, human resources,
    financial, information technology and supply management
    services. Such services are provided at cost, including
    applicable overhead. Some third party reimbursements due
    Generation are recovered through BSC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(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 its customers to Generation resulting from the 2001
    corporate restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(h) |  | Generation has long-term payables to ComEd and
    PECO as a result of the adoption of SFAS No. 143.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

68



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##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES


COMBINED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



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

At June 30, 2004, Exelon Corporate, along
with ComEd, PECO and Generation, participated in a
$750 million 364-day unsecured revolving credit agreement
and a $750 million three-year unsecured revolving credit
agreement with a group of banks. On July 16, 2004, the
$750 million 364-day facility was replaced with a
$1 billion five-year facility and the $750 million
three-year facility was reduced to $500 million. The terms
of the new facilities are consistent with the previous
facilities. Both revolving credit agreements are used
principally to support the commercial paper programs at Exelon
Corporate, ComEd, PECO and Generation and to issue letters of
credit.



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

In July 2004, Exelon purchased an interest in a
limited partnership that indirectly owns four synthetic
fuel-producing facilities. Exelons purchase price for
these facilities included a combination of cash, a note payable
and contingent consideration dependent upon the production
levels of the facilities. These facilities are not consolidated
within Exelons financial statements because Exelon does
not have a controlling financial interest in these facilities.
The note payable recorded for the purchase of the facilities was
$22 million. Exelons right to acquire its share of
tax credits generated by the facilities was recorded as an
intangible asset and will be amortized as the tax credits are
earned. Private letter rulings have been received by the
partnership that indicate these facilities qualify for tax
credits under Section 29 of the Internal Revenue Code.

69



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##### 








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

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

General

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Energy Delivery,
    whose businesses include the regulated sale of electricity and
    distribution and transmission services by Commonwealth Edison
    Company (ComEd) in northern Illinois and PECO Energy Company
    (PECO) in southeastern Pennsylvania and the purchase and
    sale of natural gas and distribution services by PECO in the
    Pennsylvania counties surrounding the City of Philadelphia.                                                                                                                                                                                                                                                                                                             
|
| |  | Generation,
    consisting of Exelon Generation Company, LLCs (Generation)
    owned and contracted for electric generating facilities, energy
    marketing operations, a 50% interest in EXRES SHC, Inc., the
    holding company of Sithe Energies, Inc. and its subsidiaries,
    hereafter referred to as Sithe, and, effective January 1,
    2004, the competitive retail sales business of Exelon Energy
    Company.                                                                                                                                                                                                                                                                                                   
|
| |  | Enterprises,
    consisting primarily of the remaining energy services business
    of Exelon Services, Inc. (Services), the remaining district
    cooling investments of Exelon Thermal Holdings, Inc. (Thermal),
    the remaining electrical contracting business of F & M
    Holdings, LLC, and other investments related to the
    communications, energy services and retail services industries.
    Effective January 1, 2004, the competitive retail sales
    business of Exelon Energy Company was transferred to Generation.
    See Note 3 of the Combined Notes to Consolidated Financial
    Statements for information regarding the disposition of
    businesses within the Enterprises segment during 2004.

See Note 17 of the Combined Notes to
Consolidated Financial Statements for further segment
information. Exelons corporate operations, through its
business services subsidiary, Exelon Business Services Company
(BSC), provide 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, ComEd, PECO and
    Generation)

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

70



---



##### 



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 total
assets and total liabilities as of June 30, 2004 were
$1,423 million and $1,338 million, respectively. As
required by FIN No. 46-R, upon the occurrence of a future
triggering event, such as a change in ownership, management will
reassess its investment in Sithe to determine if Generation
continues to qualify as the primary beneficiary. If management
determines in a future period that Sithe no longer qualifies to
be consolidated within the financial statements of Exelon and
Generation pursuant to FIN No. 46-R, the resulting
deconsolidation of Sithe could have a significant effect on the
Consolidated Balance Sheets of Exelon and Generation and
classifications within their Consolidated Statements of Income
and Comprehensive Income. The consolidation of Sithe did not
have an effect on Exelons and Generations income
before the cumulative effect of changes in accounting principles
for the six months ended June 30, 2004, and Exelon and
Generation do not anticipate that the consolidation will have a
significant effect 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 should be consolidated under FIN
No. 46-R and concluded that those entities should not be
consolidated within the financial statements of Exelon, ComEd,
PECO and Generation.

New Accounting Pronouncements

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

71



---



##### 






EXELON CORPORATION

Executive Overview

Financial Results.Exelons diluted earnings per average common share
increased by 37% for the three months ended June 30, 2004
as compared to the same period in 2003, primarily as a result of
decreased losses at Enterprises, an increase in net income at
Generation and favorable tax effects from investments in
synthetic fuel-producing facilities. Enterprises recorded a gain
on the sale of Exelon Thermal Holdings, Inc. (Exelon Thermal) of
$36 million (before income taxes and net of debt prepayment
penalties), while Enterprises 2003 income reflected a
goodwill impairment charge of $47 million (before income
taxes) and investment-related impairment charges of
$35 million (before income taxes). The increase in
Generations net income reflects an $85 million gain
(before income taxes) on the sale of Boston Generating, LLC
(Boston Generating) during the second quarter of 2004.
Exelons investments in synthetic fuel-producing facilities
provided a tax benefit of $48 million and increased
Exelons net income for the three months ended
June 30, 2004 by $15 million.

Exelons diluted earnings per average common
share increased by 25% for the six months ended June 30,
2004 as compared to the same period in 2003, primarily as a
result of decreased losses at Enterprises, an increase in net
income at Generation and favorable tax effects from investments
in synthetic fuel-producing facilities. Enterprises results were
affected by the 2004 gain recorded on the sale of Thermal and
the 2003 goodwill and investment impairment charges discussed
above. 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
$85 million gain (before income taxes) on the sale of
Boston Generating during the second quarter of 2004. In the
first quarter of 2004, Exelon recorded an after-tax gain of
$32 million in accordance with FIN No. 46-R and
the resulting consolidation of Sithe. In the first quarter of
2003, Exelon recorded an after-tax gain of $112 million
upon the adoption of Statement of Financial Accounting Standards
(SFAS) No. 143, Asset Retirement
Obligations (SFAS No. 143).

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

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On May 25, 2004, Generation completed the
    sale, transfer and assignment of ownership of its indirect
    wholly owned subsidiary Boston Generating, which owns the
    companies that own Mystic 4-7, Mystic 8 and 9 and Fore River
    generating facilities, to a special purpose entity owned by the
    lenders under Boston Generatings $1.25 billion credit
    facility. The resulting pre-tax gain of $85 million
    ($52 million after-tax) was recorded within Exelons
    Consolidated Statements of Income and Comprehensive Income
    during the second quarter of 2004.                                                                                                                        
|
| |  | Exelon continued to execute its divestiture
    strategy for Enterprises by selling five units of Exelon
    Services, Inc. (Services) during the six months ended
    June 30, 2004 for total expected proceeds of
    $34 million subject to post-closing adjustments, and
    selling its investment in PECO TelCove, a communications joint
    venture, along with certain telecommunications assets, for
    proceeds of $49 million in June 2004. Exelon closed on the
    sale of the Chicago business of Exelon Thermal during the second
    quarter of 2004 for net cash proceeds of $134 million and
    expects to close on the sale of the Aladdin thermal facility
    during the second half of 2004.

Enterprises continues to pursue the divestiture
of other businesses and investments; however, it may be unable
to fully divest certain businesses and investments for a number
of reasons, including an inability to locate appropriate buyers
or negotiate acceptable terms for the transactions. In addition,
the amount that Enterprises may realize from a divestiture is
subject to market conditions that may contribute to pricing and
other terms that are materially less than expected and could
result in a loss on the sale. Timing of any divestitures may
positively or negatively affect the results of operations. As of
June 30, 2004, Enterprises had total assets and liabilities
of $592 million and $200 million, respectively.

72



---



##### 



Financing
Activities.Exelon made payments of
approximately $345 million for the purpose of retiring PECO
and ComEd transition trust long-term debt and repaid
approximately $237 million of other net long-term debt
during the six months ended June 30, 2004. 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 and approved a
2-for-1 split of its common stock. The distribution date was
May 5, 2004. The share and per-share amounts included in
this Form 10-Q have been adjusted for all periods presented
to reflect the stock split. In the second quarter of 2004,
Exelons Board of Directors approved a discretionary share
repurchase program. Exelon purchased common stock, held as
treasury shares as of June 30, 2004, totaling
$75 million during the second quarter of 2004. Exelon also
replaced its $750 million 364-day unsecured revolving
credit agreement with a $1 billion five-year facility and
reduced its $750 million three-year facility to
$500 million in a transaction that closed on July 16,
2004.

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

ComEd currently earns approximately
$66 million annually from through and out (T&O) rates
for energy flowing across ComEds transmission system. On
March 19, 2004, the Federal Energy Regulatory Commission
(FERC) issued an order to eliminate these rates effective
May 1, 2004, which was subsequently deferred until
December 1, 2004. The T&O rates are to be replaced by a
new long-term transmission pricing structure that will eliminate
seams in the PJM and Midwest ISO regions. Transmission owners in
PJM and Midwest ISO and other parties must file one or more
pricing proposals with the FERC on or before October 1,
2004, with an effective date of December 1, 2004. While
Exelon and ComEd cannot predict the outcome of the FERCs
final determination of a new long-term transmission pricing
structure, such pricing structure could adversely impact
Exelons and ComEds results of operations.

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

Operations.Generations nuclear fleet achieved a 93.3% capacity factor
for the six months ended June 30, 2004 compared to 94.2% in
the same period of 2003 primarily as a result of increased
planned 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.

73



---



##### 



Results of Operations  Exelon
Corporation



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

|                                                 |  |      |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|------------------------------------------------ |  | ---- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                 |  | 2004 |       | 2003 |  | Variance |       | % Change
|                                                 |  |      |       |      |  |          |       |         
|Operating revenues                               |  | $    | 3,550 |      |  | $        | 3,721 |          |  | $ | (171 | ) |  |  | (4.6  | )%
|Purchased power and fuel expense                 |  |      | 1,211 |      |  |          | 1,387 |          |  |   | (176 | ) |  |  | (12.7 | )%
|Operating and maintenance expense                |  |      | 1,056 |      |  |          | 1,100 |          |  |   | (44  | ) |  |  | (4.0  | )%
|Operating income                                 |  |      | 783   |      |  |          | 800   |          |  |   | (17  | ) |  |  | (2.1  | )%
|Other income and deductions                      |  |      | (48   | )    |  |          | (205  | )        |  |   | 157  |   |  |  | (76.6 | )%
|Income before income taxes and minority interest |  |      | 735   |      |  |          | 595   |          |  |   | 140  |   |  |  | 23.5  | % 
|Net income                                       |  |      | 521   |      |  |          | 372   |          |  |   | 149  |   |  |  | 40.1  | % 
|Diluted earnings per share                       |  |      | 0.78  |      |  |          | 0.57  |          |  |   | 0.21 |   |  |  | 36.8  | % 

Operating
Revenues.Operating revenues
decreased for the three months ended June 30, 2004 as
compared to the same period in 2003 primarily due to decreased
revenues at Enterprises due to the sale of the majority of 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 2004.
Generations adoption of EITF 03-11 during 2004
changed the presentation of certain power transactions and
decreased operating revenues by $239 million for the three
months ended June 30, 2004 but had no effect on net income.
The decreases in operating revenues were partially offset by
higher delivery volume and favorable weather conditions at
Energy Delivery and an increase in market sales at Generation
due to the acquisition of the remaining 50% of AmerGen Energy
Company, LLC (AmerGen) and the consolidation of Sithe. 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 June 30, 2004 as
compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 during 2004, which
resulted in a decrease in purchased power and fuel expense of
$239 million. In addition, purchased power decreased due to
Generations acquisition of the remaining 50% of AmerGen in
December 2003, which was only partially offset by an increase in
fuel expense. Purchased power represented 23% of
Generations total supply for the three months ended
June 30, 2004 compared to 36% 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 for the three months ended June 30, 2004
as compared to the same period in 2003 primarily due to
decreased expenses at Enterprises due to the sale of the
majority of the businesses of InfraSource during the third
quarter of 2003 and a goodwill impairment charge recorded during
2003, partially offset by increased expenses at Generation due
to the acquisition of the remaining 50% of AmerGen, the
consolidation of Sithe and increased costs at Boston Generating.
Investments made by Exelon in the fourth quarter of 2003 in
synthetic fuel-producing facilities increased operating and
maintenance expense by $24 million. See further discussion
of operating and maintenance expenses by segment below.

Operating
Income.The change in operating
income, exclusive of the changes in operating revenues,
purchased power and fuel expense and operating and maintenance
expense discussed above, was primarily the result of increased
depreciation expense due to additional plant placed in service
after the second quarter of 2003 and increased amortization
expense due to investments made in the fourth quarter of 2003 in
synthetic fuel-producing facilities. Taxes other than income
were higher in 2004 as compared to 2003, primarily at Energy
Delivery, as a result of a refund of Illinois Electricity
Distribution taxes at ComEd and the reversal of a use tax
accrual resulting from an audit settlement at PECO, both in 2003.

74



---



##### 



Other Income and
Deductions.Other income and
deductions changed primarily due to 2004 gains on the sales of
Boston Generating and Exelon Thermal and 2003 investment
impairments of $35 million recorded by Enterprises. Equity
in earnings of unconsolidated affiliates decreased by
$46 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 increased $17 million, primarily
due to increased interest expense at Generation.

Effective Income Tax
Rate.Exelons effective
income tax rate decreased from 37% for the three months ended
June 30, 2003 to 31% for the same period in 2004, primarily
due to investments made in synthetic fuel-producing facilities
during the fourth quarter of 2003. See Note 12 of the
Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.



| |                                              
| | ---------------------------------------------
| | 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 June 30,
2004 and 2003 set forth below reflect intercompany transactions,
which are eliminated in Exelons consolidated financial
statements.



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

|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  
|--------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- |  |  |  | ----- | -
|                |  |                |     |      |  |         
|                |  | Three Months   |     |      |  |         
|                |  | Ended June 30, |     |      |  |         
|                |  |                |     |      |  |         
|                |  | 2004           |     | 2003 |  | Variance |     | % Change
|                |  |                |     |      |  |          |     |         
|Energy Delivery |  | $              | 303 |      |  | $        | 291 |          |  | $ | 12  |  |  |  | 4.1   | %
|Generation      |  |                | 178 |      |  |          | 142 |          |  |   | 36  |  |  |  | 25.4% |  
|Enterprises     |  |                | 27  |      |  |          | (61 | )        |  |   | 88  |  |  |  | n.m.  |  
|Corporate       |  |                | 13  |      |  |          |    |          |  |   | 13  |  |  |  | n.m.  |  
|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  
|Total           |  | $              | 521 |      |  | $        | 372 |          |  | $ | 149 |  |  |  | 40.1  | %
|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  



---

n.m.  not meaningful

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, was
transferred to Generation. The information for the three months
ended June 30, 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s results for the three months ended June 30,
2003 were as follows:

|                           |  |   |     | 
|-------------------------- |  | - | --- | 
|Total revenues             |  | $ | 174 | 
|Intersegment revenues      |  |   | 2   | 
|Income before income taxes |  |   | 1   | 
|Income taxes               |  |   | 1   | 
|Net income (loss)          |  |   |    | 

75



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##### 





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

|                                      |  |                |       |      |  |          |       |          |  |   |     |   |  |  |      |   
|------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ---- | --
|                                      |  |                |       |      |  |         
|                                      |  | Three Months   |       |      |  |         
|                                      |  | Ended June 30, |       |      |  |         
|                                      |  |                |       |      |  |         
|                                      |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                      |  |                |       |      |  |          |       |         
|Operating revenues                    |  | $              | 2,435 |      |  | $        | 2,322 |          |  | $ | 113 |   |  |  | 4.9  | % 
|Purchased power and fuel expense      |  |                | 1,059 |      |  |          | 986   |          |  |   | 73  |   |  |  | 7.4  | % 
|Operating and maintenance expense     |  |                | 355   |      |  |          | 342   |          |  |   | 13  |   |  |  | 3.8  | % 
|Depreciation and amortization expense |  |                | 228   |      |  |          | 213   |          |  |   | 15  |   |  |  | 7.0  | % 
|Operating income                      |  |                | 661   |      |  |          | 666   |          |  |   | (5  | ) |  |  | (0.8 | )%
|Interest expense                      |  |                | 172   |      |  |          | 189   |          |  |   | (17 | ) |  |  | (9.0 | )%
|Net income                            |  |                | 303   |      |  |          | 291   |          |  |   | 12  |   |  |  | 4.1  | % 

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

|                                          |  |          |     |     |  |          |     |   |  |   |     |  
|----------------------------------------- |  | -------- | --- | --- |  | -------- | --- | - |  | - | --- | -
|                                          |  |          |     |     |  | Total   
|                                          |  | Electric |     | Gas |  | Variance
|                                          |  |          |     |     |  |         
|Volume                                    |  | $        | 107 |     |  | $        | 4   |   |  | $ | 111 |  
|ComEds integration into PJM              |  |          | 43  |     |  |          |    |   |  |   | 43  |  
|Weather                                   |  |          | 43  |     |  |          | (14 | ) |  |   | 29  |  
|Rate changes and mix                      |  |          | (11 | )   |  |          | 13  |   |  |   | 2   |  
|Customer choice                           |  |          | (67 | )   |  |          |    |   |  |   | (67 | )
|Other effects                             |  |          | (11 | )   |  |          | 6   |   |  |   | (5  | )
|                                          |  |          |     |     |  |          |     |   |  |   |     |  
|Increase (decrease) in operating revenues |  | $        | 104 |     |  | $        | 9   |   |  | $ | 113 |  
|                                          |  |          |     |     |  |          |     |   |  |   |     |  

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

ComEds Integration into
PJM.Energy Deliverys operating
revenues and purchased power expense each increased by
$43 million in the three months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM. The increases relate to the change in control of the
transmission assets from ComEd to PJM as a result of which ComEd
receives revenues for its proportionate share of the
transmission revenues generated by PJM, but also pays PJM for
the use of its transmission assets. This is consistent with how
PECO accounts for its PJM transmission revenues and expenses.
For 2004, ComEds operating revenues are estimated to
increase by approximately $180 million, offset by a
corresponding and equal increase in purchased power expense.
Starting in 2005, on an annual basis, ComEds operating
revenues and purchased power expense are estimated to increase
between $200 to $250 million. However, there is no expected
effect on revenues net of purchased power expense.

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 positively affected by
favorable weather conditions. Cooling degree-days in the ComEd
and PECO service territories were 68% and 66% higher,
respectively. Heating degree-days in the ComEd and PECO service
territories were 18% lower and 32% lower, respectively.

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

Rate Changes and
Mix.ComEds CTC is reset in the
second quarter of each year to reflect market price adjustments.
Starting in the June 2003 billing cycle, the increased wholesale
market price of electricity and other adjustments to the energy
component decreased the collection of CTCs as compared to the

76



---



##### 



respective prior year period. As a result,
ComEds CTC revenues decreased $44 million for the
three months ended June 30, 2004 as compared to the same
period in 2003. This decrease was partially offset by increased
wholesale market prices which increased energy revenue received
under ComEds power purchase option (PPO) by
$28 million.


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

Electric revenues increased $17 million at
PECO as a result of $12 million of favorable rate mix due
to changes in monthly usage patterns in all customer classes and
$5 million related to a scheduled phase-out of
merger-related rate reductions. In connection with the
Pennsylvania Public Utility Commissions
(PUC) approval of the merger of PECO, Unicom Corporation,
and Exelon in 2000, PECO entered into a settlement agreement
with the PUC and 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.

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

Customer Choice.For
the three months ended June 30, 2004 and 2003, 29% and 25%,
respectively, of energy delivered to Energy Deliverys
retail customers was provided by alternative electric suppliers
(AES) or under the ComEd PPO. The decrease in electric
retail revenues attributable to customer choice included a
decrease in revenues of $51 million from customers in
Illinois electing to purchase energy from an AES or under
ComEds PPO and a decrease in revenues of $16 million
from customers in Pennsylvania being assigned to or selecting an
AES.

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

|                                             |  |          |     |     |  |          |     |   |  |   |     |  
|-------------------------------------------- |  | -------- | --- | --- |  | -------- | --- | - |  | - | --- | -
|                                             |  |          |     |     |  | Total   
|                                             |  | Electric |     | Gas |  | Variance
|                                             |  |          |     |     |  |         
|Volume                                       |  | $        | 44  |     |  | $        | 3   |   |  | $ | 47  |  
|ComEds integration into PJM                 |  |          | 43  |     |  |          |    |   |  |   | 43  |  
|Prices                                       |  |          | 13  |     |  |          | 13  |   |  |   | 26  |  
|Weather                                      |  |          | 16  |     |  |          | (10 | ) |  |   | 6   |  
|Customer choice                              |  |          | (56 | )   |  |          |    |   |  |   | (56 | )
|Other                                        |  |          | (3  | )   |  |          | 10  |   |  |   | 7   |  
|                                             |  |          |     |     |  |          |     |   |  |   |     |  
|Increase in purchased power and fuel expense |  | $        | 57  |     |  | $        | 16  |   |  | $ | 73  |  
|                                             |  |          |     |     |  |          |     |   |  |   |     |  

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.
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 increased customer growth
and usage per customer across all customer classes.

77



---



##### 



ComEds Integration into
PJM.Energy Deliverys operating
revenues and purchased power expense each increased by
$43 million in the three months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM. See Operating Revenues above.

Prices.Energy
Deliverys electric purchased power increased primarily due
to an increase at PECO as a result of higher wholesale market
prices associated with certain large commercial and industrial
customers whose billing rates are tied to wholesale market
prices for energy. Fuel expense for gas increased due to higher
gas prices. See Operating Revenues above.

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

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

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

|                                                                                       |  |          |     |  
|-------------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Higher corporate allocations(a)                                                        |  | $        | 29  |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 12  |  
|Tax consultant fees(b)                                                                 |  |          | 5   |  
|Employee fringe benefits(c)                                                            |  |          | (15 | )
|Contractors                                                                            |  |          | (8  | )
|Environmental matters                                                                  |  |          | (4  | )
|Other                                                                                  |  |          | (6  | )
|                                                                                       |  |          |     |  
|Increase in operating and maintenance expense                                          |  | $        | 13  |  
|                                                                                       |  |          |     |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Higher corporate allocations primarily result
    from a higher percentage allocation to Energy Delivery due to
    the sale of certain Enterprises businesses.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(b) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 of
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(c) |  | During the second quarter of 2004, ComEd and PECO
    adopted the provisions of FASB Staff Position
    (FSP) FAS 106-2, Accounting and Disclosure
    Requirements Related to the Medicare Prescription Drug,
    Improvement and Modernization Act of 2003 (FSP
    FAS 106-2). Employee fringe benefits include a
    $2 million reduction in net periodic postretirement benefit
    cost due to the adoption of FSP FAS 106-2. See Note 11
    of the Combined Notes to Consolidated Financial Statements for
    additional information related to employee fringe benefits.

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.

Operating
Income.The change in operating
income, exclusive of the changes in operating revenues,
purchased power and fuel expense and operating and maintenance
expense discussed above, was the result of increased taxes other
than income. This increase was primarily attributable to
$12 million related to the reversal of a PECO use tax
accrual resulting from an audit settlement in 2003 and a 2003
ComEd refund of $5 million for Illinois Electricity
Distribution Taxes.

Interest
Expense.The reduction in interest
expense was primarily due to scheduled principal payments.

78



---



##### 





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

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

|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |      |  
|------------------------------------------------ | --------------------------- | -------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ----- | ----- |  |  | ----- | ---- | -
|                                                 |                             |                |        |        |  |         
|                                                 |                             | Three Months   |        |        |  |         
|                                                 |                             | Ended June 30, |        |        |  |         
|                                                 |                             |                |        |        |  |         
|Retail Deliveries  (in gigawatthours (GWhs))(a) |                             | 2004           |        | 2003   |  | Variance |        | % Change
|                                                 |                             |                |        |        |  |          |        |         
|Full service(b)                                  |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|Residential                                      |                             |                | 8,065  |        |  |          | 7,437  |          |  |  | 628   |       |  |  | 8.4   | %   
|Small commercial & industrial                    |                             |                | 6,477  |        |  |          | 6,646  |          |  |  | (169  | )     |  |  | (2.5  | )%  
|Large commercial & industrial                    |                             |                | 5,129  |        |  |          | 5,378  |          |  |  | (249  | )     |  |  | (4.6  | )%  
|Public authorities & electric railroads          |                             |                | 1,424  |        |  |          | 1,555  |          |  |  | (131  | )     |  |  | (8.4  | )%  
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|                                                 | Total full service          |                |        | 21,095 |  |          |        | 21,016   |  |  |       | 79    |  |  |       | 0.4  | %
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|PPO (ComEd only)                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|Small commercial & industrial                    |                             |                | 870    |        |  |          | 869    |          |  |  | 1     |       |  |  | 0.1   | %   
|Large commercial & industrial                    |                             |                | 877    |        |  |          | 1,318  |          |  |  | (441  | )     |  |  | (33.5 | )%  
|Public authorities & electric railroads          |                             |                | 577    |        |  |          | 531    |          |  |  | 46    |       |  |  | 8.7   | %   
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|                                                 |                             |                | 2,324  |        |  |          | 2,718  |          |  |  | (394  | )     |  |  | (14.5 | )%  
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|Delivery only(c)                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|Residential                                      |                             |                | 488    |        |  |          | 186    |          |  |  | 302   |       |  |  | 162.4 | %   
|Small commercial & industrial                    |                             |                | 2,194  |        |  |          | 1,580  |          |  |  | 614   |       |  |  | 38.9  | %   
|Large commercial & industrial                    |                             |                | 3,280  |        |  |          | 2,320  |          |  |  | 960   |       |  |  | 41.4  | %   
|Public authorities & electric railroads          |                             |                | 406    |        |  |          | 247    |          |  |  | 159   |       |  |  | 64.4  | %   
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|                                                 |                             |                | 6,368  |        |  |          | 4,333  |          |  |  | 2,035 |       |  |  | 47.0  | %   
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|                                                 | Total PPO and delivery only |                |        | 8,692  |  |          |        | 7,051    |  |  |       | 1,641 |  |  |       | 23.3 | %
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     
|Total retail deliveries                          |                             |                | 29,787 |        |  |          | 28,067 |          |  |  | 1,720 |       |  |  | 6.1   | %   
|                                                 |                             |                |        |        |  |          |        |          |  |  |       |       |  |  |       |     



---



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

79



---



##### 



|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |      |  
|--------------------------------------- | -------------------------------------- | -------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | -- |  |  | ----- | ---- | -
|                                        |                                        |                |       |       |  |         
|                                        |                                        | Three Months   |       |       |  |         
|                                        |                                        | Ended June 30, |       |       |  |         
|                                        |                                        |                |       |       |  |         
|Electric Revenue                        |                                        | 2004           |       | 2003  |  | Variance |       | % Change
|                                        |                                        |                |       |       |  |          |       |         
|Full service(a)                         |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Residential                             |                                        | $              | 819   |       |  | $        | 769   |          |  | $ | 50  |    |  |  | 6.5   | %   
|Small commercial & industrial           |                                        |                | 593   |       |  |          | 585   |          |  |   | 8   |    |  |  | 1.4   | %   
|Large commercial & industrial           |                                        |                | 352   |       |  |          | 351   |          |  |   | 1   |    |  |  | 0.3   | %   
|Public authorities & electric railroads |                                        |                | 94    |       |  |          | 102   |          |  |   | (8  | )  |  |  | (7.8  | )%  
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|                                        | Total full service                     |                |       | 1,858 |  |          |       | 1,807    |  |   |     | 51 |  |  |       | 2.8  | %
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|PPO (ComEd only)(b)                     |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Small commercial & industrial           |                                        |                | 60    |       |  |          | 59    |          |  |   | 1   |    |  |  | 1.7   | %   
|Large commercial & industrial           |                                        |                | 51    |       |  |          | 72    |          |  |   | (21 | )  |  |  | (29.2 | )%  
|Public authorities & electric railroads |                                        |                | 31    |       |  |          | 28    |          |  |   | 3   |    |  |  | 10.7  | %   
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|                                        |                                        |                | 142   |       |  |          | 159   |          |  |   | (17 | )  |  |  | (10.7 | )%  
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Delivery only(c)                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Residential                             |                                        |                | 38    |       |  |          | 14    |          |  |   | 24  |    |  |  | 171.4 | %   
|Small commercial & industrial           |                                        |                | 58    |       |  |          | 49    |          |  |   | 9   |    |  |  | 18.4  | %   
|Large commercial & industrial           |                                        |                | 48    |       |  |          | 48    |          |  |   |    |    |  |  |      |     
|Public authorities & electric railroads |                                        |                | 9     |       |  |          | 8     |          |  |   | 1   |    |  |  | 12.5  | %   
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|                                        |                                        |                | 153   |       |  |          | 119   |          |  |   | 34  |    |  |  | 28.6  | %   
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|                                        | Total PPO and delivery only            |                |       | 295   |  |          |       | 278      |  |   |     | 17 |  |  |       | 6.1  | %
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Total electric retail revenues          |                                        |                | 2,153 |       |  |          | 2,085 |          |  |   | 68  |    |  |  | 3.3   | %   
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|                                        | Wholesale and miscellaneous revenue(d) |                |       | 163   |  |          |       | 127      |  |   |     | 36 |  |  |       | 28.3 | %
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     
|Total electric revenue                  |                                        | $              | 2,316 |       |  | $        | 2,212 |          |  | $ | 104 |    |  |  | 4.7   | %   
|                                        |                                        |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     



---



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

80



---



##### 



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

|                                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------------------------ |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                                       |  |                |        |      |  |         
|                                                       |  | Three Months   |        |      |  |         
|                                                       |  | Ended June 30, |        |      |  |         
|                                                       |  |                |        |      |  |         
|Deliveries to customers (in million cubic feet (mmcf)) |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                                       |  |                |        |      |  |          |        |         
|Retail sales                                           |  |                | 8,162  |      |  |          | 9,222  |          |  |  | (1,060 | ) |  |  | (11.5 | )%
|Transportation                                         |  |                | 6,410  |      |  |          | 5,779  |          |  |  | 631    |   |  |  | 10.9  | % 
|                                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total                                                  |  |                | 14,572 |      |  |          | 15,001 |          |  |  | (429   | ) |  |  | (2.9  | )%
|                                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   

|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|----------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | - |  |  |  | ---- | -
|                  |  |                |     |      |  |         
|                  |  | Three Months   |     |      |  |         
|                  |  | Ended June 30, |     |      |  |         
|                  |  |                |     |      |  |         
|Revenue           |  | 2004           |     | 2003 |  | Variance |     | % Change
|                  |  |                |     |      |  |          |     |         
|Retail sales      |  | $              | 102 |      |  | $        | 99  |          |  | $ | 3 |  |  |  | 3.0  | %
|Transportation    |  |                | 4   |      |  |          | 4   |          |  |   |  |  |  |  |     |  
|Resales and other |  |                | 13  |      |  |          | 7   |          |  |   | 6 |  |  |  | 85.7 | %
|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|Total             |  | $              | 119 |      |  | $        | 110 |          |  | $ | 9 |  |  |  | 8.2  | %
|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  



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

|                                                 |  |                |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|------------------------------------------------ |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                 |  |                |       |      |  |         
|                                                 |  | Three Months   |       |      |  |         
|                                                 |  | Ended June 30, |       |      |  |         
|                                                 |  |                |       |      |  |         
|                                                 |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                                 |  |                |       |      |  |          |       |         
|Operating revenues                               |  | $              | 1,948 |      |  | $        | 1,886 |          |  | $ | 62   |   |  |  | 3.3   | % 
|Purchased power and fuel expense                 |  |                | 1,025 |      |  |          | 1,148 |          |  |   | (123 | ) |  |  | (10.7 | )%
|Operating and maintenance expense                |  |                | 623   |      |  |          | 451   |          |  |   | 172  |   |  |  | 38.1  | % 
|Operating income                                 |  |                | 183   |      |  |          | 201   |          |  |   | (18  | ) |  |  | (9.0  | )%
|Income before income taxes and minority interest |  |                | 266   |      |  |          | 233   |          |  |   | 33   |   |  |  | 14.2  | % 
|Net income                                       |  |                | 178   |      |  |          | 142   |          |  |   | 36   |   |  |  | 25.4  | % 

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

|                                    |  |          |     |  
|----------------------------------- |  | -------- | --- | -
|                                    |  | Variance
|                                    |  |         
|Retail gas revenue                  |  | $        | 84  |  
|Wholesale and retail electric sales |  |          | (39 | )
|Electric revenue from affiliates    |  |          | (31 | )
|Other                               |  |          | 48  |  
|                                    |  |          |     |  
|Increase in operating revenues      |  | $        | 62  |  
|                                    |  |          |     |  

Retail Gas Revenue.Retail gas revenue increased $84 million as a result of the
transfer of Exelon Energy Company to Generation as of
January 1, 2004.

81



---



##### 



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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Effects of the adoption of EITF 03-11(a)        |  | $        | (238 | )
|Sale of Boston Generating                       |  |          | (43  | )
|Exelon Energy Company and AmerGen operations    |  |          | 104  |  
|Other operations                                |  |          | 138  |  
|                                                |  |          |      |  
|Decrease in wholesale and retail electric sales |  | $        | (39  | )
|                                                |  |          |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $1 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

The adoption of EITF 03-11 on
January 1, 2004 resulted in the netting of certain revenues
and the associated purchase power and fuel expense in 2004. See
Note 2 of the Combined Notes to Consolidated Financial
Statements for further discussion of EITF 03-11. The sale
of Boston Generating in May 2004 resulted in less revenues from
this entity compared to the same period in the prior year. The
acquisition of Exelon Energy and AmerGen resulted in increased
wholesale and retail electric sales of approximately
$104 million compared to the same period in the prior year.

The other increase in wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market and higher prices in the spot wholesale market.
Market prices in the Midwest region were primarily driven by
higher coal prices, and in the Mid-Atlantic region market prices
were driven primarily by higher oil and gas prices.

Electric Revenue from
Affiliates.Revenue from sales to
affiliates decreased primarily as a result of the transfer of
Exelon Energy Company to Generation effective January 1,
2004 as a result of which sales to Exelon Energy Company are no
longer reported as affiliate revenue by Generation. Revenue from
sales to Exelon Energy Company for the three months ended
June 30, 2003 was $44 million.

The decrease in revenue from sales to affiliates
was partially offset by $15 million in higher sales to
Energy Delivery. The higher sales to Energy Delivery were
primarily due to overall increased usage per customer and
favorable weather conditions.

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

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

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Effects of the adoption of EITF 03-11          |  | $        | (239 | )
|Boston Generating                              |  |          | (33  | )
|Midwest Generation                             |  |          | (25  | )
|AmerGen and Exelon Energy Company              |  |          | (11  | )
|Volume                                         |  |          | 92   |  
|Sithe Energies, Inc.                           |  |          | 62   |  
|Price                                          |  |          | 49   |  
|Mark-to-market adjustments on hedging activity |  |          | 11   |  
|Other                                          |  |          | (29  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (123 | )
|                                               |  |          |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power of
$238 million and fuel expense of $1 million.

82



---



##### 



Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due primarily to the sale of the business in May
2004. See Note 3 of the Combined Notes to Consolidated
Financial Statements for additional information regarding Boston
Generating.

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

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, purchased power decreased
$97 million. In prior periods, Generation reported energy
purchased from AmerGen as purchased power expense.

Due to the transfer of Exelon Energy Company to
Generation effective January 1, 2004, fuel expense
increased $86 million as fuel purchases made by Exelon
Energy Company did not previously affect Generations
results.

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

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

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

Hedging Activity.Mark-to-market gains on hedging activities were $21 million
for the three months ended June 30, 2004 compared to gains
of $32 million for the same period of 2003. Hedging
activities in 2004 relating to Boston Generating accounted for a
gain of $6 million and hedging activities relating to other
Generation operations in 2004 accounted for a gain of
$15 million.

Other.Other
decreases in purchased power and fuel expense were primarily due
to $21 million of lower transmission expense resulting from
reduced inter-region transmission charges, primarily associated
with ComEds integration into PJM during the second quarter
of 2004 and $10 million of nuclear fuel amortization
recorded in 2003 as a result of the replacement of
underperforming fuel at the Quad Cities Station.

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

|                                                                                 |  |          |     |  
|-------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                 |  | Variance
|                                                                                 |  |         
|AmerGen and Exelon Energy Company                                                |  | $        | 87  |  
|Sithe Energies, Inc.                                                             |  |          | 22  |  
|Decommissioning accretion costs(a)                                               |  |          | 18  |  
|Boston Generating                                                                |  |          | 13  |  
|Pension, payroll and benefit costs, primarily
    associated with The Exelon Way |  |          | (14 | )
|Other                                                                            |  |          | 46  |  
|                                                                                 |  |          |     |  
|Increase in operating and maintenance expense                                    |  | $        | 172 |  
|                                                                                 |  |          |     |  



---



|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|(a) |  | Includes $10 million due to AmerGen asset
    retirement obligation accretion.

The increase in operating and maintenance expense
is primarily due to the inclusion of AmerGen, Exelon Energy
Company and Sithe in Generations consolidated financial
results for 2004. The increase in operating and maintenance
expenses attributable to Boston Generating was due to the Mystic
8 and 9 and Fore River facilities commencing commercial
operation at the end of the second quarter of 2003 and in the
third quarter of 2003, respectively, which more than offset the
reduction in operating and maintenance expenses resulting

83



---



##### 



from their sale in May 2004. Decommissioning
accretion costs increased primarily due to the inclusion of
AmerGen for the three months ended June 30, 2004 as
compared to the same period in the prior year. The reduction in
payroll-related costs associated with the implementation of the
programs associated with The Exelon Way partially offset the
other increases to operating and maintenance expense.


Depreciation and
Amortization.The increase in
depreciation and amortization expense for the three months ended
June 30, 2004 as compared to the same period in 2003
includes the impact of capital additions and the consolidation
of Sithe, AmerGen and Exelon Energy. These increases were
partially offset by a decrease in depreciation expense related
to the Boston Generating facilities as the assets were
classified as held for sale during the period.

Effective Income Tax
Rate.The effective income tax
rate was 38% for the three months ended June 30, 2004
compared to 39% for the same period in 2003. This decrease is
primarily attributable to the impairment charges recorded in
2003 related to Generations investment in Sithe which
resulted in a pre-tax loss. This impairment charge was taxed at
a rate different than the overall generation effective income
tax rate. See Note 12 of the Combined Notes to the
Consolidated Financial Statements for further discussion of the
change in the effective income tax rate.



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

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

|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|-------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ----- | --
|                                       |  |                |       |      |  |         
|                                       |  | Three Months   |       |      |  |         
|                                       |  | Ended June 30, |       |      |  |         
|                                       |  |                |       |      |  |         
|Revenue                                |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                       |  |                |       |      |  |          |       |         
|Sales to affiliates(a)                 |  | $              | 846   |      |  | $        | 877   |          |  | $ | (31 | ) |  |  | (3.5  | )%
|Wholesale and retail electric sales(b) |  |                | 858   |      |  |          | 897   |          |  |   | (39 | ) |  |  | (4.3  | )%
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total energy sales revenue             |  |                | 1,704 |      |  |          | 1,774 |          |  |   | (70 | ) |  |  | (3.9  | )%
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Retail gas sales                       |  |                | 84    |      |  |          |      |          |  |   | 84  |   |  |  | n.m.  |   
|Trading portfolio                      |  |                | (2    | )    |  |          | (1    | )        |  |   | (1  | ) |  |  | 100.0 | % 
|Other revenue(c)                       |  |                | 162   |      |  |          | 113   |          |  |   | 49  |   |  |  | 43.4  | % 
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total revenue                          |  | $              | 1,948 |      |  | $        | 1,886 |          |  | $ | 62  |   |  |  | 3.3   | % 
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|-------------------------------------- |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                       |  |                |        |      |  |         
|                                       |  | Three Months   |        |      |  |         
|                                       |  | Ended June 30, |        |      |  |         
|                                       |  |                |        |      |  |         
|Sales (in GWhs)                        |  | 2004(c)        |        | 2003 |  | Variance |        | % Change
|                                       |  |                |        |      |  |          |        |         
|Sales to affiliates(a)                 |  |                | 26,133 |      |  |          | 26,869 |          |  |  | (736   | ) |  |  | (2.7 | )%
|Wholesale and retail electric sales(b) |  |                | 24,976 |      |  |          | 27,449 |          |  |  | (2,473 | ) |  |  | (9.0 | )%
|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total sales                            |  |                | 51,109 |      |  |          | 54,318 |          |  |  | (3,209 | ) |  |  | (5.9 | )%
|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   



---



|    |  |                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                                                                             
|   
|(c) |  | Sales in 2004 do not include 6,185 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

84



---



##### 



|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------ |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                     |  |                |        |      |  |         
|                                     |  | Three Months   |        |      |  |         
|                                     |  | Ended June 30, |        |      |  |         
|                                     |  |                |        |      |  |         
|Supply Source (in GWhs)              |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                     |  |                |        |      |  |          |        |         
|Nuclear generation(a)                |  |                | 34,254 |      |  |          | 29,619 |          |  |  | 4,635  |   |  |  | 15.6  | % 
|Purchases  non-trading portfolio(b) |  |                | 11,904 |      |  |          | 19,344 |          |  |  | (7,440 | ) |  |  | (38.5 | )%
|Fossil and hydroelectric generation  |  |                | 4,951  |      |  |          | 5,355  |          |  |  | (404   | ) |  |  | (7.5  | )%
|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total supply                         |  |                | 51,109 |      |  |          | 54,318 |          |  |  | (3,209 | ) |  |  | (5.9  | )%
|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen in 2003. AmerGen generated 5,122
    GWhs during the three months ended June 30, 2004.                                                                                                                                                              
|   
|(b) |  | Sales in 2004 do not include 6,185 GWhs that were
    netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes PPAs with AmerGen, which
    represented 3,731 GWhs in 2003.

Trading volumes of 5,324 GWhs and 7,919 GWhs for
the three months ended June 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations supply mix changed primarily as
a result of the sale of Boston Generating in May 2004.

Generations average margin and other
operating data for the three months ended June 30, 2004 and
2003 were as follows:

|                                                             |                                         |                |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | --------------------------------------- | -------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                         |                |       |      
|                                                             |                                         | Three Months   |       |      
|                                                             |                                         | Ended June 30, |       |      
|                                                             |                                         |                |       |      
|($/MWh)                                                      |                                         | 2004           |       | 2003  |  | % Change
|                                                             |                                         |                |       |       |  |         
|Average revenue                                              |                                         |                |       |       |  |          |       |       |  |  |      |     
|                                                             | Electric sales to affiliates(a)         |                | $     | 32.37 |  |          | $     | 32.64 |  |  |      | (0.8 | )%
|                                                             | Market and retail electric sales(b)     |                |       | 34.35 |  |          |       | 32.68 |  |  |      | 5.1  | % 
|                                                             | Total  excluding the trading portfolio |                |       | 33.34 |  |          |       | 32.66 |  |  |      | 2.1  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                         | $              | 20.06 |       |  | $        | 21.13 |       |  |  | (5.1 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $              | 13.28 |       |  | $        | 11.53 |       |  |  | 15.2 | %   



---



|    |  |                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail 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 primarily due to decreased average
supply cost as a result of forward hedging of fuel at lower
costs during the three months ended June 30, 2004 as
compared to the same period in the prior year. Also, Generation
experienced a decrease in purchased power due to reducing the
capacity purchased from Midwest Generation and the affect of
acquiring the remaining 50% of AmerGen in 2003. The increase in
nuclear generation during the quarter, which is

85



---



##### 



generally less expensive than purchased power,
along with the effect of the adoption of EITF 03-11, also
contributed to the increase in average margin.


|                                                                     |  |                |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |               
|                                                                     |  | Three Months  
|                                                                     |  | Ended June 30,
|                                                                     |  |               
|                                                                     |  | 2004           |       | 2003
|                                                                     |  |                |       |     
|Nuclear fleet capacity factor(a)                                     |  |                | 96.1  | %    |  |   | 94.0  | %
|Nuclear fleet production cost per MWh(a)                             |  | $              | 10.88 |      |  | $ | 12.08 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $              | 47.13 |      |  | $ | 41.36 |  



---



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

Higher nuclear capacity factors and lower nuclear
production costs were primarily due to nine fewer planned
refueling outage days, resulting in a $14 million decrease
in planned outage costs for the three months ended June 30,
2004 as compared to the same period in 2003. There was one
planned refueling outage that began in late March 2004 and was
completed during the three months ended June 30, 2004,
while there was one refueling outage that began and was
completed during the three months ended June 30, 2003. The
three months ended June 30, 2004 included seven unplanned
outages compared to nine unplanned outages during the same
period in 2003.

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



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

|                                      |  |                |     |      |  |          |     |          |  |   |      |   |  |  |        |   
|------------------------------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | ---- | - |  |  | ------ | --
|                                      |  |                |     |      |  |         
|                                      |  | Three Months   |     |      |  |         
|                                      |  | Ended June 30, |     |      |  |         
|                                      |  |                |     |      |  |         
|                                      |  | 2004           |     | 2003 |  | Variance |     | % Change
|                                      |  |                |     |      |  |          |     |         
|Operating revenues                    |  | $              | 43  |      |  | $        | 443 |          |  | $ | (400 | ) |  |  | (90.3  | )%
|Purchased power and fuel expense      |  |                |    |      |  |          | 166 |          |  |   | (166 | ) |  |  | (100.0 | )%
|Operating and maintenance expense     |  |                | 65  |      |  |          | 322 |          |  |   | (257 | ) |  |  | (79.8  | )%
|Depreciation and amortization expense |  |                |    |      |  |          | 10  |          |  |   | (10  | ) |  |  | (100.0 | )%
|Operating income (loss)               |  |                | (23 | )    |  |          | (57 | )        |  |   | 34   |   |  |  | (59.6  | )%
|Other income and deductions           |  |                | 74  |      |  |          | (38 | )        |  |   | 112  |   |  |  | n.m.   |   
|Loss before income taxes              |  |                | 51  |      |  |          | (95 | )        |  |   | 146  |   |  |  | n.m.   |   
|Net income (loss)                     |  |                | 27  |      |  |          | (61 | )        |  |   | 88   |   |  |  | n.m.   |   

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

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

Exelon Energy
Company.Effective January 1,
2004, the operations and assets of Enterprises competitive
retail sales business, Exelon Energy Company, were transferred
to Generation. See Note 3 of the Combined Notes to
Consolidated Financial Statements for further discussion of this
transfer.

Exelon Services,
Inc.During the three months ended
June 30, 2004, Enterprises disposed of certain businesses
of Services, including Exelon Solutions and certain businesses
of the Mechanical and Integrated Technology Group. Total
expected proceeds and the net gain on sale recorded during the
three months ended June 30, 2004 related to the disposition
of these Services businesses were $16 million and
$12 million,

86



---



##### 



respectively. The gain was recorded in other
income and deductions on Exelons Consolidated Statements
of Income and Comprehensive Income. As of June 30, 2004,
Services had assets and liabilities of $58 million and
$90 million, respectively, which primarily represented the
corporate operations and the remaining businesses of the
Mechanical and Integrated Technology Group.


In addition, during the three months ended
June 30, 2004, Enterprises disposed of the following
business and investment. These dispositions and the transactions
described above will affect Enterprises future results of
operations.

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

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

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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Transfer of Exelon Energy Company to Generation |  | $        | (174 | )
|Sale of InfraSource businesses                  |  |          | (145 | )
|Services(a)                                     |  |          | (61  | )
|F&M Holdings, LLC(b)                            |  |          | (28  | )
|Other                                           |  |          | 8    |  
|                                                |  |          |      |  
|Decrease in operating revenues                  |  | $        | (400 | )
|                                                |  |          |      |  



---



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

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

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

|                                              |  |          |      |  
|--------------------------------------------- |  | -------- | ---- | -
|                                              |  | Variance
|                                              |  |         
|Sale of InfraSource businesses                |  | $        | (135 | )
|Services(a)                                   |  |          | (52  | )
|Goodwill impairment charge(b)                 |  |          | (47  | )
|F & M Holdings, LLC(c)                        |  |          | (22  | )
|Other                                         |  |          | (1   | )
|                                              |  |          |      |  
|Decrease in operating and maintenance expense |  | $        | (257 | )
|                                              |  |          |      |  



---



|    |  |                                                                                                                                                                                   
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                                                  
|   
|(b) |  | Enterprises recorded a goodwill impairment charge
    of $47 million during the second quarter of 2003 related to
    the goodwill recorded within the InfraSource reporting unit.

87



---



##### 





|    |  |                                                                                                                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | For the remaining businesses of
    F & M Holdings, LLC, operating and
    maintenance expense decreased $29 million as a result of
    wind-down efforts for these businesses. These decreases were
    partially offset by increased expense of $7 million due to
    margin deterioration on various construction projects.

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.

Other Income and
Deductions.The increase in other
income and deductions was primarily due to 2004 gains on the
sales of Exelon Thermal, the Services businesses and
Enterprises investment in PECO Telcove of an aggregate of
$66 million (before income taxes and debt prepayment
penalties) and income of $18 million recorded during the
second quarter of 2004 related to the collection of a note
receivable prior to its maturity. Other income and deductions in
2003 included impairment charges of energy-related and
communications investments of $35 million.

Effective Income Tax
Rate.The effective income tax
rate was 47% for the three months ended June 30, 2004
compared to 36% for the same period in 2003. The increase in the
effective tax rate was primarily attributable to state tax
impact on the Thermal divestiture and tax adjustments resulting
from various income tax related items.



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



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004 Compared
    To Six Months Ended June 30, 2003

|                                                                                                            |  |      |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|----------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                                                                            |  | 2004 |       | 2003 |  | Variance |       | % Change
|                                                                                                            |  |      |       |      |  |          |       |         
|Operating revenues                                                                                          |  | $    | 7,272 |      |  | $        | 7,795 |          |  | $ | (523 | ) |  |  | (6.7  | )%
|Purchased power and fuel expense                                                                            |  |      | 2,608 |      |  |          | 3,119 |          |  |   | (511 | ) |  |  | (16.4 | )%
|Operating and maintenance expense                                                                           |  |      | 2,165 |      |  |          | 2,212 |          |  |   | (47  | ) |  |  | (2.1  | )%
|Operating income                                                                                            |  |      | 1,505 |      |  |          | 1,557 |          |  |   | (52  | ) |  |  | (3.3  | )%
|Other income and deductions                                                                                 |  |      | (239  | )    |  |          | (563  | )        |  |   | 324  |   |  |  | (57.5 | )%
|Income before income taxes, minority interest and
    cumulative effect of changes in accounting principles |  |      | 1,266 |      |  |          | 994   |          |  |   | 272  |   |  |  | 27.4  | % 
|Income before cumulative effect of changes in
    accounting principles                                     |  |      | 901   |      |  |          | 621   |          |  |   | 280  |   |  |  | 45.1  | % 
|Cumulative effect of changes in accounting
    principles                                                   |  |      | 32    |      |  |          | 112   |          |  |   | (80  | ) |  |  | (71.4 | )%
|Net income                                                                                                  |  |      | 933   |      |  |          | 733   |          |  |   | 200  |   |  |  | 27.3  | % 
|Diluted earnings per share                                                                                  |  |      | 1.40  |      |  |          | 1.12  |          |  |   | 0.28 |   |  |  | 25.0  | % 

Operating
Revenues.Operating revenues
decreased for the six months ended June 30, 2004 as
compared to the same period in 2003 primarily due to decreased
revenues at Enterprises due to the sale of the majority of the
businesses of InfraSource during the third quarter of 2003 and
Generations adoption of EITF 03-11 in the first
quarter of 2004 which changed the presentation of certain power
transactions and decreased operating revenues by
$452 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 six months ended June 30, 2004 as
compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 during 2004 which
resulted in a decrease in purchased power expense and fuel
expense of $452 million. In addition, purchased power
decreased due to Generations acquisition of the remaining
50% of AmerGen in December 2003, which was only partially offset
by an increase in fuel expense, and the consolidation of Sithe.
Purchased power represented 23% of Generations total
supply for the six months ended June 30, 2004 compared to
36% for the same period in 2003. See further discussion of
purchased power and fuel expense by segment below.

88



---



##### 



Operating and Maintenance
Expense.Operating and maintenance
expense decreased slightly for the six months ended
June 30, 2004 as compared to the same period in 2003
primarily due to decreased expenses at Enterprises due to the
sale of the majority of 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 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 and
generating assets placed in service after the first quarter of
2003. Operating and maintenance expense increased
$48 million due to investments made in the fourth quarter
of 2003 in synthetic fuel-producing facilities. See further
discussion of operating and maintenance expenses by segment
below.

Operating
Income.The slight 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 $67 million in depreciation expense and
increased taxes other than income at Energy Delivery. The
increase in depreciation and amortization expense was primarily
related to assets placed in service after the second quarter of
2003 and investments made in the fourth quarter of 2003 in
synthetic fuel-producing facilities.

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, an $85 million gain (before income taxes) on the
sale of Boston Generating and a $36 million gain on the
sale of Exelon Thermal (before income taxes and net of debt
prepayment penalties). Equity in earnings of unconsolidated
affiliates decreased by $88 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 increased
$6 million, primarily due to increased interest expense at
Generation, partially offset by lower outstanding debt and
refinancings at lower rates at Energy Delivery.

Effective Income Tax
Rate.Exelons effective
income tax rate decreased from 37% for the six months ended
June 30, 2003 to 30% for the same period in 2004, primarily
due to investments made in synthetic fuel-producing facilities
during the fourth quarter of 2003. See Note 12 of the
Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.

Cumulative Effect of Changes in Accounting
Principles.Net income for the six
months ended June 30, 2004 reflects income of
$32 million, net of income taxes, related to the
consolidation of Sithe pursuant to FIN No. 46-R which
resulted from the reversal of certain guarantees on behalf of
Sithe that had been recorded at Generation prior to
December 31, 2003, while net income for the six months
ended June 30, 2003 reflects income of $112 million,
net of income taxes, for the adoption of SFAS No. 143.
See Note 2 of the Combined Notes to Consolidated Financial
Statements for further information regarding the adoptions of
FIN No. 46-R and SFAS No. 143.



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

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

89



---



##### 





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

|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  
|--------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- |  |  |  | ----- | -
|                |  |                |     |      |  |         
|                |  | Six Months     |     |      |  |         
|                |  | Ended June 30, |     |      |  |         
|                |  |                |     |      |  |         
|                |  | 2004           |     | 2003 |  | Variance |     | % Change
|                |  |                |     |      |  |          |     |         
|Energy Delivery |  | $              | 619 |      |  | $        | 616 |          |  | $ | 3   |  |  |  | 0.5   | %
|Generation      |  |                | 248 |      |  |          | 89  |          |  |   | 159 |  |  |  | 178.7 | %
|Enterprises     |  |                | 11  |      |  |          | (78 | )        |  |   | 89  |  |  |  | n.m.  |  
|Corporate       |  |                | 23  |      |  |          | (6  | )        |  |   | 29  |  |  |  | n.m.  |  
|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  
|Total           |  | $              | 901 |      |  | $        | 621 |          |  | $ | 280 |  |  |  | 45.1  | %
|                |  |                |     |      |  |          |     |          |  |   |     |  |  |  |       |  



---

n.m.  not meaningful



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

|                |  |                |     |      |  |          |     |          |  |   |     |   |  |  |      |   
|--------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | --- | - |  |  | ---- | --
|                |  |                |     |      |  |         
|                |  | Six Months     |     |      |  |         
|                |  | Ended June 30, |     |      |  |         
|                |  |                |     |      |  |         
|                |  | 2004           |     | 2003 |  | Variance |     | % Change
|                |  |                |     |      |  |          |     |         
|Energy Delivery |  | $              | 619 |      |  | $        | 621 |          |  | $ | (2  | ) |  |  | (0.3 | )%
|Generation      |  |                | 280 |      |  |          | 197 |          |  |   | 83  |   |  |  | 42.1 | % 
|Enterprises     |  |                | 11  |      |  |          | (79 | )        |  |   | 90  |   |  |  | n.m. |   
|Corporate       |  |                | 23  |      |  |          | (6  | )        |  |   | 29  |   |  |  | n.m. |   
|                |  |                |     |      |  |          |     |          |  |   |     |   |  |  |      |   
|Total           |  | $              | 933 |      |  | $        | 733 |          |  | $ | 200 |   |  |  | 27.3 | % 
|                |  |                |     |      |  |          |     |          |  |   |     |   |  |  |      |   



---

n.m.  not meaningful

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, became
part of Generation. The information for the six months ended
June 30, 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s results
for the six months ended June 30, 2003 were as follows:

|                         |  |   |     |  
|------------------------ |  | - | --- | -
|Total revenues           |  | $ | 504 |  
|Intersegment revenues    |  |   | 9   |  
|Loss before income taxes |  |   | (16 | )
|Income tax benefit       |  |   | (6  | )
|Net loss                 |  |   | (10 | )

90



---



##### 





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

|                                                                                         |  |                |       |      |  |          |       |          |  |   |     |   |  |  |      |   
|---------------------------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ---- | --
|                                                                                         |  |                |       |      |  |         
|                                                                                         |  | Six Months     |       |      |  |         
|                                                                                         |  | Ended June 30, |       |      |  |         
|                                                                                         |  |                |       |      |  |         
|                                                                                         |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                                                                         |  |                |       |      |  |          |       |         
|Operating revenues                                                                       |  | $              | 5,010 |      |  | $        | 4,964 |          |  | $ | 46  |   |  |  | 0.9  | % 
|Purchased power and fuel expense                                                         |  |                | 2,239 |      |  |          | 2,175 |          |  |   | 64  |   |  |  | 2.9  | % 
|Operating and maintenance expense                                                        |  |                | 704   |      |  |          | 744   |          |  |   | (40 | ) |  |  | (5.4 | )%
|Depreciation and amortization expense                                                    |  |                | 455   |      |  |          | 427   |          |  |   | 28  |   |  |  | 6.6  | % 
|Operating income                                                                         |  |                | 1,343 |      |  |          | 1,360 |          |  |   | (17 | ) |  |  | (1.3 | )%
|Interest expense                                                                         |  |                | 355   |      |  |          | 383   |          |  |   | (28 | ) |  |  | (7.3 | )%
|Income before income taxes and cumulative effect
    of a change in accounting principle |  |                | 986   |      |  |          | 998   |          |  |   | (12 | ) |  |  | (1.2 | )%
|Income before cumulative effect of a change in
    accounting principle                  |  |                | 619   |      |  |          | 616   |          |  |   | 3   |   |  |  | 0.5  | % 
|Net income                                                                               |  |                | 619   |      |  |          | 621   |          |  |   | (2  | ) |  |  | (0.3 | )%

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

|                                          |  |          |      |     |  |          |     |   |  |   |      |  
|----------------------------------------- |  | -------- | ---- | --- |  | -------- | --- | - |  | - | ---- | -
|                                          |  |          |      |     |  | Total   
|                                          |  | Electric |      | Gas |  | Variance
|                                          |  |          |      |     |  |         
|Volume                                    |  | $        | 158  |     |  | $        | (4  | ) |  | $ | 154  |  
|ComEds integration in PJM                |  |          | 43   |     |  |          |    |   |  |   | 43   |  
|Rate changes and mix                      |  |          | (68  | )   |  |          | 82  |   |  |   | 14   |  
|Customer choice                           |  |          | (149 | )   |  |          |    |   |  |   | (149 | )
|Weather                                   |  |          | 13   |     |  |          | (19 | ) |  |   | (6   | )
|Other effects                             |  |          | (16  | )   |  |          | 6   |   |  |   | (10  | )
|                                          |  |          |      |     |  |          |     |   |  |   |      |  
|(Decrease) increase in operating revenues |  | $        | (19  | )   |  | $        | 65  |   |  | $ | 46   |  
|                                          |  |          |      |     |  |          |     |   |  |   |      |  

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

ComEds Integration into
PJM.Energy Deliverys
transmission revenues and purchased power expense each increased
by $43 million in the six months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM.

Rate Changes and
Mix.Starting in the June 2003 billing
cycle, the increased wholesale market price of electricity and
other adjustments to the energy component decreased the
collection of CTCs as compared to the respective prior year
period. As a result, ComEds CTC revenues decreased by
$120 million for the six months ended June 30, 2004 as
compared to the same period in 2003. This decrease was partially
offset by increased wholesale market prices which increased
energy revenue received under ComEds PPO by
$47 million.

Customer Choice.For
the six months ended June 30, 2004 and 2003, 28% and 24%,
respectively, of energy delivered to Energy Deliverys
retail customers was provided by an AES or under the ComEd PPO.
The decrease in electric retail revenues attributable to
customer choice included a decrease in revenues of
$107 million from customers in Illinois electing to
purchase energy from an AES or ComEds PPO and a decrease
in revenues of $42 million from customers in Pennsylvania
being assigned to or selecting an AES.

For the six months ended June 30, 2004 and
June 30, 2003, ComEd collected approximately
$87 million and $207 million, respectively, of CTC
revenue. As a result of increasing mitigation factors, changes
in energy

91



---



##### 



prices and the ability of certain customers to
establish fixed, multi-year CTC rates beginning in 2003, and
increases in ComEds open access transmission tariff rates
(OATT) effective May 1, 2004, ComEd anticipates that
this revenue source will decline to approximately
$180 million for 2004 and range from $100 million to
$180 million annually in 2005 and 2006. Under the current
restructuring statute, no CTCs will be collected after 2006.


Electric revenues increased $2 million at
PECO as a result of $9 million related to a scheduled
phase-out of merger-related rate reductions, largely offset by a
$7 million decrease reflecting a change in rate mix due to
changes in monthly usage patterns in all customer classes during
2004 as compared to 2003. In connection with the PUCs
approval of the merger of PECO, Unicom Corporation, and Exelon
in 2000, PECO entered into a settlement agreement with the PUC
and 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

Energy Deliverys gas revenues increased due
to increases in rates through PUC approved changes to the
purchased gas adjustment clause that became effective
March 1, 2003, June 1, 2003, December 1, 2003 and
March 1, 2004. The average purchased gas cost rate per
million cubic feet for the six months ended June 30, 2004
was 39% higher than the rate for the same period in 2003.

Weather.Energy
Deliverys electric revenues were affected by favorable
weather conditions. Cooling degree-days in the ComEd and PECO
service territories were 68% higher and 66% higher,
respectively, for the six months ended June 30, 2004 as
compared to the same period in 2003. Heating degree-days were 8%
lower in both the ComEd and PECO service territories for the six
months ended June 30, 2004 as compared to the same period
in 2003.

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

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

|                                                            |  |          |      |     |  |                |     |   |  |   |      |  
|----------------------------------------------------------- |  | -------- | ---- | --- |  | -------------- | --- | - |  | - | ---- | -
|                                                            |  | Electric |      | Gas |  | Total Variance
|                                                            |  |          |      |     |  |               
|Prices                                                      |  | $        |     |     |  | $              | 82  |   |  | $ | 82   |  
|Volume                                                      |  |          | 81   |     |  |                | (4  | ) |  |   | 77   |  
|ComEds integration into PJM                                |  |          | 43   |     |  |                |    |   |  |   | 43   |  
|Customer choice                                             |  |          | (134 | )   |  |                |    |   |  |   | (134 | )
|Weather                                                     |  |          | 5    |     |  |                | (16 | ) |  |   | (11  | )
|Other                                                       |  |          | (6   | )   |  |                | 13  |   |  |   | 7    |  
|                                                            |  |          |      |     |  |                |     |   |  |   |      |  
|(Decrease) increase in purchased power and fuel
    expense |  | $        | (11  | )   |  | $              | 75  |   |  | $ | 64   |  
|                                                            |  |          |      |     |  |                |     |   |  |   |      |  

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

Volume.ComEds
purchased power and fuel expense increased due to increases,
exclusive of the effect of weather and customer choice, in the
number of customers and average usage per customer, primarily
residential and large 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 increased
customer growth and usage per customer across all customer
classes.

ComEds Integration into
PJM.Energy Deliverys
transmission revenues and purchased power expense each increased
by $43 million in the six months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM. See Operating Revenues above.

Customer Choice.An
increase in customer switching resulted in a reduction of
purchased power expense, primarily due to ComEds
non-residential customers electing to purchase energy from an
AES or

92



---



##### 



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


Weather.Energy
Deliverys purchased power and fuel expense were affected
by unfavorable weather conditions.

Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the six months ended June 30,
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)                                |  |          | (21 | )
|Contractors                                                                            |  |          | (9  | )
|Allowance for uncollectible accounts expense                                           |  |          | (6  | )
|Environmental charges                                                                  |  |          | (5  | )
|Employee fringe benefits(b, d)                                                         |  |          | (3  | )
|Higher corporate allocations(c)                                                        |  |          | 42  |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 19  |  
|Tax Consultant fees(e)                                                                 |  |          | 5   |  
|Other                                                                                  |  |          | (21 | )
|                                                                                       |  |          |     |  
|Decrease in operating and maintenance expense                                          |  | $        | (40 | )
|                                                                                       |  |          |     |  



---



|    |  |                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2003, ComEd reached an agreement with various
    Illinois retail market participants and other interested parties.                                                                                                                              
|   
|(b) |  | Energy Delivery has fewer employees as a result
    of The Exelon Way terminations.                                                                                                                                                                 
|   
|(c) |  | Higher corporate allocations primarily result
    from a higher percentage allocation to Energy Delivery due to
    the sale of certain Enterprises businesses.                                                                                     
|   
|(d) |  | During the second quarter of 2004, ComEd and PECO
    adopted the provisions of FSP FAS 106-2. Employee fringe
    benefits include a $5 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.
|   
|(e) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 to
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                          

Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense was primarily due to
increased competitive transition charge amortization of
$14 million at PECO and increased depreciation of
$10 million due to capital additions across Energy Delivery.

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

93



---



##### 





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

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

|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |      |   
|--------------------------------------- | --------------------------- | -------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ------ | ----- | - |  | ----- | ---- | --
|                                        |                             |                |        |        |  |         
|                                        |                             | Six Months     |        |        |  |         
|                                        |                             | Ended June 30, |        |        |  |         
|                                        |                             |                |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004           |        | 2003   |  | Variance |        | % Change
|                                        |                             |                |        |        |  |          |        |         
|Full service(a)                         |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Residential                             |                             |                | 17,821 |        |  |          | 17,438 |          |  |  | 383    |       |   |  | 2.2   | %   
|Small commercial & industrial           |                             |                | 13,294 |        |  |          | 14,053 |          |  |  | (759   | )     |   |  | (5.4  | )%  
|Large commercial & industrial           |                             |                | 10,091 |        |  |          | 10,344 |          |  |  | (253   | )     |   |  | (2.4  | )%  
|Public authorities & electric railroads |                             |                | 2,893  |        |  |          | 3,224  |          |  |  | (331   | )     |   |  | (10.3 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        | Total full service          |                |        | 44,099 |  |          |        | 45,059   |  |  |        | (960  | ) |  |       | (2.1 | )%
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|PPO (ComEd only)                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Small commercial & industrial           |                             |                | 1,600  |        |  |          | 1,662  |          |  |  | (62    | )     |   |  | (3.7  | )%  
|Large commercial & industrial           |                             |                | 1,624  |        |  |          | 2,750  |          |  |  | (1,126 | )     |   |  | (40.9 | )%  
|Public authorities & electric railroads |                             |                | 1,012  |        |  |          | 1,069  |          |  |  | (57    | )     |   |  | (5.3  | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        |                             |                | 4,236  |        |  |          | 5,481  |          |  |  | (1,245 | )     |   |  | (22.7 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Delivery only(b)                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Residential                             |                             |                | 1,070  |        |  |          | 450    |          |  |  | 620    |       |   |  | 137.8 | %   
|Small commercial & industrial           |                             |                | 4,389  |        |  |          | 3,131  |          |  |  | 1,258  |       |   |  | 40.2  | %   
|Large commercial & industrial           |                             |                | 6,371  |        |  |          | 4,362  |          |  |  | 2,009  |       |   |  | 46.1  | %   
|Public authorities & electric railroads |                             |                | 894    |        |  |          | 529    |          |  |  | 365    |       |   |  | 69.0  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        |                             |                | 12,724 |        |  |          | 8,472  |          |  |  | 4,252  |       |   |  | 50.2  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        | Total PPO and delivery only |                |        | 16,960 |  |          |        | 13,953   |  |  |        | 3,007 |   |  |       | 21.6 | % 
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Total retail deliveries                 |                             |                | 61,059 |        |  |          | 59,012 |          |  |  | 2,047  |       |   |  | 3.5   | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     



---



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

94



---



##### 



|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |      |   
|--------------------------------------- | -------------------------------------- | ---------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | --- | - |  | ----- | ---- | --
|                                        |                                        |                  |       |       |  |         
|                                        |                                        | Six Months Ended |       |       |  |         
|                                        |                                        | June 30,         |       |       |  |         
|                                        |                                        |                  |       |       |  |         
|Electric Revenue                        |                                        | 2004             |       | 2003  |  | Variance |       | % Change
|                                        |                                        |                  |       |       |  |          |       |         
|Full service(a)                         |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                             |                                        | $                | 1,691 |       |  | $        | 1,673 |          |  | $ | 18  |     |   |  | 1.1   | %   
|Small commercial & industrial           |                                        |                  | 1,143 |       |  |          | 1,177 |          |  |   | (34 | )   |   |  | (2.9  | )%  
|Large commercial & industrial           |                                        |                  | 682   |       |  |          | 692   |          |  |   | (10 | )   |   |  | (1.4  | )%  
|Public authorities & electric railroads |                                        |                  | 188   |       |  |          | 207   |          |  |   | (19 | )   |   |  | (9.2  | )%  
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        | Total full service                     |                  |       | 3,704 |  |          |       | 3,749    |  |   |     | (45 | ) |  |       | (1.2 | )%
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|PPO (ComEd only)(b)                     |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Small commercial & industrial           |                                        |                  | 108   |       |  |          | 109   |          |  |   | (1  | )   |   |  | (0.9  | )%  
|Large commercial & industrial           |                                        |                  | 92    |       |  |          | 144   |          |  |   | (52 | )   |   |  | (36.1 | )%  
|Public authorities & electric railroads |                                        |                  | 53    |       |  |          | 55    |          |  |   | (2  | )   |   |  | (3.6  | )%  
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        |                                        |                  | 253   |       |  |          | 308   |          |  |   | (55 | )   |   |  | (17.9 | )%  
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Delivery only(c)                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                             |                                        |                  | 80    |       |  |          | 31    |          |  |   | 49  |     |   |  | 158.1 | %   
|Small commercial & industrial           |                                        |                  | 110   |       |  |          | 99    |          |  |   | 11  |     |   |  | 11.1  | %   
|Large commercial & industrial           |                                        |                  | 93    |       |  |          | 103   |          |  |   | (10 | )   |   |  | (9.7  | )%  
|Public authorities & electric railroads |                                        |                  | 18    |       |  |          | 17    |          |  |   | 1   |     |   |  | 5.9   | %   
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        |                                        |                  | 301   |       |  |          | 250   |          |  |   | 51  |     |   |  | 20.4  | %   
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        | Total PPO and delivery only            |                  |       | 554   |  |          |       | 558      |  |   |     | (4  | ) |  |       | (0.7 | )%
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric retail revenues          |                                        |                  | 4,258 |       |  |          | 4,307 |          |  |   | (49 | )   |   |  | (1.1  | )%  
|                                        | Wholesale and miscellaneous revenue(d) |                  |       | 288   |  |          |       | 258      |  |   |     | 30  |   |  |       | 11.6 | % 
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric revenue                  |                                        | $                | 4,546 |       |  | $        | 4,565 |          |  | $ | (19 | )   |   |  | (0.4  | )%  
|                                        |                                        |                  |       |       |  |          |       |          |  |   |     |     |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service revenue reflects deliveries to
    customers taking electric service under tariffed rates, which
    include the cost of energy and the delivery cost of the
    transmission and the distribution of the energy. PECOs
    tariffed rates also include a CTC.                                                                                            
|   
|(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 reflects revenue from customers
    receiving electric generation service from an AES. Revenue from
    customers choosing an AES includes a distribution charge and a
    CTC. Prior to ComEds full integration into PJM on
    May 1, 2004, ComEds transmission charges received
    from an AES were included in wholesale and miscellaneous revenue.
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue (including revenue from PJM), sales to
    municipalities and other wholesale energy sales.                                                                                                                                                                                                       

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

|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|--------------------------------- |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                  |  |                |        |      |  |         
|                                  |  | Six Months     |        |      |  |         
|                                  |  | Ended June 30, |        |      |  |         
|                                  |  |                |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                  |  |                |        |      |  |          |        |         
|Retail sales                      |  |                | 37,965 |      |  |          | 40,685 |          |  |  | (2,720 | ) |  |  | (6.7 | )%
|Transportation                    |  |                | 13,542 |      |  |          | 13,942 |          |  |  | (400   | ) |  |  | (2.9 | )%
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total                             |  |                | 51,507 |      |  |          | 54,627 |          |  |  | (3,120 | ) |  |  | (5.7 | )%
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   

95



---



##### 



|                  |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|----------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- |  |  |  | ---- | -
|                  |  |                |     |      |  |         
|                  |  | Six Months     |     |      |  |         
|                  |  | Ended June 30, |     |      |  |         
|                  |  |                |     |      |  |         
|Revenue           |  | 2004           |     | 2003 |  | Variance |     | % Change
|                  |  |                |     |      |  |          |     |         
|Retail sales      |  | $              | 431 |      |  | $        | 372 |          |  | $ | 59 |  |  |  | 15.9 | %
|Transportation    |  |                | 9   |      |  |          | 9   |          |  |   |   |  |  |  |     |  
|Resales and other |  |                | 24  |      |  |          | 18  |          |  |   | 6  |  |  |  | 33.3 | %
|                  |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|Total             |  | $              | 464 |      |  | $        | 399 |          |  | $ | 65 |  |  |  | 16.3 | %
|                  |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  



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

|                                                                                                            |  |                |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|----------------------------------------------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                                                                                            |  |                |       |      |  |         
|                                                                                                            |  | Six Months     |       |      |  |         
|                                                                                                            |  | Ended June 30, |       |      |  |         
|                                                                                                            |  |                |       |      |  |         
|                                                                                                            |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                                                                                            |  |                |       |      |  |          |       |         
|Operating revenues                                                                                          |  | $              | 3,900 |      |  | $        | 3,765 |          |  | $ | 135  |   |  |  | 3.6   | % 
|Purchased power and fuel expense                                                                            |  |                | 2,129 |      |  |          | 2,348 |          |  |   | (219 | ) |  |  | (9.3  | )%
|Operating and maintenance expense                                                                           |  |                | 1,273 |      |  |          | 943   |          |  |   | 330  |   |  |  | 35.0  | % 
|Operating income                                                                                            |  |                | 279   |      |  |          | 295   |          |  |   | (16  | ) |  |  | (5.4  | )%
|Income before income taxes, minority interest and
    cumulative effect of changes in accounting principles |  |                | 383   |      |  |          | 162   |          |  |   | 221  |   |  |  | 136.4 | % 
|Income before cumulative effect of changes in
    accounting principles                                     |  |                | 248   |      |  |          | 89    |          |  |   | 159  |   |  |  | 178.7 | % 
|Cumulative effect of changes in accounting
    principles                                                   |  |                | 32    |      |  |          | 108   |          |  |   | (76  | ) |  |  | (70.4 | )%
|Net income                                                                                                  |  |                | 280   |      |  |          | 197   |          |  |   | 83   |   |  |  | 42.1  | % 

Operating
Revenues.The changes in
Generations operating revenues for the six months ended
June 30, 2004 compared to the same period in 2003 consisted
of the following:

|                                    |  |          |      |  
|----------------------------------- |  | -------- | ---- | -
|                                    |  | Variance
|                                    |  |         
|Retail gas revenue                  |  | $        | 260  |  
|Electric sales to affiliates        |  |          | (136 | )
|Wholesale and retail electric sales |  |          | (12  | )
|Other                               |  |          | 23   |  
|                                    |  |          |      |  
|Increase in operating revenues      |  | $        | 135  |  
|                                    |  |          |      |  

Retail Gas Revenue.Retail gas revenue increased as a result of the transfer of
Exelon Energy Company to Generation as of January 1, 2004.

Electric Sales to
Affiliates.Revenue from sales to
affiliates decreased primarily as a result of the transfer of
Exelon Energy Companys assets and operations to Generation
effective January 1, 2004. Sales to Exelon Energy Company
are no longer reported as affiliate revenue by Generation.
Revenue from sales to Exelon Energy Company for the six months
ended June 30, 2003 was $108 million.

The decrease in revenue from affiliates included
$40 million in lower sales to Energy Delivery. The lower
sales to Energy Delivery were primarily due to customers
purchasing energy from alternative electric suppliers and
unfavorable weather conditions in the ComEd and PECO service
territories compared to the prior year.

96



---



##### 



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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Effects of the adoption of EITF 03-11(a)        |  | $        | (444 | )
|Boston Generating                               |  |          | 74   |  
|Exelon Energy Company and AmerGen operations    |  |          | 182  |  
|Other operations                                |  |          | 176  |  
|                                                |  |          |      |  
|Decrease in wholesale and retail electric sales |  | $        | (12  | )
|                                                |  |          |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $8 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

The adoption of EITF 03-11 on
January 1, 2004 resulted in the netting of certain revenues
and the associated purchase power and fuel expense in 2004.

The other increase in wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market and higher prices in the spot wholesale market.
Market prices in the Midwest region were primarily driven by
higher coal prices, and in the Mid-Atlantic region market prices
were driven primarily by higher oil and gas prices.

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

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

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Effects of the adoption of EITF 03-11          |  | $        | (452 | )
|Midwest Generation                             |  |          | (48  | )
|Price                                          |  |          | (47  | )
|Volume                                         |  |          | 129  |  
|AmerGen and Exelon Energy Company              |  |          | 101  |  
|Sithe Energies, Inc.                           |  |          | 62   |  
|Boston Generating                              |  |          | 75   |  
|Mark-to-market adjustments on hedging activity |  |          | 19   |  
|Other                                          |  |          | (58  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (219 | )
|                                               |  |          |      |  

Effects of the Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power
expense of $444 and fuel expense of $8 million.

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

Price.The decrease
primarily reflects lower average fossil fuel costs of
$47 million during the six months ended June 30, 2004
as compared to the same period in 2003.

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

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, purchased power decreased
$160 million. In prior periods,

97



---



##### 



Generation reported energy purchased from AmerGen
as purchased power expense. Due to the transfer of Exelon Energy
Company to Generation effective January 1, 2004, fuel
expense increased $261 million as fuel purchases made by
Exelon Energy Company were not previously included in
Generations results.


Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due primarily to the sale of the business in May
of 2004. The Mystic 8 and 9 generating facilities began
commercial operations at the end of the second quarter of 2003,
and the Fore River generating facilities began commercial
operations during the third quarter of 2003.

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

Hedging Activity.Mark-to-market losses on hedging activities were
$18 million for the six months ended June 30, 2004
compared to gains of $1 million for the same period in
2003. Hedging activities in 2004 related to Boston Generating
operations accounted for a gain of $4 million and hedging
activities for other Generation operations in 2004 accounted for
a loss of $22 million.

Other.Other
decreases in purchased power and fuel were primarily due to
$46 million in lower transmission expense resulting from
reduced inter-region transmission as a result of ComEds
integration into PJM in the second quarter of 2004, offset by
$16 million of nuclear fuel amortization recorded in 2003
as a result of the replacement of underperforming fuel at the
Quad Cities Station.

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

|                                                                      |  |          |     |  
|--------------------------------------------------------------------- |  | -------- | --- | -
|                                                                      |  | Variance
|                                                                      |  |         
|AmerGen and Exelon Energy Company(a)                                  |  | $        | 197 |  
|Refueling outage costs                                                |  |          | 38  |  
|Boston Generating                                                     |  |          | 33  |  
|Decommissioning accretion costs(b)                                    |  |          | 25  |  
|Sithe Energies, Inc.                                                  |  |          | 22  |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |          | (23 | )
|Other                                                                 |  |          | 38  |  
|                                                                      |  |          |     |  
|Increase in operating and maintenance expense                         |  | $        | 330 |  
|                                                                      |  |          |     |  



---



|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|(a) |  | Includes refueling outage expense of
    $24 million at AmerGen.              
|   
|(b) |  | Includes $20 million due to AmerGen asset
    retirement obligation accretion.

Depreciation and Amortization.The increase in depreciation and
amortization expense for the six months ended June 30, 2004
as compared to the same period in 2003 was primarily
attributable to the impact of capital additions and the
consolidation of Sithe Energies, AmerGen, and Exelon Energy.
These increases were partially offset by a decrease in
depreciation expense related to the Boston Generating facilities
as the assets were classified as held for sale during the period.

Effective Income Tax
Rate.The effective income tax
rate was 38% for the six months ended June 30, 2004
compared to 44% for the same period in 2003. The decrease was
primarily attributable to the impairment charge recorded in 2003
related to Generations investment in Sithe that resulted
in a pre-tax loss. The impairment charge was taxed at a rate
different than the overall Generation effective tax rate. See
Note 12 of the Combined Notes to the Consolidated Financial
Statements for further discussion of the change in the effective
income tax rate.

Cumulative Effect of Changes in Accounting
Principles.The cumulative effect
of changes in accounting principles recorded during the six
months ended June 30, 2004 and 2003 included
$32 million, net of income taxes, recorded in 2004 related
to the consolidation of Sithe pursuant to FIN No. 46-R
which resulted from

98



---



##### 



the reversal of certain guarantees on behalf of
Sithe that had been recorded at Generation prior to
December 31, 2003, and income of $108 million, net of
income taxes, recorded in 2003 related to the adoption of
SFAS No. 143. See Note 2 of the Combined Notes to
Consolidated Financial Statements for further discussion of
these effects.




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

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

|                                       |  |                |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|-------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ---- | --
|                                       |  |                |       |      |  |         
|                                       |  | Six Months     |       |      |  |         
|                                       |  | Ended June 30, |       |      |  |         
|                                       |  |                |       |      |  |         
|Revenue                                |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                       |  |                |       |      |  |          |       |         
|Sales to affiliates(a)                 |  | $              | 1,706 |      |  | $        | 1,842 |          |  | $ | (136 | ) |  |  | (7.4 | )%
|Wholesale and retail electric sales(b) |  |                | 1,742 |      |  |          | 1,754 |          |  |   | (12  | ) |  |  | (0.7 | )%
|                                       |  |                |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Total energy sales revenue             |  |                | 3,448 |      |  |          | 3,596 |          |  |   | (148 | ) |  |  | (4.1 | )%
|                                       |  |                |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Retail gas sales                       |  |                | 260   |      |  |          |      |          |  |   | 260  |   |  |  | n.m. |   
|Trading portfolio                      |  |                | (2    | )    |  |          | (2    | )        |  |   |     |   |  |  | n.m. |   
|Other revenue                          |  |                | 194   |      |  |          | 171   |          |  |   | 23   |   |  |  | 13.5 | % 
|                                       |  |                |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Total revenue                          |  | $              | 3,900 |      |  | $        | 3,765 |          |  | $ | 135  |   |  |  | 3.6  | % 
|                                       |  |                |       |      |  |          |       |          |  |   |      |   |  |  |      |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   
|-------------------------------------- |  | ---------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------ | - |  |  | ---- | --
|                                       |  |                  |         |      |  |         
|                                       |  | Six Months Ended |         |      |  |         
|                                       |  | June 30,         |         |      |  |         
|                                       |  |                  |         |      |  |         
|Sales (in GWhs)                        |  | 2004             |         | 2003 |  | Variance |         | % Change
|                                       |  |                  |         |      |  |          |         |         
|Sale to affiliates(a)                  |  |                  | 53,597  |      |  |          | 57,463  |          |  |  | (3,866 | ) |  |  | (6.7 | )%
|Wholesale and retail electric sales(b) |  |                  | 48,959  |      |  |          | 51,264  |          |  |  | (2,305 | ) |  |  | (4.5 | )%
|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   
|Total sales                            |  |                  | 102,556 |      |  |          | 108,727 |          |  |  | (6,171 | ) |  |  | (5.7 | )%
|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   



---



|    |  |                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 electric sales.                                                                                         
|   
|(b) |  | Sales in 2004 do not include 11,638 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes retail electric sales of Exelon
    Energy Company in 2004.

|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|------------------------------------ |  | ---------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                     |  |                  |         |      |  |         
|                                     |  | Six Months Ended |         |      |  |         
|                                     |  | June 30,         |         |      |  |         
|                                     |  |                  |         |      |  |         
|Supply Source (in GWhs)              |  | 2004             |         | 2003 |  | Variance |         | % Change
|                                     |  |                  |         |      |  |          |         |         
|Nuclear generation(a)                |  |                  | 67,665  |      |  |          | 58,949  |          |  |  | 8,716   |   |  |  | 14.8  | % 
|Purchases  non-trading portfolio(b) |  |                  | 23,595  |      |  |          | 39,373  |          |  |  | (15,778 | ) |  |  | (40.1 | )%
|Fossil and hydroelectric generation  |  |                  | 11,296  |      |  |          | 10,405  |          |  |  | 891     |   |  |  | 8.6   | % 
|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total supply                         |  |                  | 102,556 |      |  |          | 108,727 |          |  |  | (6,171  | ) |  |  | (5.7  | )%
|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen in 2003. AmerGen generated 9,761
    GWhs during the six months ended June 30, 2004.                                                                                                                                                                   
|   
|(b) |  | Sales in 2004 do not include 11,638 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes PPAs with AmerGen, which
    represented 6,219 GWhs in 2003.

99



---



##### 



Trading volumes of 10,437 GWhs and 17,446 GWhs
for the six months ended June 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations 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 2,688 GWhs.

Generations average margin and other
operating data for the six months ended June 30, 2004 and
2003 were as follows:

|                                                             |                                              |                  |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | -------------------------------------------- | ---------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                              |                  |       |      
|                                                             |                                              | Six Months Ended |       |      
|                                                             |                                              | June 30,         |       |      
|                                                             |                                              |                  |       |      
|($/MWh)                                                      |                                              | 2004             |       | 2003  |  | % Change
|                                                             |                                              |                  |       |       |  |         
|Average revenue                                              |                                              |                  |       |       |  |          |       |       |  |  |      |     
|                                                             | Energy Delivery and Exelon Energy Company(a) |                  | $     | 31.83 |  |          | $     | 32.06 |  |  |      | (0.7 | )%
|                                                             | Market and retail electric sales(b)          |                  |       | 35.58 |  |          |       | 34.22 |  |  |      | 4.0  | % 
|                                                             | Total  excluding the trading portfolio      |                  |       | 33.62 |  |          |       | 33.07 |  |  |      | 1.7  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                              | $                | 20.77 |       |  | $        | 21.60 |       |  |  | (3.8 | )%  
|Average margin  excluding the trading
    portfolio         |                                              | $                | 12.85 |       |  | $        | 11.47 |       |  |  | 12.0 | %   



---



|    |  |                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail 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 primarily due to decreased average
supply cost as a result of forward hedging of fuel at lower
costs than prior periods. Also, Generation experienced a
decrease in purchased power due to reducing the capacity
purchased from Midwest Generation and the impact of
consolidating AmerGen in 2003. The increase in nuclear
generation during the period, which is generally less expensive
than purchased power, along with the effect of the adoption of
EITF 03-11, contributed to the increase in average margin.
The increase in nuclear generation is due primarily to the
consolidation of AmerGen.

|                                                                     |  |                |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |               
|                                                                     |  | Six Months    
|                                                                     |  | Ended June 30,
|                                                                     |  |               
|                                                                     |  | 2004           |       | 2003
|                                                                     |  |                |       |     
|Nuclear fleet capacity factor(a)                                     |  |                | 93.3  | %    |  |   | 94.2  | %
|Nuclear fleet production cost per MWh(a)                             |  | $              | 12.54 |      |  | $ | 12.40 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $              | 45.81 |      |  | $ | 41.68 |  



---



|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(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 were primarily due to 55 additional
planned refueling outage days, resulting in a $46 million
increase in planned outage costs in the six months ended
June 30, 2004 as compared to the same period in 2003. There
were five planned outages during the six months ended
June 30, 2004, compared to three planned outages during the
same period in 2003. The six months ended June 30, 2004
included twelve unplanned outages compared to eleven 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-EPU generation levels due to performance issues
with their steam dryers. Generation plans additional
expenditures to ensure safe and reliable operations at the EPU
output levels by mid-2005.

100



---



##### 





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

|                                                                                     |  |                |     |      |  |          |       |          |  |   |      |   |  |  |        |   
|------------------------------------------------------------------------------------ |  | -------------- | --- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ------ | --
|                                                                                     |  |                |     |      |  |         
|                                                                                     |  | Six Months     |     |      |  |         
|                                                                                     |  | Ended June 30, |     |      |  |         
|                                                                                     |  |                |     |      |  |         
|                                                                                     |  | 2004           |     | 2003 |  | Variance |       | % Change
|                                                                                     |  |                |     |      |  |          |       |         
|Operating revenues                                                                   |  | $              | 133 |      |  | $        | 1,022 |          |  | $ | (889 | ) |  |  | (87.0  | )%
|Purchased power and fuel expense                                                     |  |                |    |      |  |          | 505   |          |  |   | (505 | ) |  |  | (100.0 | )%
|Operating and maintenance expense                                                    |  |                | 170 |      |  |          | 575   |          |  |   | (405 | ) |  |  | (70.4  | )%
|Depreciation and amortization expense                                                |  |                |    |      |  |          | 20    |          |  |   | (20  | ) |  |  | (100.0 | )%
|Operating income (loss)                                                              |  |                | (42 | )    |  |          | (84   | )        |  |   | 42   |   |  |  | (50.0  | )%
|Other income and deductions                                                          |  |                | 68  |      |  |          | (41   | )        |  |   | 109  |   |  |  | n.m.   |   
|Loss before income taxes and cumulative effect of
    change in accounting principle |  |                | 26  |      |  |          | (125  | )        |  |   | 151  |   |  |  | n.m.   |   
|Loss before cumulative effect of change in
    accounting principle                  |  |                | 11  |      |  |          | (78   | )        |  |   | 89   |   |  |  | n.m.   |   
|Net income (loss)                                                                    |  |                | 11  |      |  |          | (79   | )        |  |   | 90   |   |  |  | n.m.   |   

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

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

Exelon Energy
Company.Effective January 1,
2004, the operations and assets of Enterprises competitive
retail sales business, Exelon Energy Company, were transferred
to Generation. See Note 3 of the Combined Notes to
Consolidated Financial Statements for further discussion of this
transfer.

Exelon Services,
Inc.During the six months ended
June 30, 2004, Enterprises disposed of certain businesses
of Services, including Exelon Solutions and certain businesses
of the Mechanical and Integrated Technology Group. Total
expected proceeds and the net gain on sale recorded during the
six months ended June 30, 2004 related to the disposition
of these Services businesses were $34 million and
$9 million, respectively. The gain was recorded in other
income and deductions on Exelons Consolidated Statements
of Income and Comprehensive Income. As of June 30, 2004,
Services had assets and liabilities of $58 million and
$90 million, respectively, which primarily represented the
corporate operations and the remaining businesses of the
Mechanical and Integrated Technology Group.

In addition, during the six months ended
June 30, 2004, Enterprises disposed of the following
business and investment. These dispositions and the transactions
described above will affect Enterprises future results of
operations.

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

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

101



---



##### 



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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Transfer of Exelon Energy Company to Generation |  | $        | (504 | )
|Sale of InfraSource businesses                  |  |          | (262 | )
|Services(a)                                     |  |          | (72  | )
|F & M Holdings, LLC(b)                          |  |          | (60  | )
|Other                                           |  |          | 9    |  
|                                                |  |          |      |  
|Decrease in operating revenues                  |  | $        | (889 | )
|                                                |  |          |      |  



---



|    |  |                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                                  
|   
|(b) |  | Operating revenues decreased $60 million as
    a result of the sale of certain businesses and the reduction of
    new business as a result of wind-down efforts.

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

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

|                                              |  |          |      |  
|--------------------------------------------- |  | -------- | ---- | -
|                                              |  | Variance
|                                              |  |         
|Sale of InfraSource businesses                |  | $        | (246 | )
|Services(a)                                   |  |          | (56  | )
|Goodwill impairment charge(b)                 |  |          | (47  | )
|F & M Holdings, LLC(c)                        |  |          | (43  | )
|Other                                         |  |          | (13  | )
|                                              |  |          |      |  
|Decrease in operating and maintenance expense |  | $        | (405 | )
|                                              |  |          |      |  



---



|    |  |                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                                                                                                                                      
|   
|(b) |  | Enterprises recorded a goodwill impairment charge
    of $47 million during the second quarter of 2003 related to
    the goodwill recorded within the InfraSource reporting unit.                                                                                    
|   
|(c) |  | Operating and maintenance expense decreased
    $62 million as a result of wind-down efforts for these
    businesses. These decreases were partially offset by increased
    expense of $19 million due to margin deterioration on
    various construction projects.

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.

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

Effective Income Tax
Rate.The effective income tax
rate was 58% for the six months ended June 30, 2004
compared to 38% for the same period in 2003. The increase in the
effective tax rate was primarily attributable to state tax
impact on the Thermal divestiture and a 16.4% increase of tax
expense resulting from various income tax related items.

102



---



##### 



Liquidity and Capital Resources

Exelons businesses are capital intensive
and require considerable capital resources. These capital
resources are primarily provided by internally generated cash
flows from Energy Deliverys and Generations
operations. When necessary, Exelon obtains funds from external
sources in the capital markets and through bank borrowings.
Exelons access to external financing at reasonable terms
depends on Exelon and its subsidiaries credit ratings and
general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
Exelon no longer has access to the capital markets at reasonable
terms, Exelon has access to revolving credit facilities with
aggregate bank commitments of $1.5 billion that it
currently utilizes to support its commercial paper programs. See
the Credit Issues section of Liquidity and
Capital Resources for further discussion. Exelon primarily
uses its capital resources to fund capital requirements,
including construction, to 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 six months
ended June 30, 2004 and 2003 were $1,907 million and
$1,292 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 six months ended
June 30, 2004 and 2003:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the six months ended June 30, 2004,
    Exelons federal income tax position changed from a net
    federal income tax payable to a net federal income tax
    receivable. The large increase in cash from the changes in
    receivables is due primarily to the current year federal income
    tax provision of approximately $200 million and the receipt
    of a $150 million federal income tax refund in the first
    quarter of 2004, partially offset by a $58 million increase
    in customer accounts receivable and the payment of
    $67 million for federal income taxes.                                                                                                                                                                                                                                                                                                
|
| |  | Natural gas inventories and deferred natural gas
    costs decreased $24 million and $56 million,
    respectively, during the six months ended June 30, 2004
    resulting in an $80 million increase to operating cash
    flows. During 2003, an increase in natural gas inventories of
    $1 million and an increase in deferred natural gas costs of
    $24 million resulted in a $25 million decrease to
    operating cash flow. PECOs gas cost rates are subject to
    periodic adjustments by the PUC and are designed to recover from
    or refund to customers the difference between the actual cost of
    purchased gas and the amount included in rates. During 2004,
    PECO was recovering fuel revenues from customers in excess of
    gas costs being incurred. During 2003, PECO was incurring gas
    costs in excess of fuel revenues being recovered from customers.

103



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An increase in required deposits for energy
    trading activity of $136 million resulted from Generation
    exceeding its negotiated credit positions with counterparties
    during the six months ended June 30, 2003. During 2004,
    required deposits for trading activity resulted in a
    $2 million net cash inflow.                               
|
| |  | Discretionary tax-deductible pension plan
    payments were $288 million for the six months ended
    June 30, 2004 compared to $246 million for the same
    period in 2003. Additionally, $42 million and
    $30 million were contributed to the postretirement welfare
    benefit plans for the six months ended June 30, 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,
$11 million is estimated to be needed to satisfy Internal
Revenue Service (IRS) minimum funding requirements.

Exelon, through its ComEd subsidiary, has taken
certain tax positions, which have been disclosed to the IRS to
defer the tax gain on the 1999 sale of its fossil generating
assets. As of June 30, 2004, deferred tax liabilities
related to the fossil plant sale are reflected in Exelons
Consolidated Balance Sheets with the majority allocated to the
Consolidated Balance Sheets of ComEd and the remainder to the
Consolidated Balance Sheets of Generation. The 1999 income tax
liability deferred as a result of these transactions was
approximately $1.1 billion. Changes in IRS interpretations
of existing primary tax authority or challenges to ComEds
positions could have the impact of accelerating future income
tax payments and increasing interest expense related to the
deferred tax gain that becomes current. Any required payments
could be significant to the cash flows of Exelon. Exelons
management believes Exelons reserve for interest, which
has been established in the event that such positions are not
sustained, has been appropriately recorded in accordance with
SFAS No. 5, Accounting for Contingencies
(SFAS No. 5). However, the ultimate outcome of such
matters could result in 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
six months ended June 30, 2004 and 2003 were
$669 million and $1,016 million, respectively. The
$347 million reduction of cash used in investing activities
in 2004 versus 2003 is primarily attributable to the following:



| |   |                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash proceeds of $210 million received
    during the six months ended June 30, 2004 from the sales of
    Exelon Thermal, certain businesses of Exelon Services and
    Enterprises investments in PECO TelCove and other equity
    method investments.                                                                                                
|
| |  | Cash proceeds of $42 million received from
    the sale of three gas turbines at Generation that were
    classified as assets held for sale at December 31, 2003.                                                                                                                                                                                        
|
| |  | A decrease in capital expenditures of
    $89 million net of liquidating damages received in 2003.                                                                                                                                                                                                                                                        
|
| |  | An increase in investments in nuclear
    decommissioning trust funds of $30 million.                                                                                                                                                                                                                                                                     
|
| |  | On March 31, 2004, Exelon consolidated the
    assets and liabilities of Sithe under the provisions of
    FIN No. 46-R, which resulted in an increase in cash of
    $19 million. See Note 2 and Note 4 of the
    Combined Notes to Consolidated Financial Statements for further
    information regarding the FIN No. 46-R consolidation
    of Sithe.
|
| |  | Early settlement on an acquisition note
    receivable from the 2003 disposition of InfraSource resulted in
    cash proceeds of $30 million during the six months ended
    June 30, 2004.                                                                                                                                                               

104



---



##### 



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

|                                                                    |  |                |     |      |  |   |     | 
|------------------------------------------------------------------- |  | -------------- | --- | ---- |  | - | --- | 
|                                                                    |  |               
|                                                                    |  | Six Months    
|                                                                    |  | Ended June 30,
|                                                                    |  |               
|                                                                    |  | 2004           |     | 2003
|                                                                    |  |                |     |     
|Energy Delivery                                                     |  | $              | 474 |      |  | $ | 487 | 
|Generation                                                          |  |                | 366 |      |  |   | 424 | 
|Enterprises                                                         |  |                |    |      |  |   | 11  | 
|Corporate and other                                                 |  |                | 4   |      |  |   | 11  | 
|                                                                    |  |                |     |      |  |   |     | 
|Total capital expenditures, net of liquidating
    damages received |  | $              | 844 |      |  | $ | 933 | 
|                                                                    |  |                |     |      |  |   |     | 

Energy Deliverys capital expenditures for
the six months ended June 30, 2004 reflect continuing
efforts to improve the reliability of its transmission and
distribution systems and capital additions to support new
business and customer growth. ComEd estimates that it will spend
up to approximately $715 million in total capital
expenditures for 2004. This represents an increase of
approximately $100 million more than had been previously
planned, primarily as a result of expansion of the ComEd
distribution system to support new business and customer growth.
However, Exelon is continuing to evaluate its total capital
spending requirements and potential mitigating opportunities
across the company. 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
six months ended June 30, 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 six
months ended June 30, 2003 reflected the construction of
the Mystic 8 and 9 and Fore River Boston Generating
facilities. During 2003, Boston Generating received
$86 million of liquidated damages from Raytheon Company
(Raytheon) as a result of Raytheon not meeting the expected
completion date and certain contractual performance criteria in
connection with Raytheons construction of these generating
facilities. Exelon anticipates that Generations capital
expenditures will be funded by internally generated funds,
Generations borrowings or capital contributions from
Exelon.



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

Cash flows used in financing activities for the
six months ended June 30, 2004 were $937 million
compared to $255 million for the same period in 2003. The
increase in cash used in financing activities is primarily
attributable to the net retirement of $582 million of
long-term debt during the six months ended June 30, 2004
versus the net issuance of long-term debt of $334 million
during the six months ended June 30, 2003. See Note 9
of the Combined Notes to Consolidated Financial Statements for
further information regarding debt issuances and retirements
during the six months ended June 30, 2004. During the six
months ended June 30, 2004, Exelon repaid $65 million
of commercial paper and received cash proceeds of
$31 million from the settlement of interest-rate swaps.
During the six months ended June 30, 2003, Exelon repaid
$100 million of commercial paper and paid $51 million
to settle an interest-rate swap. Additionally, Exelon purchased
treasury shares totaling $75 million during the second
quarter of 2004 and received proceeds from employee stock plans
of $140 million and $91 million for the six months
ended June 30, 2004 and 2003, respectively.

The cash dividend payments on common stock for
the six months ended June 30, 2004 increased
$79 million over the six months ended June 30, 2003,
reflecting a 9% increase in the common stock dividend in the
third quarter of 2003 and a 10% increase in the first quarter of
2004. Payment of future dividends is subject to approval and
declaration by the Board.

From time to time and as market conditions
warrant, Exelon may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of Exelons balance sheet.

105



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##### 





| |              
| | -------------
| | 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. At June 30,
2004, Exelon Corporate, along with ComEd, PECO and Generation,
participated in a $750 million 364-day unsecured revolving
credit agreement and a $750 million three-year unsecured
revolving credit agreement with a group of banks. On
July 16, 2004, the $750 million 364-day facility was
replaced with a $1 billion five-year facility, and the
$750 million three-year facility was reduced to
$500 million. Both revolving credit agreements are used
principally to support the commercial paper programs at Exelon
Corporate, ComEd, PECO and Generation and to issue letters of
credit. At June 30, 2004, Exelon Corporate, ComEd, PECO and
Generation had the following sublimits and available capacity
under the credit agreements and the indicated amounts of
outstanding commercial paper:

|                 |  |             |     |             |  |                  |     |  |  |   |     | 
|---------------- |  | ----------- | --- | ----------- |  | ---------------- | --- |  |  | - | --- | 
|                 |  | Bank        |     | Available   |  | Outstanding     
|Borrower         |  | Sublimit(a) |     | Capacity(b) |  | Commercial Paper
|                 |  |             |     |             |  |                 
|Exelon Corporate |  | $           | 550 |             |  | $                | 531 |  |  | $ | 50  | 
|ComEd            |  |             | 100 |             |  |                  | 74  |  |  |   |    | 
|PECO             |  |             | 250 |             |  |                  | 250 |  |  |   |    | 
|Generation       |  |             | 600 |             |  |                  | 460 |  |  |   | 211 | 



---



|    |  |                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 six months ended
June 30, 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
Holding Company, LLC (Exelon New England) and Sithe and interest
on the debt of their project subsidiaries. Exelon Corporate is
measured at the Exelon consolidated level. The following table
summarizes the minimum thresholds reflected in the credit
agreements for the twelve-month period ended June 30, 2004:

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

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

106



---



##### 



Capital Structure.At June 30, 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               |  |              | 37 | %        |  |         | 33 | %          |  |  | 21 | %   |  |  | 42 | %
|Long-term debt to affiliates |  |              | 24 | (b)      |  |         | 15 | (b)        |  |  | 61 | (b) |  |  |   |  
|Common equity                |  |              | 38 |          |  |         | 52 |            |  |  | 17 |     |  |  |   |  
|Members equity              |  |              |   |          |  |         |   |            |  |  |   |     |  |  | 50 |  
|Preferred securities         |  |              |   |          |  |         |   |            |  |  | 1  |     |  |  |   |  
|Notes payable                |  |              | 1  |          |  |         |   |            |  |  |   |     |  |  | 7  |  
|Minority interest            |  |              |   |          |  |         |   |            |  |  |   |     |  |  | 1  |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | At June 30, 2004, ComEds capital
    structure, excluding the deduction from shareholders
    equity of the $188 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, 14% long-term
    debt to affiliates and 53% common equity. Likewise, PECOs
    capital structure, excluding the deduction from
    shareholders equity of the $1.6 billion receivable
    from Exelon, consisted of 33% common equity, 1% preferred
    securities and 66% long-term debt, including long-term debt to
    unconsolidated affiliates.
|   
|(b) |  | Includes $6 billion, $2 billion and
    $4 billion owed to unconsolidated affiliates of Exelon,
    ComEd and PECO, respectively, that qualify as special purpose
    entities under FIN No. 46-R. These special purpose entities
    were created for the sole purpose of issuing debt obligations to
    securitize intangible transition property and CTCs of Energy
    Delivery or mandatorily redeemable preferred securities. See
    Note 2 of the Combined Notes to Consolidated Financial
    Statements for further information regarding FIN No. 46-R.                                                                                                                                                                                                             

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

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

Intercompany Money
Pool.To provide an additional
short-term borrowing option that will generally be more
favorable to the borrowing participants than the cost of
external financing, Exelon operates an intercompany money pool.
Participation in the money pool is subject to authorization by
Exelons corporate treasurer. ComEd and its subsidiary,
Commonwealth Edison of Indiana, Inc. (ComEd of Indiana), PECO,
Generation and BSC may participate in the money pool as lenders
and borrowers, and Exelon Corporate and Unicom Investment, Inc.,
a wholly owned subsidiary of Exelon, may participate as lenders.
Funding of, and borrowings from, the money pool are predicated
on whether the contributions and borrowings result in economic
benefits. Interest on borrowings is based on short-term market
rates of interest, or, if from an external source, specific
borrowing rates. During 2004, ComEd, ComEd of Indiana and PECO
had various

107



---



##### 



contributions to the money pool, and Generation
and BSC had various loans from the money pool as described in
the following table:


|                 |  |          |     |          |  |               |     |  |  |   |      |    
|---------------- |  | -------- | --- | -------- |  | ------------- | --- |  |  | - | ---- | ---
|                 |  |          |     |          |  | June 30, 2004
|                 |  | Maximum  |     | Maximum  |  | Contributed  
|                 |  | Invested |     | Borrowed |  | (Borrowed)   
|                 |  |          |     |          |  |              
|ComEd            |  | $        | 487 |          |  | $             |    |  |  | $ | 198  |    
|ComEd of Indiana |  |          | 21  |          |  |               |    |  |  |   | 21   | (a)
|PECO             |  |          | 162 |          |  |               |    |  |  |   | 35   |    
|Generation       |  |          |    |          |  |               | 407 |  |  |   | (198 | )  
|BSC              |  |          |    |          |  |               | 197 |  |  |   | (35  | )  



---



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

Sithe Long-Term
Debt.At June 30, 2004,
$852 million of Sithes long-term debt, including
current maturities, was included in Exelon and Generations
Consolidated Balance Sheets. See Note 2 and Note 4 of
the Combined Notes to Consolidated Financial Statements for
information regarding the consolidation of Sithe and see
Note 9 of the Combined Notes to Consolidated Financial
Statements for information regarding Sithes long-term debt
and the annual maturities.

Security Ratings.Exelons access to the capital markets, including the
commercial paper market, and its financing costs in those
markets depend on the securities ratings of the entity that is
accessing the capital markets. On July 22, 2004,
Standard & Poors Ratings Services lowered the
ratings on PECOs First Mortgage Bonds from A to A-. None
of the other securities ratings of Exelon, PECO or Exelon
subsidiaries has changed. None of Exelons borrowings is
subject to default or prepayment as a result of a downgrading of
securities although such a downgrading could increase fees and
interest charges under Exelons credit facilities.

Shelf Registration.As of June 30, 2004, Exelon, ComEd and PECO have current
shelf registration statements for the sale of $2.0 billion,
$555 million and $550 million, respectively, of
securities that are effective with the SEC. Exelon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 for Exelon
Corporate and Generation at December 31, 2003 with no
separate sublimit for short-term debt. The new financing order
replaced a prior SEC order that expired on March 31, 2004
that had authorized up to $4.0 billion of financing. No
securities have been issued under the above described limit. The
prior order also authorized Exelon to issue guarantees of up to
$4.5 billion outstanding at any one time. The new order
gives Exelon an additional $1.5 billion of guaranty
authority. At June 30, 2004, Exelon had provided
$1.9 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 June 30, 2004, Exelons
common equity ratio was 38%. 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 June 30, 2004, Exelon had invested
$1.9 billion in EWGs, leaving $2.1 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.

108



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##### 



Under applicable law, Exelon, ComEd, PECO and
Generation can pay dividends only from retained, undistributed
or current earnings. A significant loss recorded at ComEd, PECO
or Generation may limit the dividends that these companies can
distribute to Exelon. At June 30, 2004, Exelon had retained
earnings of $2.9 billion, including ComEds retained
earnings of $1,064 million (all of which had been
appropriated for future dividend payments), PECOs retained
earnings of $597 million and Generations
undistributed earnings of $773 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 June 30, 2004 were materially unchanged,
other than in the normal course of business, from the amounts
set forth in the 2003 Form 10-K except for the following:



| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generation acquired a $50 million letter of
    credit that supports the contractual obligations of Sithe and
    its subsidiaries.                                                                                   
|
| |  | See Note 9 and Note 19 to the Combined
    Notes to Consolidated Financial Statements for discussion of
    material changes in the registrants respective debt from
    the amounts set forth in the 2003 Form 10-K.

109



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##### 






COMMONWEALTH EDISON COMPANY

General

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

Executive Overview

Financial Results.ComEds net income was consistent for the three months
ended June 30, 2004 as compared to the same period in 2003.

ComEd experienced an overall decline in net
income of 3% during the six months ended June 30, 2004.
This decline primarily reflects lower collections of CTCs,
partially offset by lower operating and maintenance expense
compared to the corresponding period in 2003 in which ComEd
recorded charges associated with an agreement with various
Illinois retail market participants and other interested parties.

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.During the six months
ended June 30, 2004, ComEd repaid $178 million of
long-term debt and made a $179 million payment on long-term
debt to ComEd Transitional Funding Trust. ComEd met all of its
capital resource commitments with internally generated cash and
expects to do so in the foreseeable future, absent new
acquisitions.

Regulatory Developments  PJM
Integration.On April 1, 2003,
ComEd received approval from the FERC to transfer control of its
transmission assets to PJM. The FERC also accepted for filing
the amended PJM Tariff to reflect the inclusion of the
transmission assets of ComEd and other new members, subject to a
compliance filing and 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. 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 effects. The NERC
granted the required approval on April 2, 2004. On
April 27, 2004, the FERC issued its order approving
ComEds application, subject to certain stipulations,
including a provision to hold certain other utilities harmless
from the impacts of ComEd joining PJM. ComEd agreed to these
stipulations and fully integrated into PJM on May 1, 2004.

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

Through and Out
Rates.ComEd currently earns
approximately $66 million annually from T&O rates for
energy flowing across ComEds transmission system. On
March 19, 2004, the FERC issued an order to eliminate these
rates effective May 1, 2004, which was subsequently
deferred until December 1, 2004. The T&O rates are to
be replaced by a new long-term transmission pricing structure
that will eliminate seams in the PJM and Midwest ISO regions.
Transmission owners in PJM and Midwest ISO and other parties
must file one or more pricing proposals with the FERC on or
before October 1, 2004, with an effective date of
December 1, 2004. While Exelon and ComEd cannot predict the
outcome of the FERCs final determination of a new
long-term transmission pricing structure, such pricing structure
could adversely impact Exelons and ComEds after-tax
results of operations.

Delivery Services
Rates.On March 3, 2003, ComEd
entered into, and the ICC subsequently entered orders, which are
now final, that effectuated an agreement (Agreement) with
various Illinois retail market

110



---



##### 



participants and other interested parties that
settled, among other things, delivery service rates and the
market value index proceeding and facilitates competitive
service declarations for large-load customers and an extension
of the PPA with Generation.


Open Access Transmission
Tariff.On November 10, 2003, the
FERC issued an order allowing ComEd to put into effect, 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 CTCs, the increase is not
expected to have a significant effect on operating revenues
until after December 31, 2006. ComEd began charging the new
rates May 1, 2004. ComEds management believes an
adequate reserve for any required refunds has been established
in the event that the new rates are adjusted based on rehearing
or settlement negotiations.

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.

Results of Operations



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

|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |        |      |   
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ---- | --- | -------- | ----- | -------- | ---- | - | --- | -- | -- |  | ---- | ------ | ---- | --
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | Three Months                      |       |      |     |         
|                            |                                                                  | Ended June 30,                    |       |      |     |         
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | 2004                              |       | 2003 |     | Variance |       | % Change
|                            |                                                                  |                                   |       |      |     |          |       |         
|Operating revenues          |                                                                  | $                                 | 1,403 |      |     | $        | 1,361 |          |      | $ | 42  |    |    |  | 3.1  | %     
|Operating expenses          |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|                            | Purchased power                                                  |                                   |       | 574  |     |          |       | 533      |      |   |     | 41 |    |  |      | 7.7    | %   
|                            | Operating and maintenance                                        |                                   |       | 223  |     |          |       | 221      |      |   |     | 2  |    |  |      | 0.9    | %   
|                            | Depreciation and amortization                                    |                                   |       | 103  |     |          |       | 96       |      |   |     | 7  |    |  |      | 7.3    | %   
|                            | Taxes other than income                                          |                                   |       | 72   |     |          |       | 68       |      |   |     | 4  |    |  |      | 5.9    | %   
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|                            |                                                                  | Total operating expense           |       |      | 972 |          |       |          | 918  |   |     |    | 54 |  |      |        | 5.9  | % 
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|Operating income            |                                                                  |                                   | 431   |      |     |          | 443   |          |      |   | (12 | )  |    |  | (2.7 | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|Other income and deductions |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|                            | Interest expense                                                 |                                   |       | (96  | )   |          |       | (106     | )    |   |     | 10 |    |  |      | (9.4   | )%  
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |     |     |          |       | (6       | )    |   |     | 6  |    |  |      | (100.0 | )%  
|                            | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |       | (6   | )   |          |       |         |      |   |     | (6 | )  |  |      | n.m.   |     
|                            | Other, net                                                       |                                   |       | 7    |     |          |       | 12       |      |   |     | (5 | )  |  |      | (41.7  | )%  
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|                            |                                                                  | Total other income and deductions |       |      | (95 | )        |       |          | (100 | ) |     |    | 5  |  |      |        | (5.0 | )%
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|Income before income taxes  |                                                                  |                                   | 336   |      |     |          | 343   |          |      |   | (7  | )  |    |  | (2.0 | )%    
|Income taxes                |                                                                  |                                   | 132   |      |     |          | 138   |          |      |   | (6  | )  |    |  | (4.3 | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       
|Net income                  |                                                                  | $                                 | 204   |      |     | $        | 205   |          |      | $ | (1  | )  |    |  | (0.5 | )%    
|                            |                                                                  |                                   |       |      |     |          |       |          |      |   |     |    |    |  |      |       



---

n.m.  not meaningful

111



---



##### 





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

ComEds electric sales statistics were as
follows:

|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |      |   
|--------------------------------------- | --------------------------- | -------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ----- | ----- | - |  | ----- | ---- | --
|                                        |                             |                |        |        |  |         
|                                        |                             | Three Months   |        |        |  |         
|                                        |                             | Ended June 30, |        |        |  |         
|                                        |                             |                |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004           |        | 2003   |  | Variance |        | % Change
|                                        |                             |                |        |        |  |          |        |         
|Full service(a)                         |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|Residential                             |                             |                | 5,793  |        |  |          | 5,163  |          |  |  | 630   |       |   |  | 12.2  | %   
|Small commercial & industrial           |                             |                | 4,791  |        |  |          | 5,114  |          |  |  | (323  | )     |   |  | (6.3  | )%  
|Large commercial & industrial           |                             |                | 1,426  |        |  |          | 1,683  |          |  |  | (257  | )     |   |  | (15.3 | )%  
|Public authorities & electric railroads |                             |                | 1,200  |        |  |          | 1,333  |          |  |  | (133  | )     |   |  | (10.0 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|                                        | Total full service          |                |        | 13,210 |  |          |        | 13,293   |  |  |       | (83   | ) |  |       | (0.6 | )%
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|PPO                                     |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|Small commercial & industrial           |                             |                | 870    |        |  |          | 869    |          |  |  | 1     |       |   |  | 0.1   | %   
|Large commercial & industrial           |                             |                | 877    |        |  |          | 1,318  |          |  |  | (441  | )     |   |  | (33.5 | )%  
|Public authorities & electric railroads |                             |                | 577    |        |  |          | 531    |          |  |  | 46    |       |   |  | 8.7   | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|                                        |                             |                | 2,324  |        |  |          | 2,718  |          |  |  | (394  | )     |   |  | (14.5 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|Delivery only(b)                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|Small commercial & industrial           |                             |                | 1,761  |        |  |          | 1,257  |          |  |  | 504   |       |   |  | 40.1  | %   
|Large commercial & industrial           |                             |                | 3,090  |        |  |          | 2,128  |          |  |  | 962   |       |   |  | 45.2  | %   
|Public authorities & electric railroads |                             |                | 406    |        |  |          | 247    |          |  |  | 159   |       |   |  | 64.4  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|                                        |                             |                | 5,257  |        |  |          | 3,632  |          |  |  | 1,625 |       |   |  | 44.7  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|                                        | Total PPO and delivery only |                |        | 7,581  |  |          |        | 6,350    |  |  |       | 1,231 |   |  |       | 19.4 | % 
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     
|Total retail deliveries                 |                             |                | 20,791 |        |  |          | 19,643 |          |  |  | 1,148 |       |   |  | 5.8   | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |       |       |   |  |       |     



---



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

112



---



##### 



|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |     |  
|--------------------------------------- | ------------------ | -------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | -- |  |  | ----- | --- | -
|                                        |                    |                |       |       |  |         
|                                        |                    | Three Months   |       |       |  |         
|                                        |                    | Ended June 30, |       |       |  |         
|                                        |                    |                |       |       |  |         
|Electric Revenue                        |                    | 2004           |       | 2003  |  | Variance |       | % Change
|                                        |                    |                |       |       |  |          |       |         
|Full service(a)                         |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Residential                             |                    | $              | 521   |       |  | $        | 472   |          |  | $ | 49  |    |  |  | 10.4  | %  
|Small commercial & industrial           |                    |                | 396   |       |  |          | 405   |          |  |   | (9  | )  |  |  | (2.2  | )% 
|Large commercial & industrial           |                    |                | 71    |       |  |          | 84    |          |  |   | (13 | )  |  |  | (15.5 | )% 
|Public authorities & electric railroads |                    |                | 74    |       |  |          | 81    |          |  |   | (7  | )  |  |  | (8.6  | )% 
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|                                        | Total full service |                |       | 1,062 |  |          |       | 1,042    |  |   |     | 20 |  |  |       | 1.9 | %
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|PPO(b)                                  |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Small commercial & industrial           |                    |                | 60    |       |  |          | 59    |          |  |   | 1   |    |  |  | 1.7   | %  
|Large commercial & industrial           |                    |                | 51    |       |  |          | 72    |          |  |   | (21 | )  |  |  | (29.2 | )% 
|Public authorities & electric railroads |                    |                | 31    |       |  |          | 28    |          |  |   | 3   |    |  |  | 10.7  | %  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|                                        |                    |                | 142   |       |  |          | 159   |          |  |   | (17 | )  |  |  | (10.7 | )% 
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Delivery only(c)                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Small commercial & industrial           |                    |                | 35    |       |  |          | 32    |          |  |   | 3   |    |  |  | 9.4   | %  
|Large commercial & industrial           |                    |                | 43    |       |  |          | 43    |          |  |   |    |    |  |  |      |    
|Public authorities & electric railroads |                    |                | 9     |       |  |          | 8     |          |  |   | 1   |    |  |  | 12.5  | %  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|                                        |                    |                | 87    |       |  |          | 83    |          |  |   | 4   |    |  |  | 4.8   | %  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Total PPO and delivery only             |                    |                | 229   |       |  |          | 242   |          |  |   | (13 | )  |  |  | (5.4  | )% 
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Total electric retail revenues          |                    |                | 1,291 |       |  |          | 1,284 |          |  |   | 7   |    |  |  | 0.5   | %  
|Wholesale and miscellaneous revenue(d)  |                    |                | 112   |       |  |          | 77    |          |  |   | 35  |    |  |  | 45.5  | %  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    
|Total electric revenue                  |                    | $              | 1,403 |       |  | $        | 1,361 |          |  | $ | 42  |    |  |  | 3.1   | %  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |    |  |  |       |    



---



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

113



---



##### 



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

|                             |                                     |          |     |    | 
|---------------------------- | ----------------------------------- | -------- | --- | -- | 
|                             |                                     | Variance
|                             |                                     |         
|Volume                       |                                     | $        | 61  |   
|Weather                      |                                     |          | 29  |   
|Customer choice              |                                     |          | (51 | ) 
|Rate changes                 |                                     |          | (28 | ) 
|Other                        |                                     |          | (4  | ) 
|                             |                                     |          |     |   
|                             | Electric retail revenue             |          |     | 7  | 
|                             |                                     |          |     |   
|ComEds integration into PJM |                                     |          | 43  |   
|Other                        |                                     |          | (8  | ) 
|                             |                                     |          |     |   
|                             | Wholesale and miscellaneous revenue |          |     | 35 | 
|                             |                                     |          |     |   
|                             | Total electric retail revenue       |          | $   | 42 | 
|                             |                                     |          |     |   

Volume.Revenues
from higher delivery volume, exclusive of weather, increased
$61 million due to increased residential customer growth
and an increased usage per customer, primarily residential and
large commercial and industrial.

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 June 30, 2004
were favorable compared to the same period in 2003. Cooling
degree-days increased 68% for the three months ended
June 30, 2004 compared to the same period in 2003, and were
14% lower than normal. Heating degree-days decreased 18% for the
three months ended June 30, 2004 compared to the same
period in 2003, and were 13% lower than normal.

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

For the three months ended June 30, 2004,
the energy provided by AESs was 5,257 GWhs, or 25%, as compared
to 3,632 GWhs, or 18%, for the same period in 2003.

The decrease in revenues reflects customers in
Illinois electing to purchase energy from an AES or the PPO. As
of June 30, 2004, the number of retail customers that had
elected to purchase energy from an AES or the ComEd PPO was
approximately 21,400 as compared to 22,000 as of the same period
in 2003, representing less than 1% of total customers in each
period. MWhs delivered to such customers increased from
approximately 6.3 million for the three months ended
June 30, 2003 to 7.6 million for three months ended
June 30, 2004, or from 32% to 36% of total quarterly retail
deliveries.

Rate Changes.ComEds CTC is reset in the second quarter of each year to
reflect market price adjustments. Starting in the June 2003
billing cycle, the increased wholesale market price of
electricity and other adjustments to the energy component,
decreased the collection of CTCs as compared to the respective
prior year period. ComEds CTC revenues decreased
$44 million for the three months ended June 30, 2004
as compared to the same period in 2003. This decrease was
partially offset by increased wholesale market prices which
increased energy revenue received under ComEds PPO by
$28 million.

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

114



---



##### 



ComEds Integration into
PJM.ComEds transmission
revenues and purchased power expense each increased by
$43 million in the three months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM. The increase relates to the change in control of the
transmission assets from ComEd to PJM whereby ComEd receives
revenues for its proportionate share of the transmission
revenues generated by PJM, but also pays PJM for the use of its
transmission assets. For 2004, ComEds operating revenues
are estimated to increase by approximately $180 million,
offset by a corresponding and equal increase in purchased power
expense. Starting in 2005, on an annual basis, ComEds
operating revenues and purchased power expense are estimated to
increase between $200 to $250 million; however, there is no
expected impact on revenues net of purchased power expense.



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

The increase in purchased power expense was
primarily attributable to an increase of $28 million due to
higher volume and a $10 million increase due to favorable
weather conditions offset by a $40 million decrease as a
result of non-residential customers choosing to purchase energy
from an AES. ComEds operating revenues and purchased power
expense each increased by $43 million in the three months
ended June 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM. See Operating
Revenues above.



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

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

|                                                                                       |  |          |     |  
|-------------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Higher corporate allocations(a)                                                        |  | $        | 17  |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 8   |  
|Tax consultant fees(b)                                                                 |  |          | 5   |  
|Employee fringe benefits(c)                                                            |  |          | (10 | )
|Contractors                                                                            |  |          | (11 | )
|Environmental charges                                                                  |  |          | (4  | )
|Other                                                                                  |  |          | (3  | )
|                                                                                       |  |          |     |  
|Increase in operating and maintenance expense                                          |  | $        | 2   |  
|                                                                                       |  |          |     |  



---



|    |  |                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprise companies resulting in
    ComEd comprising a greater percentage of Exelon.
|   
|(b) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 of
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                                                                                    
|   
|(c) |  | During the second quarter of 2004, ComEd adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $1 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.                                                                   



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

|                                          |  |                |     |      |  |          |    |          |  |   |   |  |  |  |      |  
|----------------------------------------- |  | -------------- | --- | ---- |  | -------- | -- | -------- |  | - | - |  |  |  | ---- | -
|                                          |  |                |     |      |  |         
|                                          |  | Three Months   |     |      |  |         
|                                          |  | Ended June 30, |     |      |  |         
|                                          |  |                |     |      |  |         
|                                          |  | 2004           |     | 2003 |  | Variance |    | % Change
|                                          |  |                |     |      |  |          |    |         
|Depreciation expense                      |  | $              | 81  |      |  | $        | 76 |          |  | $ | 5 |  |  |  | 6.6  | %
|Recoverable transition costs amortization |  |                | 12  |      |  |          | 12 |          |  |   |  |  |  |  |     |  
|Other amortization expense                |  |                | 10  |      |  |          | 8  |          |  |   | 2 |  |  |  | 25.0 | %
|                                          |  |                |     |      |  |          |    |          |  |   |   |  |  |  |      |  
|Total depreciation and amortization       |  | $              | 103 |      |  | $        | 96 |          |  | $ | 7 |  |  |  | 7.3  | %
|                                          |  |                |     |      |  |          |    |          |  |   |   |  |  |  |      |  

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

115



---



##### 



Recoverable transition costs amortization
remained constant in the three months ended June 30, 2004
compared to the same period in 2003. ComEd expects to fully
recover its remaining recoverable transition costs regulatory
asset balance of $109 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 increased for three
months ended June 30, 2004 as compared to the same period
in 2003 as a result of a 2003 refund of $5 million for
Illinois Electricity Distribution Taxes.



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

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



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

In 2004, ComEd has $6 million of equity in
net losses of subsidiaries as a result of deconsolidating its
financing trusts.



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

The change in Other, net is primarily related to
the 2003 $2 million gain on sale of non-utility property
and $1 million decrease in interest income on the long-term
receivable from Unicom Investments, Inc. as a result of a lower
principal balance.



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

The effective income tax rate was 39% for the
three months ended June 30, 2004, compared to 40% for the
three months ended June 30, 2003. The decrease in the
effective tax rate was primarily attributable to the adoption of
FSP FAS 106-2 and other items. See Note 12 of the
Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.

116



---



##### 





| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004 Compared
    to Six Months Ended June 30, 2003

|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |        |      |   
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ----- | ----- | -------- | ----- | -------- | ----- | - | --- | --- | --- | - | ------ | ------ | ---- | --
|                                                                                         |                                                                  |                                   |       |       |       |         
|                                                                                         |                                                                  | Six Months                        |       |       |       |         
|                                                                                         |                                                                  | Ended June 30,                    |       |       |       |         
|                                                                                         |                                                                  |                                   |       |       |       |         
|                                                                                         |                                                                  | 2004                              |       | 2003  |       | Variance |       | % Change
|                                                                                         |                                                                  |                                   |       |       |       |          |       |         
|Operating revenues                                                                       |                                                                  | $                                 | 2,739 |       |       | $        | 2,785 |          |       | $ | (46 | )   |     |   | (1.7   | )%    
|Operating expenses                                                                       |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         | Purchased power                                                  |                                   |       | 1,108 |       |          |       | 1,110    |       |   |     | (2  | )   |   |        | (0.2   | )%  
|                                                                                         | Operating and maintenance                                        |                                   |       | 438   |       |          |       | 483      |       |   |     | (45 | )   |   |        | (9.3   | )%  
|                                                                                         | Depreciation and amortization                                    |                                   |       | 205   |       |          |       | 190      |       |   |     | 15  |     |   |        | 7.9    | %   
|                                                                                         | Taxes other than income                                          |                                   |       | 151   |       |          |       | 148      |       |   |     | 3   |     |   |        | 2.0    | %   
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         |                                                                  | Total operating expense           |       |       | 1,902 |          |       |          | 1,931 |   |     |     | (29 | ) |        |        | (1.5 | )%
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|Operating income                                                                         |                                                                  |                                   | 837   |       |       |          | 854   |          |       |   | (17 | )   |     |   | (2.0   | )%    
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|Other income and deductions                                                              |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         | Interest expense                                                 |                                   |       | (202  | )     |          |       | (215     | )     |   |     | 13  |     |   |        | (6.0   | )%  
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                   |       |      |       |          |       | (14      | )     |   |     | 14  |     |   |        | (100.0 | )%  
|                                                                                         | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |       | (9    | )     |          |       |         |       |   |     | (9  | )   |   |        | n.m.   |     
|                                                                                         | Other, net                                                       |                                   |       | 17    |       |          |       | 34       |       |   |     | (17 | )   |   |        | (50.0  | )%  
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|                                                                                         |                                                                  | Total other income and deductions |       |       | (194  | )        |       |          | (195  | ) |     |     | 1   |   |        |        | (0.5 | )%
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                   | 643   |       |       |          | 659   |          |       |   | (16 | )   |     |   | (2.4   | )%    
|Income taxes                                                                             |                                                                  |                                   | 255   |       |       |          | 263   |          |       |   | (8  | )   |     |   | (3.0   | )%    
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|Net income before cumulative effect of a
    change in accounting principle              |                                                                  |                                   | 388   |       |       |          | 396   |          |       |   | (8  | )   |     |   | (2.0   | )%    
|Cumulative effect of a change in accounting
    principle                                |                                                                  |                                   |      |       |       |          | 5     |          |       |   | (5  | )   |     |   | (100.0 | )%    
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       
|Net income                                                                               |                                                                  | $                                 | 388   |       |       | $        | 401   |          |       | $ | (13 | )   |     |   | (3.2   | )%    
|                                                                                         |                                                                  |                                   |       |       |       |          |       |          |       |   |     |     |     |   |        |       



---

n.m.  not meaningful

117



---



##### 





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

ComEds electric sales statistics were as
follows:

|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |      |   
|--------------------------------------- | --------------------------- | -------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ------ | ----- | - |  | ----- | ---- | --
|                                        |                             |                |        |        |  |         
|                                        |                             | Six Months     |        |        |  |         
|                                        |                             | Ended June 30, |        |        |  |         
|                                        |                             |                |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004           |        | 2003   |  | Variance |        | % Change
|                                        |                             |                |        |        |  |          |        |         
|Full service(a)                         |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Residential                             |                             |                | 12,805 |        |  |          | 12,049 |          |  |  | 756    |       |   |  | 6.3   | %   
|Small commercial & industrial           |                             |                | 9,924  |        |  |          | 10,741 |          |  |  | (817   | )     |   |  | (7.6  | )%  
|Large commercial & industrial           |                             |                | 2,771  |        |  |          | 3,167  |          |  |  | (396   | )     |   |  | (12.5 | )%  
|Public authorities & electric railroads |                             |                | 2,440  |        |  |          | 2,749  |          |  |  | (309   | )     |   |  | (11.2 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        | Total full service          |                |        | 27,940 |  |          |        | 28,706   |  |  |        | (766  | ) |  |       | (2.7 | )%
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|PPO                                     |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Small commercial & industrial           |                             |                | 1,600  |        |  |          | 1,662  |          |  |  | (62    | )     |   |  | (3.7  | )%  
|Large commercial & industrial           |                             |                | 1,624  |        |  |          | 2,750  |          |  |  | (1,126 | )     |   |  | (40.9 | )%  
|Public authorities & electric railroads |                             |                | 1,012  |        |  |          | 1,069  |          |  |  | (57    | )     |   |  | (5.3  | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        |                             |                | 4,236  |        |  |          | 5,481  |          |  |  | (1,245 | )     |   |  | (22.7 | )%  
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Delivery only(b)                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Small commercial & industrial           |                             |                | 3,532  |        |  |          | 2,606  |          |  |  | 926    |       |   |  | 35.5  | %   
|Large commercial & industrial           |                             |                | 6,031  |        |  |          | 3,960  |          |  |  | 2,071  |       |   |  | 52.3  | %   
|Public authorities & electric railroads |                             |                | 894    |        |  |          | 529    |          |  |  | 365    |       |   |  | 69.0  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        |                             |                | 10,457 |        |  |          | 7,095  |          |  |  | 3,362  |       |   |  | 47.4  | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|                                        | Total PPO and delivery only |                |        | 14,693 |  |          |        | 12,576   |  |  |        | 2,117 |   |  |       | 16.8 | % 
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     
|Total retail deliveries                 |                             |                | 42,633 |        |  |          | 41,282 |          |  |  | 1,351  |       |   |  | 3.3   | %   
|                                        |                             |                |        |        |  |          |        |          |  |  |        |       |   |  |       |     



---



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

118



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##### 



|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |      |   
|--------------------------------------- | ------------------ | -------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | --- | - |  | ----- | ---- | --
|                                        |                    |                |       |       |  |         
|                                        |                    | Six Months     |       |       |  |         
|                                        |                    | Ended June 30, |       |       |  |         
|                                        |                    |                |       |       |  |         
|Electric Revenue                        |                    | 2004           |       | 2003  |  | Variance |       | % Change
|                                        |                    |                |       |       |  |          |       |         
|Full service(a)                         |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                             |                    | $              | 1,080 |       |  | $        | 1,018 |          |  | $ | 62  |     |   |  | 6.1   | %   
|Small commercial & industrial           |                    |                | 769   |       |  |          | 802   |          |  |   | (33 | )   |   |  | (4.1  | )%  
|Large commercial & industrial           |                    |                | 131   |       |  |          | 158   |          |  |   | (27 | )   |   |  | (17.1 | )%  
|Public authorities & electric railroads |                    |                | 148   |       |  |          | 165   |          |  |   | (17 | )   |   |  | (10.3 | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        | Total full service |                |       | 2,128 |  |          |       | 2,143    |  |   |     | (15 | ) |  |       | (0.7 | )%
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|PPO(b)                                  |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Small commercial & industrial           |                    |                | 108   |       |  |          | 109   |          |  |   | (1  | )   |   |  | (0.9  | )%  
|Large commercial & industrial           |                    |                | 92    |       |  |          | 144   |          |  |   | (52 | )   |   |  | (36.1 | )%  
|Public authorities & electric railroads |                    |                | 53    |       |  |          | 55    |          |  |   | (2  | )   |   |  | (3.6  | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        |                    |                | 253   |       |  |          | 308   |          |  |   | (55 | )   |   |  | (17.9 | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Delivery only(c)                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Small commercial & industrial           |                    |                | 67    |       |  |          | 73    |          |  |   | (6  | )   |   |  | (8.2  | )%  
|Large commercial & industrial           |                    |                | 84    |       |  |          | 91    |          |  |   | (7  | )   |   |  | (7.7  | )%  
|Public authorities & electric railroads |                    |                | 18    |       |  |          | 17    |          |  |   | 1   |     |   |  | 5.9   | %   
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                        |                    |                | 169   |       |  |          | 181   |          |  |   | (12 | )   |   |  | (6.6  | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total PPO and delivery only             |                    |                | 422   |       |  |          | 489   |          |  |   | (67 | )   |   |  | (13.7 | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric retail revenues          |                    |                | 2,550 |       |  |          | 2,632 |          |  |   | (82 | )   |   |  | (3.1  | )%  
|Wholesale and miscellaneous revenue(d)  |                    |                | 189   |       |  |          | 153   |          |  |   | 36  |     |   |  | 23.5  | %   
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric revenue                  |                    | $              | 2,739 |       |  | $        | 2,785 |          |  | $ | (46 | )   |   |  | (1.7  | )%  
|                                        |                    |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     



---



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

119



---



##### 



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

|                             |                                     |          |      |     |  
|---------------------------- | ----------------------------------- | -------- | ---- | --- | -
|                             |                                     | Variance
|                             |                                     |         
|Customer choice              |                                     | $        | (107 | )  
|Rate changes                 |                                     |          | (70  | )  
|Volume                       |                                     |          | 92   |    
|Weather                      |                                     |          | 6    |    
|Other                        |                                     |          | (3   | )  
|                             |                                     |          |      |    
|                             | Electric retail revenue             |          | $    | (82 | )
|                             |                                     |          |      |    
|ComEds integration into PJM |                                     |          | 43   |    
|Other                        |                                     |          | (7   | )  
|                             |                                     |          |      |    
|                             | Wholesale and miscellaneous revenue |          |      | 36  |  
|                             |                                     |          |      |    
|                             | Electric retail revenue             |          | $    | (46 | )
|                             |                                     |          |      |    

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

For the six months ended June 30, 2004, the
energy provided by AESs was 10,457 GWhs, or 25%, as compared to
7,095 GWhs, or 17%, for the same period in 2003.

The decrease in revenues reflects customers in
Illinois electing to purchase energy from an AES or the PPO. As
of June 30, 2004, the number of retail customers that had
elected to purchase energy from an AES or the ComEd PPO was
approximately 21,400 as compared to 22,000 as of June 30,
2003, representing less than 1% of total customers in each
period. MWhs delivered to such customers increased from
approximately 12.6 million for the six months ended
June 30, 2003 to approximately 14.7 million for six
months ended June 30, 2004, or from 30% to 34% of total
quarterly retail deliveries.

Rate Changes.Starting in the June 2003 billing cycle, the increased wholesale
market price of electricity and other adjustments to the energy
component, decreases the collection of CTCs as compared to the
respective prior year period. ComEds CTC revenues
decreased by $120 million for the six months ended
June 30, 2004 as compared to the same period in 2003. This
decrease was partially offset by increased wholesale market
prices which increased energy revenue received under
ComEds PPO by $47 million. For the six months ended
June 30, 2004 and June 30, 2003, ComEd collected
approximately $87 million and $207 million,
respectively, of CTC revenue. As a result of increasing
mitigation factors, changes in energy prices and the ability of
certain customers to establish fixed, multi-year CTC rates
beginning in 2003, and increases in ComEds OATT effective
May 1, 2004, ComEd anticipates that this revenue source
will decline to approximately $180 million for 2004 and
range from $100 million to $180 million annually in
2005 and 2006. Under the current restructuring statute, no CTCs
will be collected after 2006.

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

Weather.The weather
conditions for the six months ended June 30, 2004 were
favorable compared to the same period in 2003. Cooling
degree-days increased 68% for the six months ended June 30,
2004 compared to the same period in 2003 and were 14% lower than
normal. Heating degree-days decreased 8% for the six months
ended June 30, 2004 compared to the same period in 2003,
and were 4% lower than normal.

ComEds Integration into
PJM.ComEds transmission
revenues and purchased power expense each increased by
$43 million in the six months ended June 30, 2004
relative to 2003 due to ComEds May 1, 2004 entry into
PJM.

120



---



##### 





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

The decrease in purchased power expense was
primarily attributable to a $92 million decrease as a
result of customers choosing to purchase energy from an AES and
an $8 million decrease due to the mix of average pricing
related to ComEds PPA with Generation partially offset by
an increase of $50 million due to higher volume.
ComEds transmission revenues and purchased power expense
each increased by $43 million in the six months ended
June 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM. See Operating
Revenues above.



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

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

|                                                                                       |  |          |     |  
|-------------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Charge recorded at ComEd in 2003(a)                                                    |  | $        | (41 | )
|Contractors                                                                            |  |          | (13 | )
|Decreased payroll expense due to fewer
    employees(b)                                |  |          | (10 | )
|Environmental charges                                                                  |  |          | (5  | )
|Allowance for uncollectible accounts expense                                           |  |          | (4  | )
|Higher corporate allocations(c)                                                        |  |          | 23  |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 9   |  
|Tax consultant fees(d)                                                                 |  |          | 5   |  
|Employee fringe benefits(e)                                                            |  |          | 1   |  
|Other                                                                                  |  |          | (10 | )
|                                                                                       |  |          |     |  
|Decrease in operating and maintenance expense                                          |  | $        | (45 | )
|                                                                                       |  |          |     |  



---



|    |  |                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2003, ComEd reached an agreement with various
    Illinois retail market participants and other interested parties.                                                                                                                                                                                        
|   
|(b) |  | ComEd has fewer employees as a result of The
    Exelon Way terminations.                                                                                                                                                                                                                                     
|   
|(c) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprise companies resulting in
    ComEd comprising a greater percentage of Exelon.
|   
|(d) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 to
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                                                                                    
|   
|(e) |  | During the second quarter of 2004, ComEd adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $3 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.                                                                   



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

|                                          |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|----------------------------------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- |  |  |  | ---- | -
|                                          |  |                |     |      |  |         
|                                          |  | Six Months     |     |      |  |         
|                                          |  | Ended June 30, |     |      |  |         
|                                          |  |                |     |      |  |         
|                                          |  | 2004           |     | 2003 |  | Variance |     | % Change
|                                          |  |                |     |      |  |          |     |         
|Depreciation expense                      |  | $              | 163 |      |  | $        | 152 |          |  | $ | 11 |  |  |  | 7.2  | %
|Recoverable transition costs amortization |  |                | 23  |      |  |          | 23  |          |  |   |   |  |  |  |     |  
|Other amortization expense                |  |                | 19  |      |  |          | 15  |          |  |   | 4  |  |  |  | 26.7 | %
|                                          |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|Total depreciation and amortization       |  | $              | 205 |      |  | $        | 190 |          |  | $ | 15 |  |  |  | 7.9  | %
|                                          |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  

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

Recoverable transition costs amortization
remained constant in the six months ended June 30, 2004
compared to the same period in 2003. ComEd expects to fully
recover its remaining recoverable transition costs regulatory
asset balance of $109 million by 2006. Consistent with the
provision of the Illinois legislation,

121



---



##### 



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 increased for six months
ended June 30, 2004 as compared to the same period in 2003
as a result of a 2003 refund of $5 million for Illinois
Electricity Distribution taxes.



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

The aggregate of interest expense and
distributions on mandatorily redeemable preferred securities
decreased as a result of scheduled principal payments and
refinancings at lower rates. Effective December 31, 2003,
upon the adoption of FIN No. 46-R, ComEd deconsolidated its
financing trusts (see Note 2 of the Combined Notes to
Consolidated Financial Statements). ComEd no longer records
distributions on mandatorily redeemable preferred securities,
but records interest expense to affiliates related to
ComEds obligations to the financing trusts. This decrease
was offset by $3 million of less allowance for funds used
during construction (AFUDC) debt recorded during the six
months ended June 30, 2004 as a result of lower
construction work in process balances.



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

In 2004, ComEd has $9 million of equity in
net losses 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 as a result of the Agreement (see
Operating and Maintenance above), a reduction in
AFUDC equity of $4 million during 2004 as a result of lower
construction work in process balances and a $3 million
decrease in interest income on the long-term receivable from
Unicom Investments, Inc. as a result of a lower principal
balance.



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

The effective income tax rate was 40% for the six
months ended June 30, 2004, compared to 40% for the six
months ended June 30, 2003. The reduction in the effective
tax rate is primarily attributable to the adoption of FSP
FAS 106-2. See Note 12 of the Combined Notes to the
Consolidated Financial Statements for further discussion of the
change in the effective income tax rate.



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

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

Liquidity and Capital Resources

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

122



---



##### 





| |                                         
| | ----------------------------------------
| | 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 six months
ended June 30, 2004 and 2003 were $602 million and
$369 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 six months ended June 30, 2004 and 2003 were
affected by the following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the first half of 2003, ComEd made
    additional payments to Generation for amounts owed under the
    PPA. At June 30, 2004 and December 31, 2003, ComEd had
    accrued payments due to Generation under the PPA of
    $182 million and $171 million, respectively. At
    June 30, 2003 and December 31, 2002, ComEd had accrued
    payments due to Generation under the PPA of $185 million
    and $339 million, respectively.
|
| |  | Discretionary contributions by ComEd to
    Exelons defined benefit pension plans were
    $144 million for the six months ended June 30, 2004
    compared to $117 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 $11 million to satisfy IRS minimum funding
requirements. Of the $419 million, $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 June 30, 2004,
the majority of the deferred tax liabilities related to the
fossil plant sale are reflected in ComEds Consolidated
Balance Sheets with the remainder having been allocated to the
Consolidated Balance Sheets of Generation in connection with
Exelons 2001 corporate restructuring. The total 1999
income tax liability deferred as a result of these transactions
was approximately $1.1 billion. Changes in IRS
interpretations of existing primary tax authority or challenges
to ComEds positions could have the impact of accelerating
future income tax payments and increasing interest expense
related to the deferred tax gain that becomes current. Any
required payments could be significant to the cash flows of
ComEd. ComEds management believes ComEds reserve for
interest, which has been established in the event that such
positions are not sustained, has been appropriately recorded in
accordance with SFAS No. 5. However, the ultimate
outcome of such matters could result in additional unfavorable
or favorable adjustments to the results of operations, and such
adjustments could be material. Federal tax returns covering the
period of the 1999 sale are currently under IRS audit. Final
resolution of this matter is not anticipated for several years.



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

Cash flows used in investing activities were
$133 million for the six months ended June 30, 2004
compared to cash flows used in investing activities of
$524 million for the same period in 2003. The change in
cash flows from investing activities was primarily attributable
to $372 million of net proceeds from an investment in the
Exelon intercompany money pool and $36 million of net
changes in restricted cash. ComEds investing activities
for the six months ended June 30, 2004 were funded
primarily through operating activities.

ComEds capital expenditures for the six
months ended June 30, 2004 and 2003 were $369 million
and $355 million, respectively. ComEd estimates that it
will spend up to approximately $715 million in total

123



---



##### 



capital expenditures for 2004. This represents an
increase of approximately $100 million more than had been
previously planned, primarily as a result of expansion of the
ComEd distribution system to support new business and customer
growth. Although not anticipated, ComEd believes it could obtain
any needed financing through borrowings, the issuance of debt or
preferred securities, or capital contributions from Exelon.
ComEds proposed capital expenditures and other investments
are subject to periodic review and revision to reflect changes
in economic conditions and other factors.




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

Cash flows used in financing activities for the
six months ended June 30, 2004 were $476 million as
compared to cash flows from financing activities of
$173 million in 2003. The decrease in cash flows from
financing activities is primarily attributable to the retirement
of long-term debt of $357 million during the
six months ended June 30, 2004 versus the net proceeds
from the issuance of long-term debt of $473 million during
the same period in 2003. During the six months ended
June 30, 2003, ComEd also repaid $71 million of
commercial paper and paid $51 million to settle
interest-rate swaps. During the six months ended June 30,
2004, ComEd received $26 million from the settlement of
interest-rate swaps. Additionally, ComEd paid $207 million
in dividends to Exelon during the six months ended June 30,
2004 compared to $211 million in dividends during the same
period in 2003.

From time to time and as market conditions
warrant, ComEd may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of ComEds balance sheet.



| |              
| | -------------
| | 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, along with Exelon Corporate, PECO and
Generation, participated in a $750 million 364-day
unsecured revolving credit agreement and a $750 million
three-year unsecured revolving credit agreement with a group of
banks. On July 16, 2004, the $750 million 364-day
facility was replaced with a $1 billion five-year facility
and the $750 million three-year facility was reduced to
$500 million. These credit agreements, and ComEds
participation therein, are described above under Credit
Issues  Exelon Credit Facility in Exelon
Corporation  Liquidity and Capital Resources.

Capital Structure.ComEds capital structure at June 30, 2004 is
described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money
Pool.A description of the
intercompany money pool, and ComEds participation therein,
is set forth above under Credit Issues 
Intercompany Money Pool in Exelon
Corporation  Liquidity and Capital Resources.
During the six months ended June 30, 2004, ComEd earned
$2 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 June 30, 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 June 30, 2004,
ComEd had retained earnings of $1,064 million, which 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

124



---



##### 



federal and Illinois law and under the agreements
governing ComEd Financing II and III regarding
dividend payments by ComEd. ComEd is precluded from lending or
extending credit or indemnity to Exelon.




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

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



| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | See Note 9 and Note 19 to the Combined
    Notes to Consolidated Financial Statements for discussion of
    material changes in ComEds debt from the amounts set forth
    in the 2003 Form 10-K.

125



---



##### 








| |                    
| | -------------------
| | PECO ENERGY COMPANY

General

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

Executive Overview

Financial Results.PECOs net income increased 14% for the three months ended
June 30, 2004 as compared to the same period in 2003. This
increase reflects higher electric revenues, partially offset by
higher operating expenses.

PECOs net income increased 4% for the six
months ended June 30, 2004 as compared to the same period
in 2003 and is generally comparable between periods.

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

Financing
Activities.During the six months
ended June 30, 2004, PECO refinanced $75 million of
First and Refunding Mortgage Bonds and repaid $166 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, absent new
acquisitions.

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.

126



---



##### 



Results of Operations



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

|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |        |      |   
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ---- | --- | -------- | --- | -------- | --- | - | -- | -- | -- |  | ----- | ------ | ---- | --
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | Three Months                      |       |      |     |         
|                            |                                                                  | Ended June 30,                    |       |      |     |         
|                            |                                                                  |                                   |       |      |     |         
|                            |                                                                  | 2004                              |       | 2003 |     | Variance |     | % Change
|                            |                                                                  |                                   |       |      |     |          |     |         
|Operating revenues          |                                                                  | $                                 | 1,032 |      |     | $        | 961 |          |     | $ | 71 |    |    |  | 7.4   | %     
|Operating expenses          |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|                            | Purchased power                                                  |                                   |       | 402  |     |          |     | 386      |     |   |    | 16 |    |  |       | 4.1    | %   
|                            | Fuel                                                             |                                   |       | 83   |     |          |     | 67       |     |   |    | 16 |    |  |       | 23.9   | %   
|                            | Operating and maintenance                                        |                                   |       | 132  |     |          |     | 121      |     |   |    | 11 |    |  |       | 9.1    | %   
|                            | Depreciation and amortization                                    |                                   |       | 125  |     |          |     | 116      |     |   |    | 9  |    |  |       | 7.8    | %   
|                            | Taxes other than income                                          |                                   |       | 60   |     |          |     | 47       |     |   |    | 13 |    |  |       | 27.7   | %   
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|                            |                                                                  | Total operating expenses          |       |      | 802 |          |     |          | 737 |   |    |    | 65 |  |       |        | 8.8  | % 
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|Operating income            |                                                                  |                                   | 230   |      |     |          | 224 |          |     |   | 6  |    |    |  | 2.7   | %     
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|Other income and deductions |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|                            | Interest expense                                                 |                                   |       | (76  | )   |          |     | (83      | )   |   |    | 7  |    |  |       | (8.4   | )%  
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |     |     |          |     | (2       | )   |   |    | 2  |    |  |       | (100.0 | )%  
|                            | Equity in losses of unconsolidated affiliates                    |                                   |       | (7   | )   |          |     |         |     |   |    | (7 | )  |  |       | n.m.   |     
|                            | Other, net                                                       |                                   |       | 3    |     |          |     | 1        |     |   |    | 2  |    |  |       | n.m.   |     
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|                            |                                                                  | Total other income and deductions |       |      | (80 | )        |     |          | (84 | ) |    |    | 4  |  |       |        | (4.8 | )%
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|Income before income taxes  |                                                                  |                                   | 150   |      |     |          | 140 |          |     |   | 10 |    |    |  | 7.1   | %     
|Income taxes                |                                                                  |                                   | 50    |      |     |          | 52  |          |     |   | (2 | )  |    |  | (3.8  | )%    
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|Net income                  |                                                                  |                                   | 100   |      |     |          | 88  |          |     |   | 12 |    |    |  | 13.6  | %     
|Preferred stock dividends   |                                                                  |                                   | 1     |      |     |          | 2   |          |     |   | (1 | )  |    |  | (50.0 | )%    
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       
|Net income on common stock  |                                                                  | $                                 | 99    |      |     | $        | 86  |          |     | $ | 13 |    |    |  | 15.1  | %     
|                            |                                                                  |                                   |       |      |     |          |     |          |     |   |    |    |    |  |       |       



---

n.m.  not meaningful

127



---



##### 





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

PECOs electric sales statistics were as
follows:

|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |      |  
|---------------------------------------------- | ------------------- | -------------- | ----- | ----- |  | -------- | ----- | -------- |  |  | --- | --- |  |  | ----- | ---- | -
|                                               |                     |                |       |       |  |         
|                                               |                     | Three Months   |       |       |  |         
|                                               |                     | Ended June 30, |       |       |  |         
|                                               |                     |                |       |       |  |         
|Retail Deliveries  (in GWhs)                  |                     | 2004           |       | 2003  |  | Variance |       | % Change
|                                               |                     |                |       |       |  |          |       |         
|Full service(a)                                |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|Residential                                    |                     |                | 2,272 |       |  |          | 2,274 |          |  |  | (2  | )   |  |  | (0.1  | )%  
|Small commercial & industrial                  |                     |                | 1,686 |       |  |          | 1,532 |          |  |  | 154 |     |  |  | 10.1  | %   
|Large commercial & industrial                  |                     |                | 3,703 |       |  |          | 3,695 |          |  |  | 8   |     |  |  | 0.2   | %   
|Public authorities & electric railroads        |                     |                | 224   |       |  |          | 222   |          |  |  | 2   |     |  |  | 0.9   | %   
|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|                                               | Total full service  |                |       | 7,885 |  |          |       | 7,723    |  |  |     | 162 |  |  |       | 2.1  | %
|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|Delivery only(b)                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|Residential                                    |                     |                | 488   |       |  |          | 186   |          |  |  | 302 |     |  |  | 162.4 | %   
|Small commercial & industrial                  |                     |                | 433   |       |  |          | 323   |          |  |  | 110 |     |  |  | 34.1  | %   
|Large commercial & industrial                  |                     |                | 190   |       |  |          | 192   |          |  |  | (2  | )   |  |  | (1.0  | )%  
|Public authorities & electric
    railroads(c) |                     |                |      |       |  |          |      |          |  |  |    |     |  |  |      |     
|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|                                               | Total delivery only |                |       | 1,111 |  |          |       | 701      |  |  |     | 410 |  |  |       | 58.5 | %
|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     
|Total retail deliveries                        |                     |                | 8,996 |       |  |          | 8,424 |          |  |  | 572 |     |  |  | 6.8   | %   
|                                               |                     |                |       |       |  |          |       |          |  |  |     |     |  |  |       |     



---



|    |  |                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric service under tariffed rates.                    
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.                    
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than one GWh per
    quarter.

|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |      |  
|---------------------------------------------- | ------------------- | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- | -- |  |  | ----- | ---- | -
|                                               |                     |                |     |      |  |         
|                                               |                     | Three Months   |     |      |  |         
|                                               |                     | Ended June 30, |     |      |  |         
|                                               |                     |                |     |      |  |         
|Electric Revenue                               |                     | 2004           |     | 2003 |  | Variance |     | % Change
|                                               |                     |                |     |      |  |          |     |         
|Full service(a)                                |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|Residential                                    |                     | $              | 298 |      |  | $        | 297 |          |  | $ | 1  |    |  |  | 0.3   | %   
|Small commercial & industrial                  |                     |                | 197 |      |  |          | 180 |          |  |   | 17 |    |  |  | 9.4   | %   
|Large commercial & industrial                  |                     |                | 281 |      |  |          | 267 |          |  |   | 14 |    |  |  | 5.2   | %   
|Public authorities & electric railroads        |                     |                | 20  |      |  |          | 21  |          |  |   | (1 | )  |  |  | (4.8  | )%  
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|                                               | Total full service  |                |     | 796  |  |          |     | 765      |  |   |    | 31 |  |  |       | 4.1  | %
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|Delivery only(b)                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|Residential                                    |                     |                | 38  |      |  |          | 14  |          |  |   | 24 |    |  |  | 171.4 | %   
|Small commercial & industrial                  |                     |                | 23  |      |  |          | 17  |          |  |   | 6  |    |  |  | 35.3  | %   
|Large commercial & industrial                  |                     |                | 5   |      |  |          | 5   |          |  |   |   |    |  |  |      |     
|Public authorities & electric
    railroads(c) |                     |                |    |      |  |          |    |          |  |   |   |    |  |  |      |     
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|                                               | Total delivery only |                |     | 66   |  |          |     | 36       |  |   |    | 30 |  |  |       | 83.3 | %
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|Total electric retail revenues                 |                     |                | 862 |      |  |          | 801 |          |  |   | 61 |    |  |  | 7.6   | %   
|Wholesale and miscellaneous revenue(d)         |                     |                | 51  |      |  |          | 50  |          |  |   | 1  |    |  |  | 2.0   | %   
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     
|Total electric revenue                         |                     | $              | 913 |      |  | $        | 851 |          |  | $ | 62 |    |  |  | 7.3   | %   
|                                               |                     |                |     |      |  |          |     |          |  |   |    |    |  |  |       |     



---



|    |  |                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service revenue reflects revenue from
    customers taking electric service under tariffed rates, which
    includes the cost of energy, the delivery cost of the
    transmission and the distribution of the energy and a CTC charge.

128



---



##### 





|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Delivery only revenue reflects revenue from
    customers receiving generation from an AES, which includes a
    distribution charge and a CTC charge.
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than
    $1 million per quarter.                                
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue from PJM and other wholesale energy sales.                                      

The changes in electric retail revenues for the
three months ended June 30, 2004, as compared to the same
period in 2003, were as follows:

|                |  |          |     |  
|--------------- |  | -------- | --- | -
|                |  | Variance
|                |  |         
|Volume          |  | $        | 46  |  
|Weather         |  |          | 14  |  
|Rate mix        |  |          | 12  |  
|Rate change     |  |          | 5   |  
|Customer choice |  |          | (16 | )
|                |  |          |     |  
|Retail revenue  |  | $        | 61  |  
|                |  |          |     |  

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

Weather.The demand
for electricity is affected by weather conditions. Very warm
weather in summer months and very cold weather in other months
are referred to as favorable weather conditions
because these weather conditions result in increased sales of
electricity. Conversely, mild weather reduces demand. The
weather impact was favorable compared to the prior year. Cooling
degree-days increased 66% and heating degree-days decreased 32%.

Rate Mix.The
increase in revenues from rate mix was due to changes in monthly
usage patterns in all customer classes.

Rate change.Revenues increased $5 million due to a scheduled phase-out
of merger-related rate reductions. In connection with the
PUCs approval of the merger of PECO, Unicom Corporation,
and Exelon in 2000, PECO entered into a settlement agreement
with the PUC and 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.

Customer Choice.All
PECO customers may choose to purchase energy from an AES. This
choice does not affect kWh deliveries, but reduces revenue
collected from customers because they are not obtaining
generation supply from PECO.

For the three months ended June 30, 2004,
the energy provided by AESs was 1,111 GWhs, or 12%, as compared
to 701 GWhs, or 8%, for the three months ended June 30,
2003. As of June 30, 2004, the number of customers served
by AESs was 292,100, or 19%, as compared to 125,000, or 8%, as
of June 30, 2003. The increases in both the energy provided
by AESs and the number of customers served by AESs were due to
the assignment of small commercial and industrial customers and
residential customers to AESs in May and December 2003,
respectively, as required by the PUC and PECOs final
electric restructuring order.

Electric wholesale and miscellaneous revenue
includes PECOs proportionate share of the transmission
revenues generated by PJMs control of the PJM network
transmission assets, including PECOs. Additionally, PECO
pays PJM for its use of these transmission assets, and this
expense is recorded in purchased power.

129



---



##### 



PECOs gas sales statistics for the three
months ended June 30, 2004 as compared to the same period
in 2003 were as follows:

|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|--------------------------------- |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                  |  |                |        |      |  |         
|                                  |  | Three Months   |        |      |  |         
|                                  |  | Ended June 30, |        |      |  |         
|                                  |  |                |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                  |  |                |        |      |  |          |        |         
|Retail sales                      |  |                | 8,162  |      |  |          | 9,222  |          |  |  | (1,060 | ) |  |  | (11.5 | )%
|Transportation                    |  |                | 6,410  |      |  |          | 5,779  |          |  |  | 631    |   |  |  | 10.9  | % 
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total                             |  |                | 14,572 |      |  |          | 15,001 |          |  |  | (429   | ) |  |  | (2.9  | )%
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   

|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|----------------- |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | - |  |  |  | ---- | -
|                  |  |                |     |      |  |         
|                  |  | Three Months   |     |      |  |         
|                  |  | Ended June 30, |     |      |  |         
|                  |  |                |     |      |  |         
|Revenue           |  | 2004           |     | 2003 |  | Variance |     | % Change
|                  |  |                |     |      |  |          |     |         
|Retail sales      |  | $              | 102 |      |  | $        | 99  |          |  | $ | 3 |  |  |  | 3.0  | %
|Transportation    |  |                | 4   |      |  |          | 4   |          |  |   |  |  |  |  |     |  
|Resales and other |  |                | 13  |      |  |          | 7   |          |  |   | 6 |  |  |  | 85.7 | %
|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|Total             |  | $              | 119 |      |  | $        | 110 |          |  | $ | 9 |  |  |  | 8.2  | %
|                  |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  

The changes in gas retail revenue for the three
months ended June 30, 2004 as compared to the same period
in 2003, were as follows:

|                          |  |          |     |  
|------------------------- |  | -------- | --- | -
|                          |  | Variance
|                          |  |         
|Rate changes              |  | $        | 13  |  
|Volume                    |  |          | 4   |  
|Weather                   |  |          | (14 | )
|                          |  |          |     |  
|Total gas retail revenues |  | $        | 3   |  
|                          |  |          |     |  

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 June 1, 2003 and
March 1, 2004. The average rate per mmcf for the three
months ended June 30, 2004 was 30% higher than the rate for
the same period in 2003. PECOs gas cost rates are subject
to periodic adjustments by the PUC and are designed to recover
from or refund to customers the difference between the actual
cost of purchased gas and the amount included in rates. PECO has
asked the PUC for a decrease in its rates through the purchased
gas adjustment clause effective December 1, 2004 as a
result of lower current gas costs. This proposed decrease would
have no impact on PECOs operating income.

Volume.Exclusive of
the effect of weather conditions, revenues were higher due
primarily to increased sales in the residential and small
commercial and industrial classes.

Weather.The weather
conditions were unfavorable compared to the prior year. Heating
degree-days decreased 32%.

Resales and other revenue increased
$6 million primarily due to increased off-system sales.



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

The increase in purchased power expense was
attributable to $16 million of increased sales exclusive of
the effect of weather conditions, $14 million of higher
prices, and $6 million related to higher sales due to
favorable weather conditions, offset by $16 million from
customers in Pennsylvania assigned to or selecting an AES and
$4 million of lower PJM transmission expense.

130



---



##### 





| |     
| | ----
| | Fuel

The increase in fuel expense was attributable to
$13 million of higher gas costs, $10 million related
to increased off-system sales, and $3 million related to
increased sales exclusive of weather conditions, partially
offset by a $10 million decrease associated with lower
sales due to unfavorable weather conditions.



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

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

|                                                                                       |  |          |    |  
|-------------------------------------------------------------------------------------- |  | -------- | -- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Higher corporate allocations(a)                                                        |  | $        | 12 |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 4  |  
|Decreased payroll expense due to fewer
    employees(b)                                |  |          | (4 | )
|Employee fringe benefits(c)                                                            |  |          | (5 | )
|Other                                                                                  |  |          | 4  |  
|                                                                                       |  |          |    |  
|Increase in operating and maintenance expense                                          |  | $        | 11 |  
|                                                                                       |  |          |    |  



---



|    |  |                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Higher corporate allocations primarily result
    from a higher percentage allocation to Energy Delivery due to
    the sales of certain Enterprises businesses.                                                                          
|   
|(b) |  | PECO has fewer employees as a result of The
    Exelon Way.                                                                                                                                                                               
|   
|(c) |  | During the second quarter of 2004, PECO adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $1 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.



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

|                                           |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|------------------------------------------ |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | - |  |  |  | ---- | -
|                                           |  |                |     |      |  |         
|                                           |  | Three Months   |     |      |  |         
|                                           |  | Ended June 30, |     |      |  |         
|                                           |  |                |     |      |  |         
|                                           |  | 2004           |     | 2003 |  | Variance |     | % Change
|                                           |  |                |     |      |  |          |     |         
|Competitive transition charge amortization |  | $              | 86  |      |  | $        | 79  |          |  | $ | 7 |  |  |  | 8.9  | %
|Depreciation expense                       |  |                | 33  |      |  |          | 33  |          |  |   |  |  |  |  |     |  
|Other amortization expense                 |  |                | 6   |      |  |          | 4   |          |  |   | 2 |  |  |  | 50.0 | %
|                                           |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  
|Total depreciation and amortization        |  | $              | 125 |      |  | $        | 116 |          |  | $ | 9 |  |  |  | 7.8  | %
|                                           |  |                |     |      |  |          |     |          |  |   |   |  |  |  |      |  

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



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

The increase in taxes other than income was
primarily attributable to $12 million related to the
reversal of a use tax accrual resulting from an audit settlement
in 2003.



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

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

131



---



##### 





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

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



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

The increase was attributable to a
$2 million increase in interest income.



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

The effective tax rate was 33% for the three
months ended June 30, 2004 as compared to 37% for the same
period in 2003. The decrease in the effective tax rate was
primarily attributable to plant-related differences. See
Note 12 of the Combined Notes to the Consolidated Financial
Statements for further discussion of the change in the effective
income tax rate.

Results of Operations



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004 Compared
    to Six Months Ended June 30, 2003

|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |        |      |   
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ---- | ----- | -------- | ----- | -------- | ----- | - | -- | --- | -- |  | ----- | ------ | ---- | --
|                            |                                                                  |                                   |       |      |       |         
|                            |                                                                  | Six Months                        |       |      |       |         
|                            |                                                                  | Ended June 30,                    |       |      |       |         
|                            |                                                                  |                                   |       |      |       |         
|                            |                                                                  | 2004                              |       | 2003 |       | Variance |       | % Change
|                            |                                                                  |                                   |       |      |       |          |       |         
|Operating revenues          |                                                                  | $                                 | 2,271 |      |       | $        | 2,178 |          |       | $ | 93 |     |    |  | 4.3   | %     
|Operating expenses          |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|                            | Purchased power                                                  |                                   |       | 799  |       |          |       | 808      |       |   |    | (9  | )  |  |       | (1.1   | )%  
|                            | Fuel                                                             |                                   |       | 332  |       |          |       | 257      |       |   |    | 75  |    |  |       | 29.2   | %   
|                            | Operating and maintenance                                        |                                   |       | 266  |       |          |       | 261      |       |   |    | 5   |    |  |       | 1.9    | %   
|                            | Depreciation and amortization                                    |                                   |       | 250  |       |          |       | 236      |       |   |    | 14  |    |  |       | 5.9    | %   
|                            | Taxes other than income                                          |                                   |       | 118  |       |          |       | 110      |       |   |    | 8   |    |  |       | 7.3    | %   
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|                            |                                                                  | Total operating expenses          |       |      | 1,765 |          |       |          | 1,672 |   |    |     | 93 |  |       |        | 5.6  | % 
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|Operating income            |                                                                  |                                   | 506   |      |       |          | 506   |          |       |   |   |     |    |  |      |       
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|Other income and deductions |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|                            | Interest expense                                                 |                                   |       | (153 | )     |          |       | (168     | )     |   |    | 15  |    |  |       | (8.9   | )%  
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |     |       |          |       | (5       | )     |   |    | 5   |    |  |       | (100.0 | )%  
|                            | Equity in earnings (losses) of unconsolidated
    affiliates     |                                   |       | (13  | )     |          |       |         |       |   |    | (13 | )  |  |       | n.m.   |     
|                            | Other, net                                                       |                                   |       | 5    |       |          |       | 10       |       |   |    | (5  | )  |  |       | (50.0  | )%  
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|                            |                                                                  | Total other income and deductions |       |      | (161  | )        |       |          | (163  | ) |    |     | 2  |  |       |        | (1.2 | )%
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|Income before income taxes  |                                                                  |                                   | 345   |      |       |          | 343   |          |       |   | 2  |     |    |  | 0.6   | %     
|Income taxes                |                                                                  |                                   | 112   |      |       |          | 119   |          |       |   | (7 | )   |    |  | (5.9  | )%    
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|Net income                  |                                                                  |                                   | 233   |      |       |          | 224   |          |       |   | 9  |     |    |  | 4.0   | %     
|Preferred stock dividends   |                                                                  |                                   | 2     |      |       |          | 3     |          |       |   | (1 | )   |    |  | (33.3 | )%    
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       
|Net income on common stock  |                                                                  | $                                 | 231   |      |       | $        | 221   |          |       | $ | 10 |     |    |  | 4.5   | %     
|                            |                                                                  |                                   |       |      |       |          |       |          |       |   |    |     |    |  |       |       



---

n.m.  not meaningful

132



---



##### 





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

PECOs electric sales statistics were as
follows:

|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |      |   
|---------------------------------------------- | ------------------- | -------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ---- | ---- | - |  | ----- | ---- | --
|                                               |                     |                |        |        |  |         
|                                               |                     | Six Months     |        |        |  |         
|                                               |                     | Ended June 30, |        |        |  |         
|                                               |                     |                |        |        |  |         
|Retail Deliveries  (in GWhs)                  |                     | 2004           |        | 2003   |  | Variance |        | % Change
|                                               |                     |                |        |        |  |          |        |         
|Full service(a)                                |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |                | 5,016  |        |  |          | 5,389  |          |  |  | (373 | )    |   |  | (6.9  | )%  
|Small commercial & industrial                  |                     |                | 3,370  |        |  |          | 3,312  |          |  |  | 58   |      |   |  | 1.8   | %   
|Large commercial & industrial                  |                     |                | 7,320  |        |  |          | 7,177  |          |  |  | 143  |      |   |  | 2.0   | %   
|Public authorities & electric railroads        |                     |                | 453    |        |  |          | 475    |          |  |  | (22  | )    |   |  | (4.6  | )%  
|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|                                               | Total full service  |                |        | 16,159 |  |          |        | 16,353   |  |  |      | (194 | ) |  |       | (1.2 | )%
|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|Delivery only(b)                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |                | 1,070  |        |  |          | 450    |          |  |  | 620  |      |   |  | 137.8 | %   
|Small commercial & industrial                  |                     |                | 857    |        |  |          | 525    |          |  |  | 332  |      |   |  | 63.2  | %   
|Large commercial & industrial                  |                     |                | 340    |        |  |          | 402    |          |  |  | (62  | )    |   |  | (15.4 | )%  
|Public authorities & electric
    railroads(c) |                     |                |       |        |  |          |       |          |  |  |     |      |   |  |      |     
|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|                                               | Total delivery only |                |        | 2,267  |  |          |        | 1,377    |  |  |      | 890  |   |  |       | 64.6 | % 
|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     
|Total retail deliveries                        |                     |                | 18,426 |        |  |          | 17,730 |          |  |  | 696  |      |   |  | 3.9   | %   
|                                               |                     |                |        |        |  |          |        |          |  |  |      |      |   |  |       |     



---



|    |  |                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(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 AES.                    
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than one GWh per
    quarter.

|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |      |   
|---------------------------------------------- | ------------------- | -------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | --- | - |  | ----- | ---- | --
|                                               |                     |                |       |       |  |         
|                                               |                     | Six Months     |       |       |  |         
|                                               |                     | Ended June 30, |       |       |  |         
|                                               |                     |                |       |       |  |         
|Electric Revenue                               |                     | 2004           |       | 2003  |  | Variance |       | % Change
|                                               |                     |                |       |       |  |          |       |         
|Full service(a)                                |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                                    |                     | $              | 611   |       |  | $        | 656   |          |  | $ | (45 | )   |   |  | (6.9  | )%  
|Small commercial & industrial                  |                     |                | 374   |       |  |          | 374   |          |  |   |    |     |   |  |      |     
|Large commercial & industrial                  |                     |                | 551   |       |  |          | 534   |          |  |   | 17  |     |   |  | 3.2   | %   
|Public authorities & electric railroads        |                     |                | 40    |       |  |          | 42    |          |  |   | (2  | )   |   |  | (4.8  | )%  
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                               | Total full service  |                |       | 1,576 |  |          |       | 1,606    |  |   |     | (30 | ) |  |       | (1.9 | )%
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Delivery only(b)                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                                    |                     |                | 80    |       |  |          | 31    |          |  |   | 49  |     |   |  | 158.1 | %   
|Small commercial & industrial                  |                     |                | 43    |       |  |          | 27    |          |  |   | 16  |     |   |  | 59.3  | %   
|Large commercial & industrial                  |                     |                | 9     |       |  |          | 11    |          |  |   | (2  | )   |   |  | (18.2 | )%  
|Public authorities & electric
    railroads(c) |                     |                |      |       |  |          |      |          |  |   |    |     |   |  |      |     
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|                                               | Total delivery only |                |       | 132   |  |          |       | 69       |  |   |     | 63  |   |  |       | 91.3 | % 
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric retail revenues                 |                     |                | 1,708 |       |  |          | 1,675 |          |  |   | 33  |     |   |  | 2.0   | %   
|Wholesale and miscellaneous revenue(d)         |                     |                | 99    |       |  |          | 104   |          |  |   | (5  | )   |   |  | (4.8  | )%  
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric revenue                         |                     | $              | 1,807 |       |  | $        | 1,779 |          |  | $ | 28  |     |   |  | 1.6   | %   
|                                               |                     |                |       |       |  |          |       |          |  |   |     |     |   |  |       |     



---



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

133



---



##### 





|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Delivery only revenue reflects revenue from
    customers receiving generation from an AES, which includes a
    distribution charge and a CTC charge.
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than
    $1 million per quarter.                                
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue from PJM and other wholesale energy sales.                                      

The changes in electric retail revenues for the
six months ended June 30, 2004, as compared to the same
period in 2003, were as follows:

|                |  |          |     |  
|--------------- |  | -------- | --- | -
|                |  | Variance
|                |  |         
|Volume          |  | $        | 66  |  
|Rate change     |  |          | 9   |  
|Weather         |  |          | 7   |  
|Customer choice |  |          | (42 | )
|Rate mix        |  |          | (7  | )
|                |  |          |     |  
|Retail revenue  |  | $        | 33  |  
|                |  |          |     |  

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

Rate change.Revenues increased $9 million due to a scheduled phase-out
of merger-related rate reductions.

Weather.The weather
impact was favorable compared to the prior year. Cooling
degree-days increased 66% and heating degree-days decreased 8%.

Customer Choice.As
noted, all PECO customers may choose to purchase energy from an
AES. This choice does not affect kWh deliveries, but reduces
revenue collected from customers because they are not obtaining
generation supply from PECO.

For the six months ended June 30, 2004, the
energy provided by AESs was 2,267 GWhs, or 12%, as compared to
1,377 GWhs, or 8%, for the six months ended June 30, 2003.
As of June 30, 2004, the number of customers served by AESs
was 292,100, or 19%, as compared to 125,000, or 8%, as of
June 30, 2003. The increases in both the energy provided by
AESs and the number of customers served by AESs were due to the
assignment of small commercial and industrial customers and
residential customers to AESs in May and December 2003,
respectively, as required by the PUC and PECOs final
electric restructuring order.

Rate Mix.The
decrease in revenues from rate mix was due to changes in monthly
usage patterns in all customer classes during the six months
ended June 30, 2004 as compared to the same period in 2003.

Electric wholesale and miscellaneous revenue
includes PECOs proportionate share of the transmission
revenues generated by PJMs control of the PJM network
transmission assets, including PECOs. Additionally, PECO
pays PJM for its use of these transmission assets, and this
expense is recorded in purchased power. Electric wholesale and
miscellaneous revenue decreased $5 million primarily due to
lower PJM transmission revenue.

PECOs gas sales statistics for the six
months ended June 30, 2004 as compared to the same period
in 2003 were as follows:

|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|--------------------------------- |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                  |  |                |        |      |  |         
|                                  |  | Six Months     |        |      |  |         
|                                  |  | Ended June 30, |        |      |  |         
|                                  |  |                |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                  |  |                |        |      |  |          |        |         
|Retail sales                      |  |                | 37,965 |      |  |          | 40,685 |          |  |  | (2,720 | ) |  |  | (6.7 | )%
|Transportation                    |  |                | 13,542 |      |  |          | 13,942 |          |  |  | (400   | ) |  |  | (2.9 | )%
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total                             |  |                | 51,507 |      |  |          | 54,627 |          |  |  | (3,120 | ) |  |  | (5.7 | )%
|                                  |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   

134



---



##### 



|                  |       |                |     |      |  |          |     |          |  |   |    |    |  |  |      |      |  
|----------------- | ----- | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- | -- |  |  | ---- | ---- | -
|                  |       |                |     |      |  |         
|                  |       | Six Months     |     |      |  |         
|                  |       | Ended June 30, |     |      |  |         
|                  |       |                |     |      |  |         
|Revenue           |       | 2004           |     | 2003 |  | Variance |     | % Change
|                  |       |                |     |      |  |          |     |         
|Retail sales      |       | $              | 431 |      |  | $        | 372 |          |  | $ | 59 |    |  |  | 15.9 | %   
|Transportation    |       |                | 9   |      |  |          | 9   |          |  |   |   |    |  |  |     |     
|Resales and other |       |                | 24  |      |  |          | 18  |          |  |   | 6  |    |  |  | 33.3 | %   
|                  |       |                |     |      |  |          |     |          |  |   |    |    |  |  |      |     
|                  | Total |                | $   | 464  |  |          | $   | 399      |  |   | $  | 65 |  |  |      | 16.3 | %
|                  |       |                |     |      |  |          |     |          |  |   |    |    |  |  |      |     

The changes in gas retail revenue for the six
months ended June 30, 2004 as compared to the same period
in 2003, were as follows:

|                          |  |          |     |  
|------------------------- |  | -------- | --- | -
|                          |  | Variance
|                          |  |         
|Rate changes              |  | $        | 82  |  
|Weather                   |  |          | (19 | )
|Volume                    |  |          | (4  | )
|                          |  |          |     |  
|Total gas retail revenues |  | $        | 59  |  
|                          |  |          |     |  

Rate Changes.The
favorable variance in rates was attributable to increases in
rates through PUC-approved changes to the purchased gas
adjustment clause that became effective March 1, 2003,
June 1, 2003, December 1, 2003, and March 1,
2004. The average rate per mmcf for the six months ended
June 30, 2004 was 39% higher than the rate for the same
period in 2003.

Weather.The weather
conditions were unfavorable compared to the prior year. Heating
degree-days decreased 8% compared to the same period in 2003.

Volume.Exclusive of
the effect of weather conditions, revenues were lower in the six
months ended June 30, 2004 compared to the same period in
2003 due primarily to decreased sales in the residential and
small commercial and industrial classes.

Resales and other revenue increased
$6 million primarily due to increased off-system sales.



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

The decrease in purchased power expense was
attributable to $42 million from customers in Pennsylvania
assigned to or selecting an AES and a $9 million decrease
in PJM transmission expense, partially offset by an increase of
$31 million related to increased sales exclusive of weather
conditions, $8 million of higher prices, and a
$3 million increase associated with higher sales due to
favorable weather conditions.



| |     
| | ----
| | Fuel

The increase in fuel expense was attributable to
$82 million of higher gas costs and $13 million
related to increased off-system sales, partially offset by a
$16 million decrease associated with lower sales due to
unfavorable weather conditions and a decrease of $4 million
related to decreased sales exclusive of the effect of weather
conditions.

135



---



##### 





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

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

|                                                                                       |  |          |     |  
|-------------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                       |  | Variance
|                                                                                       |  |         
|Higher corporate allocations(a)                                                        |  | $        | 19  |  
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |          | 10  |  
|Decreased payroll expense due to fewer
    employees(b)                                |  |          | (11 | )
|Employee fringe benefits(c)                                                            |  |          | (4  | )
|Allowance for uncollectible accounts expense                                           |  |          | (2  | )
|Other                                                                                  |  |          | (7  | )
|                                                                                       |  |          |     |  
|Increase in operating and maintenance expense                                          |  | $        | 5   |  
|                                                                                       |  |          |     |  



---



|    |  |                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Higher corporate allocations primarily result
    from a higher percentage allocation to Energy Delivery due to
    the sales of certain Enterprises businesses.                                                                          
|   
|(b) |  | PECO has fewer employees as a result of The
    Exelon Way terminations.                                                                                                                                                                  
|   
|(c) |  | During the second quarter of 2004, PECO adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $2 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.



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

|                                           |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|------------------------------------------ |  | -------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- |  |  |  | ---- | -
|                                           |  |                |     |      |  |         
|                                           |  | Six Months     |     |      |  |         
|                                           |  | Ended June 30, |     |      |  |         
|                                           |  |                |     |      |  |         
|                                           |  | 2004           |     | 2003 |  | Variance |     | % Change
|                                           |  |                |     |      |  |          |     |         
|Competitive transition charge amortization |  | $              | 174 |      |  | $        | 161 |          |  | $ | 13 |  |  |  | 8.1  | %
|Depreciation expense                       |  |                | 66  |      |  |          | 66  |          |  |   |   |  |  |  |     |  
|Other amortization expense                 |  |                | 10  |      |  |          | 9   |          |  |   | 1  |  |  |  | 11.1 | %
|                                           |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  
|Total depreciation and amortization        |  | $              | 250 |      |  | $        | 236 |          |  | $ | 14 |  |  |  | 5.9  | %
|                                           |  |                |     |      |  |          |     |          |  |   |    |  |  |  |      |  

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



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

The increase in taxes other than income was
primarily attributable to $12 million related to the
reversal of a use tax accrual in 2003 resulting from an audit
settlement, partially offset by $6 million of lower capital
stock tax.



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

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



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

In 2004, PECO recorded $13 million of equity
in net losses of subsidiaries as a result of deconsolidating its
subsidiary financing trusts.

136



---



##### 





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

The decrease was attributable to a
$2 million decrease in interest income and a
$4 million favorable settlement of a customer contract in
2003.



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

The effective tax rate was 33% for the six months
ended June 30, 2004 as compared to 35% for the same period
in 2003. The decrease in the effective tax rate was primarily
attributable to plant-related differences. See Note 12 of
the Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.

Liquidity and Capital Resources

PECOs business is capital intensive and
requires considerable capital resources. PECOs capital
resources are primarily provided by internally generated cash
flows from operations and, to the extent necessary, external
financing, including the issuance of commercial paper,
participation in the intercompany money pool or capital
contributions from Exelon. PECOs access to external
financing at reasonable terms is dependent on its credit ratings
and general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
PECO no longer has access to the capital markets at reasonable
terms, PECO has access to a revolving credit facility that PECO
currently utilizes to support its commercial paper program. See
the Credit Issues section of Liquidity and
Capital Resources for further discussion. Capital
resources are used primarily to fund PECOs capital
requirements, including construction, 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 six months
ended June 30, 2004 and 2003 were $509 million and
$425 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 six months ended June 30, 2004 and 2003 were
affected by the following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Deferred natural gas costs decreased
    $56 million during the six months ended June 30, 2004
    resulting in an increase to operating cash flows. During 2003,
    an increase in deferred natural gas costs of $24 million
    resulted in a decrease to operating cash flows. PECOs gas
    cost rates are subject to periodic adjustments by the PUC and
    are designed to recover from or refund to customers the
    difference between the actual cost of purchased gas and the
    amount included in rates. During 2004, PECO was recovering fuel
    revenues from customers in excess of gas costs being incurred.
    During 2003, PECO was incurring gas costs in excess of fuel
    revenues being recovered from customers.
|
| |  | Discretionary contributions by PECO to
    Exelons defined benefit pension plans were $5 million
    during the six months ended June 30, 2004 compared to
    $12 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 $11 million to satisfy IRS minimum funding
requirements. Of the $419 million, $8 million is
expected to be funded by PECO.

137



---



##### 





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

Cash flows used in investing activities for the
six months ended June 30, 2004 and 2003 were
$137 million and $98 million, respectively. The
$39 million increase in cash used in investing activities
was primarily attributable to a $35 million investment in
the Exelon intercompany money pool in 2004 and a change in
restricted cash which provided cash flows of $28 million in
2003, partially offset by lower construction expenditures of
$27 million in 2004. PECOs investing activities
during the six months ended June 30, 2004 were funded 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
six months ended June 30, 2004 were $317 million
compared to $329 million for the same period in 2003. The
decrease in cash flows used in financing activities is primarily
due to a decrease in the retirement of preferred securities of
$100 million and an increase in contributions received from
Exelon of $54 million, partially offset by an increase in
net retirements of long-term debt of $124 million.
Additionally, PECO paid dividends of $182 million and $168
during the six months ended June 30, 2004 and 2003,
respectively, of which $180 million and $165 million,
respectively, were common dividends paid to Exelon.

From time to time and as market conditions
warrant, PECO may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of PECOs balance sheet.



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

Exelon Credit
Facility.PECO 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. On
July 16, 2004, the $750 million 364-day facility was
replaced with a $1 billion five-year facility and the
$750 million three-year facility was reduced to
$500 million. These credit agreements, and PECOs
participation therein, are described above under Credit
Issues  Exelon Credit Facility in Exelon
Corporation  Liquidity and Capital Resources.

Capital Structure.PECOs capital structure at June 30, 2004 is described
above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money
Pool.A description of the
intercompany money pool, and PECOs participation therein,
is set forth above under Credit Issues 
Intercompany Money Pool in Exelon
Corporation  Liquidity and Capital Resources.
During the six months ended June 30, 2004, PECO earned less
than $1 million in interest from its investments in the
intercompany money pool.

Security Ratings.PECOs access to the capital markets, including the
commercial paper market, and its financing costs in those
markets depend on the securities ratings of the entity that is
accessing the capital markets. On July 22, 2004,
Standard & Poors Ratings Services lowered the
ratings on PECOs First Mortgage Bonds from A to A-. None
of PECOs other securities ratings has changed. None of
PECOs borrowings is subject to default or prepayment as a
result of a downgrading of securities although such a
downgrading could increase fees and interest charges under
Exelons credit facilities.

138



---



##### 



Shelf Registration.As of June 30, 2004, PECO has a current shelf registration
statement for the sale of $550 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 June 30, 2004,
PECO had retained earnings of $597 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 June 30, 2004 were materially unchanged,
other than in the normal course of business, from the amounts
set forth in the 2003 Form 10-K except for the following:



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | See Note 9 and 19 to the Combined Notes to
    Consolidated Financial Statements for discussion of material
    changes in PECOs debt from the amounts set forth in the
    2003 Form 10-K.

139



---



##### 






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s results for
the three and six months ended June 30, 2003 were as
follows:

|                                  |  |                |     |                |  |   |     |  
|--------------------------------- |  | -------------- | --- | -------------- |  | - | --- | -
|                                  |  | Three Months   |     | Six Months    
|                                  |  | Ended June 30, |     | Ended June 30,
|                                  |  | 2003           |     | 2003          
|                                  |  |                |     |               
|Total revenues                    |  | $              | 174 |                |  | $ | 504 |  
|Intersegment revenues             |  |                | 2   |                |  |   | 9   |  
|Income (loss) before income taxes |  |                | 1   |                |  |   | (16 | )
|Income taxes (benefit)            |  |                | 1   |                |  |   | (6  | )
|Net income (loss)                 |  |                |    |                |  |   | (10 | )

Executive Overview

Financial Results.Generation reported an overall increase in net income of
$36 million for the quarter ended June 30, 2004 as
compared to the prior year, due primarily to the gain of
$52 million, net of income taxes, recorded on the sale of
Boston Generating, partially offset by operating net losses of
$10 million for Boston Generating, incurred during the
second quarter of 2004. Generation reported an overall increase
in net income of $83 million for the six months ended
June 30, 2004 as compared to the same period in 2003. This
increase was primarily attributable to a gain of
$52 million, net of income taxes, recorded on the sale of
Boston Generating, partially offset by operating net losses of
$28 million for Boston Generating incurred during the first
five months of 2004, $43 million attributable to the
incremental results of AmerGen, Exelon Energy and Sithe and
$32 million of net income for the cumulative effect of a
change in accounting principle. Generation also experienced
improved results due to increased realized margins as a result
of its successful forward hedging strategy and increased market
prices. Generations results of operations for the six
months ended June 30, 2003 included the pre-tax impairment
charge on Generations investment in Sithe of
$200 million and a $108 million net gain resulting
from the cumulative effect of a change in accounting principle
for the adoption of SFAS 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.

Divestiture
Activities.During the second quarter,
Generation completed the sale and transfer of the assets of
Boston Generating to a special purpose entity formed by the
lenders of the Boston Generating credit facility.

In connection with the consolidation of Sithe,
Generation recorded assets held for sale related to Sithes
investments in certain hydroelectric facilities. At
June 30, 2004, Generations consolidated balance
sheets reflect $9 million of assets, and $3 million of
liabilities held for sale related to these investments.
Generation continues to explore various transactional strategies
related to its investment in Sithe.

Financing
Activities.On June 30, 2004,
Generation had $211 million of commercial paper outstanding
and $198 million in outstanding money pool loans to fund
operations. Also, Generation increased its distributions to
Exelon by approximately $64 million during the first six
months of 2004 compared to the same period in the prior year.
Generation continues to meet its capital resource commitments
with internally generated cash and expects to do so in the
foreseeable future, absent new acquisitions.

140



---



##### 



Operations.Generations nuclear fleet achieved a 93.3% capacity factor
during the six months ended June 30, 2004 compared to 94.2%
during the same period in 2003, primarily as a result of an
increased number of planned outages in 2004 as compared to 2003.
Generation anticipates transferring plant operations and power
marketing activities of Boston Generating to a special purpose
entity designated by the lenders of the Boston Generating credit
facility during the third quarter of 2004.

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

Results of Operations



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

|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |        |       |  
|---------------------------------------------------- | ----------------------------------------------- | --------------------------------- | ----- | ---- | ----- | -------- | ----- | -------- | ----- | - | --- | ---- | -- |  | ---- | ------ | ----- | -
|                                                     |                                                 |                                   |       |      |       |         
|                                                     |                                                 | Three Months                      |       |      |       |         
|                                                     |                                                 | Ended June 30,                    |       |      |       |         
|                                                     |                                                 |                                   |       |      |       |         
|                                                     |                                                 | 2004                              |       | 2003 |       | Variance |       | % Change
|                                                     |                                                 |                                   |       |      |       |          |       |         
|Operating revenues                                   |                                                 | $                                 | 1,948 |      |       | $        | 1,886 |          |       | $ | 62  |      |    |  | 3.3  | %     
|Operating expenses                                   |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|                                                     | Purchased power                                 |                                   |       | 563  |       |          |       | 800      |       |   |     | (237 | )  |  |      | (29.6  | )%   
|                                                     | Fuel                                            |                                   |       | 462  |       |          |       | 348      |       |   |     | 114  |    |  |      | 32.8   | %    
|                                                     | Operating and maintenance                       |                                   |       | 623  |       |          |       | 451      |       |   |     | 172  |    |  |      | 38.1   | %    
|                                                     | Depreciation and amortization                   |                                   |       | 69   |       |          |       | 46       |       |   |     | 23   |    |  |      | 50.0   | %    
|                                                     | Taxes other than income                         |                                   |       | 48   |       |          |       | 40       |       |   |     | 8    |    |  |      | 20.0   | %    
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|                                                     |                                                 | Total operating expenses          |       |      | 1,765 |          |       |          | 1,685 |   |     |      | 80 |  |      |        | 4.7   | %
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|Operating income                                     |                                                 |                                   | 183   |      |       |          | 201   |          |       |   | (18 | )    |    |  | (9.0 | )%    
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|Other income and deductions                          |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|                                                     | Interest expense                                |                                   |       | (51  | )     |          |       | (20      | )     |   |     | (31  | )  |  |      | 155.0  | %    
|                                                     | Equity in earnings of unconsolidated affiliates |                                   |       |     |       |          |       | 18       |       |   |     | (18  | )  |  |      | (100.0 | )%   
|                                                     | Other, net                                      |                                   |       | 134  |       |          |       | 34       |       |   |     | 100  |    |  |      | n.m.   |      
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|                                                     |                                                 | Total other income and deductions |       |      | 83    |          |       |          | 32    |   |     |      | 51 |  |      |        | 159.4 | %
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|Income before income taxes and minority
    interest |                                                 |                                   | 266   |      |       |          | 233   |          |       |   | 33  |      |    |  | 14.2 | %     
|Income taxes                                         |                                                 |                                   | 100   |      |       |          | 91    |          |       |   | 9   |      |    |  | 9.9  | %     
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|Income before minority interest                      |                                                 |                                   | 166   |      |       |          | 142   |          |       |   | 24  |      |    |  | 16.9 | %     
|Minority interest                                    |                                                 |                                   | 12    |      |       |          |      |          |       |   | 12  |      |    |  | n.m. |       
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       
|Net income                                           |                                                 | $                                 | 178   |      |       | $        | 142   |          |       | $ | 36  |      |    |  | 25.4 | %     
|                                                     |                                                 |                                   |       |      |       |          |       |          |       |   |     |      |    |  |      |       



---

n.m.  not meaningful

141



---



##### 





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

For the three months ended June 30, 2004 and
2003, Generations sales were as follows:

|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|-------------------------------------- |  | -------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | - |  |  | ----- | --
|                                       |  |                |       |      |  |         
|                                       |  | Three Months   |       |      |  |         
|                                       |  | Ended June 30, |       |      |  |         
|                                       |  |                |       |      |  |         
|Revenue                                |  | 2004           |       | 2003 |  | Variance |       | % Change
|                                       |  |                |       |      |  |          |       |         
|Electric sales to affiliates(a)        |  | $              | 846   |      |  | $        | 877   |          |  | $ | (31 | ) |  |  | (3.5  | )%
|Wholesale and retail electric sales(b) |  |                | 858   |      |  |          | 897   |          |  |   | (39 | ) |  |  | (4.3  | )%
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total electric energy sales revenue    |  |                | 1,704 |      |  |          | 1,774 |          |  |   | (70 | ) |  |  | (3.9  | )%
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Retail gas sales                       |  |                | 84    |      |  |          |      |          |  |   | 84  |   |  |  | n.m.  |   
|Trading portfolio                      |  |                | (2    | )    |  |          | (1    | )        |  |   | (1  | ) |  |  | 100.0 | % 
|Other revenue(c)                       |  |                | 162   |      |  |          | 113   |          |  |   | 49  |   |  |  | 43.4  | % 
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   
|Total revenue                          |  | $              | 1,948 |      |  | $        | 1,886 |          |  | $ | 62  |   |  |  | 3.3   | % 
|                                       |  |                |       |      |  |          |       |          |  |   |     |   |  |  |       |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|-------------------------------------- |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                       |  |                |        |      |  |         
|                                       |  | Three Months   |        |      |  |         
|                                       |  | Ended June 30, |        |      |  |         
|                                       |  |                |        |      |  |         
|Sales (in GWhs)                        |  | 2004(c)        |        | 2003 |  | Variance |        | % Change
|                                       |  |                |        |      |  |          |        |         
|Sales to affiliates(a)                 |  |                | 26,133 |      |  |          | 26,869 |          |  |  | (736   | ) |  |  | (2.7 | )%
|Wholesale and retail electric sales(b) |  |                | 24,976 |      |  |          | 27,449 |          |  |  | (2,473 | ) |  |  | (9.0 | )%
|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total sales                            |  |                | 51,109 |      |  |          | 54,318 |          |  |  | (3,209 | ) |  |  | (5.9 | )%
|                                       |  |                |        |      |  |          |        |          |  |  |        |   |  |  |      |   



---



|    |  |                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                                                                             
|   
|(c) |  | Sales in 2004 do not include 6,185 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 5,324 GWhs and 7,919 GWhs for
the three months ended June 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

142



---



##### 



Generations average margin and other
operating data for the three months ended June 30, 2004 and
2003 are as follows:

|                                                             |                                         |                |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | --------------------------------------- | -------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                         |                |       |      
|                                                             |                                         | Three Months   |       |      
|                                                             |                                         | Ended June 30, |       |      
|                                                             |                                         |                |       |      
|($/MWh)                                                      |                                         | 2004           |       | 2003  |  | % Change
|                                                             |                                         |                |       |       |  |         
|Average revenue                                              |                                         |                |       |       |  |          |       |       |  |  |      |     
|                                                             | Electric sales to affiliates(a)         |                | $     | 32.37 |  |          | $     | 32.64 |  |  |      | (0.8 | )%
|                                                             | Wholesale and retail electric sales(b)  |                |       | 34.35 |  |          |       | 32.68 |  |  |      | 5.1  | % 
|                                                             | Total  excluding the trading portfolio |                |       | 33.34 |  |          |       | 32.66 |  |  |      | 2.1  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                         | $              | 20.06 |       |  | $        | 21.13 |       |  |  | (5.1 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $              | 13.28 |       |  | $        | 11.53 |       |  |  | 15.2 | %   



---



|    |  |                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail 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.                                                                         

The changes in Generations operating
revenues for the three months ended June 30, 2004 compared
to the same period in 2003 consisted of the following:

|                                    |  |          |     |  
|----------------------------------- |  | -------- | --- | -
|                                    |  | Variance
|                                    |  |         
|Retail gas revenue                  |  | $        | 84  |  
|Wholesale and retail electric sales |  |          | (39 | )
|Electric revenue from affiliates    |  |          | (31 | )
|Other                               |  |          | 48  |  
|                                    |  |          |     |  
|Increase in operating revenues      |  | $        | 62  |  
|                                    |  |          |     |  

Retail Gas Revenue.Retail gas revenue increased $84 million as a result of the
transfer of Exelon Energy Company to Generation as of
January 1, 2004.

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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Effects of EITF 03-11 adoption(a)               |  | $        | (238 | )
|Boston Generating                               |  |          | (43  | )
|Exelon Energy Company and AmerGen operations    |  |          | 104  |  
|Other operations                                |  |          | 138  |  
|                                                |  |          |      |  
|Decrease in wholesale and retail electric sales |  | $        | (39  | )
|                                                |  |          |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $1 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

As previously described, the adoption of
EITF 03-11 on January 1, 2004 resulted in the netting
of certain revenues and the associated purchase power and fuel
expense in 2004. The sale of Boston Generating in May 2004
resulted in less revenues from this entity compared to the same
period in the prior year. The acquisition of Exelon Energy and
AmerGen resulted in increased market and retail electric sales
of approximately $104 million compared to the same period
in the prior year.

The other increase in wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market and higher prices in the spot wholesale market.
Market prices in the Midwest region were primarily driven by
higher coal prices, and in the Mid-Atlantic region market prices
were driven by higher oil and gas prices.

143



---



##### 



Electric Sales to
Affiliates.Revenue from sales to
affiliates decreased primarily as a result of the transfer of
Exelon Energy Company to Generation effective January 1,
2004. Sales to Exelon Energy Company are no longer reported as
affiliate revenue by Generation. Revenue from sales to Exelon
Energy Company for the three months ended June 30, 2003 was
$44 million.

The decrease in revenue from sales to affiliates
was partially offset by $15 million in higher sales to
Energy Delivery. The higher sales to Energy Delivery were
primarily due to an overall increased usage per customer and
favorable weather conditions.

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



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

Generations supply source is summarized
below:

|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|------------------------------------ |  | -------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                     |  |                |        |      |  |         
|                                     |  | Three Months   |        |      |  |         
|                                     |  | Ended June 30, |        |      |  |         
|                                     |  |                |        |      |  |         
|Supply Source (in GWhs)              |  | 2004           |        | 2003 |  | Variance |        | % Change
|                                     |  |                |        |      |  |          |        |         
|Nuclear generation(a)                |  |                | 34,254 |      |  |          | 29,619 |          |  |  | 4,635  |   |  |  | 15.6  | % 
|Purchases  non-trading portfolio(b) |  |                | 11,904 |      |  |          | 19,344 |          |  |  | (7,440 | ) |  |  | (38.5 | )%
|Fossil and hydro generation          |  |                | 4,951  |      |  |          | 5,355  |          |  |  | (404   | ) |  |  | (7.5  | )%
|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total supply                         |  |                | 51,109 |      |  |          | 54,318 |          |  |  | (3,209 | ) |  |  | (5.9  | )%
|                                     |  |                |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen for 2003. AmerGen generated
    5,122 GWhs during the three months ended June 30, 2004.                                                                                                                                                             
|   
|(b) |  | Sales in 2004 do not include 6,185 GWhs that were
    netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes PPAs with AmerGen, which
    represented 3,731 GWhs in 2003.

Generations supply mix changed as a result
of the sale of Boston Generating in May 2004.

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

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Effects of the adoption of EITF 03-11          |  | $        | (239 | )
|Volume                                         |  |          | 92   |  
|Price                                          |  |          | 49   |  
|Boston Generating                              |  |          | (33  | )
|Midwest Generation                             |  |          | (25  | )
|AmerGen and Exelon Energy Company              |  |          | (11  | )
|Sithe Energies, Inc.                           |  |          | 62   |  
|Mark-to-market adjustments on hedging activity |  |          | 11   |  
|Other                                          |  |          | (29  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (123 | )
|                                               |  |          |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power of
$238 million and fuel expense of $1 million.

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

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

144



---



##### 



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

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

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, purchased power decreased
$97 million. In prior periods, Generation reported energy
purchased from AmerGen as purchased power expense. Due to the
transfer of Exelon Energy Company to Generation effective
January 1, 2004, fuel expense increased $86 million as
fuel purchases made by Exelon Energy Company did not previously
affect Generations results.

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

Hedging Activity.Mark-to-market gains on hedging activities were $21 million
for the three months ended June 30, 2004 compared to gains
of $32 million for the same period of 2003. Hedging
activities in 2004 relating to Boston Generating operations
accounted for a gain of $6 million and hedging activities
relating to other Generation operations in 2004 accounted for a
gain of $15 million.

Other.Other
decreases in purchased power and fuel expense were primarily due
to $21 million of lower transmission expense resulting from
reduced inter-region transmission charges, primarily associated
with ComEds integration into PJM during the second quarter
of 2004 and $10 million of nuclear fuel amortization
recorded in 2003 as a result of the replacement of
underperforming fuel at the Quad Cities Station.



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

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

|                                                                                 |  |          |     |  
|-------------------------------------------------------------------------------- |  | -------- | --- | -
|                                                                                 |  | Variance
|                                                                                 |  |         
|AmerGen and Exelon Energy Company                                                |  | $        | 87  |  
|Sithe Energies, Inc.                                                             |  |          | 22  |  
|Decommissioning accretion costs(a)                                               |  |          | 18  |  
|Boston Generating                                                                |  |          | 13  |  
|Pension, payroll and benefit costs, primarily
    associated with The Exelon Way |  |          | (14 | )
|Other                                                                            |  |          | 46  |  
|                                                                                 |  |          |     |  
|Increase in operating and maintenance expense                                    |  | $        | 172 |  
|                                                                                 |  |          |     |  



---



|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|(a) |  | Includes $10 million due to AmerGen asset
    retirement obligation accretion.

The increase in operating and maintenance expense
is primarily due to the inclusion of AmerGen, Exelon Energy
Company and Sithe in Generations consolidated results for
2004. The increase in operating and maintenance expenses
attributable to Boston Generating was due to Mystic 8 and 9 and
Fore River commencing commercial operation at the end of the
second quarter of 2003 and in the third quarter of 2003,
respectively, which more than offset the reduction in operating
and maintenance expenses resulting from their sale in May 2004.
Decommissioning accretion costs increased primarily due to the
inclusion of AmerGen in this period compared to the prior year.
The reduction in payroll-related costs associated with the
implementation of the programs associated with The Exelon Way
partially offset the other increases to operating and
maintenance expense.

145



---



##### 



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

|                                                                     |  |                |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |               
|                                                                     |  | Three Months  
|                                                                     |  | Ended June 30,
|                                                                     |  |               
|                                                                     |  | 2004           |       | 2003
|                                                                     |  |                |       |     
|Nuclear fleet capacity factor(a)                                     |  |                | 96.1  | %    |  |   | 94.0  | %
|Nuclear fleet production cost per MWh(a)                             |  | $              | 10.88 |      |  | $ | 12.08 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $              | 47.13 |      |  | $ | 41.36 |  



---



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

Higher nuclear capacity factors and lower nuclear
production costs were primarily due to nine fewer planned
refueling outage days, resulting in a $14 million decrease
in planned outage costs for the three months ended June 30,
2004 as compared to the same period in 2003. There was one
planned refueling outage that began in late March 2004 and was
completed during the three months ended June 30, 2004,
while there was one refueling outage that began and was
completed during the three months ended June 30, 2003. The
three months ended June 30, 2004 included seven unplanned
outages compared to nine unplanned outages during the same
period in 2003.

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



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

The increase in depreciation and amortization
expense for the three months ended June 30, 2004 as
compared to the same period in 2003 includes the impact of
capital additions and the consolidation of Sithe, AmerGen and
Exelon Energy. These increases were partially offset by a
decrease in depreciation expense related to the Boston
Generating facilities as the assets were classified as held for
sale during the period.



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

The increase in interest expense was primarily
due to the issuance of $500 million of Senior Notes in
December 2003 and interest expense related to Sithe long-term
debt.



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

The decrease in equity in earnings of
unconsolidated affiliates was primarily due to a
$20 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 Combined Notes to Consolidated Financial
Statements for further discussion of Generations purchase
of British Energys 50% interest in AmerGen.

146



---



##### 





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

The components of other, net for the three months
ended June 30, 2004 as compared to the same period in the
prior year, are as follows:

|                                         |  |                |     |      |  |          |    |          |  |  |     |   |  |  |      |   
|---------------------------------------- |  | -------------- | --- | ---- |  | -------- | -- | -------- |  |  | --- | - |  |  | ---- | --
|                                         |  |                |     |      |  |         
|                                         |  | Three Months   |     |      |  |         
|                                         |  | Ended June 30, |     |      |  |         
|                                         |  |                |     |      |  |         
|Other, Net                               |  | 2004           |     | 2003 |  | Variance |    | % Change
|                                         |  |                |     |      |  |          |    |         
|Gain on sale of Boston Generating(a)     |  |                | 85  |      |  |          |   |          |  |  | 85  |   |  |  | n.m. |   
|Decommissioning trust funds(b)           |  |                | 29  |      |  |          | 32 |          |  |  | (3  | ) |  |  | (9.4 | )%
|Decommissioning trust funds  AmerGen(b) |  |                | 9   |      |  |          |   |          |  |  | 9   |   |  |  | n.m. |   
|Other income from Sithe                  |  |                | 9   |      |  |          |   |          |  |  | 9   |   |  |  | n.m. |   
|Other                                    |  |                | 2   |      |  |          | 2  |          |  |  |    |   |  |  |     |   
|                                         |  |                |     |      |  |          |    |          |  |  |     |   |  |  |      |   
|Total                                    |  |                | 134 |      |  |          | 34 |          |  |  | 100 |   |  |  | n.m. |   
|                                         |  |                |     |      |  |          |    |          |  |  |     |   |  |  |      |   



---



|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | See Note 3 of the Combined Notes to the
    Consolidated Financial Statements for further discussion of
    Generations sale of Boston Generating.



|    |                                                            
|--- | -----------------------------------------------------------
|(b) | Includes investment income and realized
    gains/(losses).

n.m.  not meaningful



| |                          
| | -------------------------
| | Effective Income Tax Rate

The effective income tax rate was 38% for the
three months ended June 30, 2004 compared to 39% for the
same period in 2003. This decrease was primarily attributable to
the impairment charges recorded in 2003 related to
Generations investment in Sithe that resulted in a pre-tax
loss. In addition, the rate increased due to the additional
nuclear decommissioning investment income associated with
AmerGen and its related taxes. See Note 12 of the Combined
Notes to the Consolidated Financial Statements for further
discussion of the change in the effective income tax rate.

147



---



##### 



Results of Operations



| |                                                                              
| | -----------------------------------------------------------------------------
| | Six Months Ended June 30, 2004 Compared
    to Six Months Ended June 30, 2003

|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |        |       |  
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------- | ----- | ----- | ----- | -------- | ----- | -------- | ----- | - | --- | ---- | --- |  | ----- | ------ | ----- | -
|                                                                                                                |                                                              |                                   |       |       |       |         
|                                                                                                                |                                                              | Six Months Ended                  |       |       |       |         
|                                                                                                                |                                                              | June 30,                          |       |       |       |         
|                                                                                                                |                                                              |                                   |       |       |       |         
|                                                                                                                |                                                              | 2004                              |       | 2003  |       | Variance |       | % Change
|                                                                                                                |                                                              |                                   |       |       |       |          |       |         
|Operating revenues                                                                                              |                                                              | $                                 | 3,900 |       |       | $        | 3,765 |          |       | $ | 135 |      |     |  | 3.6   | %     
|Operating expenses                                                                                              |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                                                                | Purchased power                                              |                                   |       | 1,081 |       |          |       | 1,642    |       |   |     | (561 | )   |  |       | (34.2  | )%   
|                                                                                                                | Fuel                                                         |                                   |       | 1,048 |       |          |       | 706      |       |   |     | 342  |     |  |       | 48.4   | %    
|                                                                                                                | Operating and maintenance                                    |                                   |       | 1,273 |       |          |       | 943      |       |   |     | 330  |     |  |       | 35.0   | %    
|                                                                                                                | Depreciation and amortization                                |                                   |       | 124   |       |          |       | 91       |       |   |     | 33   |     |  |       | 36.3   | %    
|                                                                                                                | Taxes other than income                                      |                                   |       | 95    |       |          |       | 88       |       |   |     | 7    |     |  |       | 8.0    | %    
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                                                                |                                                              | Total operating expenses          |       |       | 3,621 |          |       |          | 3,470 |   |     |      | 151 |  |       |        | 4.4   | %
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Operating income                                                                                                |                                                              |                                   | 279   |       |       |          | 295   |          |       |   | (16 | )    |     |  | (5.4  | )%    
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Other income and deductions                                                                                     |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                                                                | Interest expense                                             |                                   |       | (77   | )     |          |       | (38      | )     |   |     | (39  | )   |  |       | (102.6 | )%   
|                                                                                                                | Equity in earnings (losses) of unconsolidated
    affiliates |                                   |       | (2    | )     |          |       | 37       |       |   |     | (39  | )   |  |       | (105.4 | )%   
|                                                                                                                | Other, net                                                   |                                   |       | 183   |       |          |       | (132     | )     |   |     | 315  |     |  |       | n.m.   |      
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|                                                                                                                |                                                              | Total other income and deductions |       |       | 104   |          |       |          | (133  | ) |     |      | 237 |  |       |        | 178.2 | %
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Income before income taxes, minority interest
    and cumulative effect of changes in accounting
    principles |                                                              |                                   | 383   |       |       |          | 162   |          |       |   | 221 |      |     |  | 136.4 | %     
|Income taxes                                                                                                    |                                                              |                                   | 146   |       |       |          | 71    |          |       |   | 75  |      |     |  | 105.6 | %     
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Income before minority interest and cumulative
    effect of changes in accounting principles                   |                                                              |                                   | 237   |       |       |          | 91    |          |       |   | 146 |      |     |  | 160.4 | %     
|Minority interest                                                                                               |                                                              |                                   | 11    |       |       |          | (2    | )        |       |   | 13  |      |     |  | n.m.  |       
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Income before cumulative effect of changes in
    accounting principles                                         |                                                              |                                   | 248   |       |       |          | 89    |          |       |   | 159 |      |     |  | 178.7 | %     
|Cumulative effect of changes in accounting
    principles, net of income taxes                                  |                                                              |                                   | 32    |       |       |          | 108   |          |       |   | (76 | )    |     |  | (70.4 | )%    
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       
|Net income                                                                                                      |                                                              | $                                 | 280   |       |       | $        | 197   |          |       | $ | 83  |      |     |  | 42.1  | %     
|                                                                                                                |                                                              |                                   |       |       |       |          |       |          |       |   |     |      |     |  |       |       



---

n.m.  not meaningful

148



---



##### 





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

For the six months ended June 30, 2004 and
2003, Generations sales were as follows:

|                                       |  |                  |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|-------------------------------------- |  | ---------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ---- | --
|                                       |  |                  |       |      |  |         
|                                       |  | Six Months Ended |       |      |  |         
|                                       |  | June 30,         |       |      |  |         
|                                       |  |                  |       |      |  |         
|Revenue                                |  | 2004             |       | 2003 |  | Variance |       | % Change
|                                       |  |                  |       |      |  |          |       |         
|Electric sales to affiliates(a)        |  | $                | 1,706 |      |  | $        | 1,842 |          |  | $ | (136 | ) |  |  | (7.4 | )%
|Wholesale and retail electric sales(b) |  |                  | 1,742 |      |  |          | 1,754 |          |  |   | (12  | ) |  |  | (0.7 | )%
|                                       |  |                  |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Total electric energy sales revenue    |  |                  | 3,448 |      |  |          | 3,596 |          |  |   | (148 | ) |  |  | (4.1 | )%
|                                       |  |                  |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Retail gas sales                       |  |                  | 260   |      |  |          |      |          |  |   | 260  |   |  |  | n.m. |   
|Trading portfolio                      |  |                  | (2    | )    |  |          | (2    | )        |  |   |     |   |  |  |     |   
|Other revenue(c)                       |  |                  | 194   |      |  |          | 171   |          |  |   | 23   |   |  |  | 13.5 | % 
|                                       |  |                  |       |      |  |          |       |          |  |   |      |   |  |  |      |   
|Total revenue                          |  | $                | 3,900 |      |  | $        | 3,765 |          |  | $ | 135  |   |  |  | 3.6  | % 
|                                       |  |                  |       |      |  |          |       |          |  |   |      |   |  |  |      |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   
|-------------------------------------- |  | ---------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------ | - |  |  | ---- | --
|                                       |  |                  |         |      |  |         
|                                       |  | Six Months Ended |         |      |  |         
|                                       |  | June 30,         |         |      |  |         
|                                       |  |                  |         |      |  |         
|Sales (in GWhs)                        |  | 2004             |         | 2003 |  | Variance |         | % Change
|                                       |  |                  |         |      |  |          |         |         
|Electric sales to affiliates(a)        |  |                  | 53,597  |      |  |          | 57,463  |          |  |  | (3,866 | ) |  |  | (6.7 | )%
|Wholesale and retail electric sales(b) |  |                  | 48,959  |      |  |          | 51,264  |          |  |  | (2,305 | ) |  |  | (4.5 | )%
|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   
|Total sales                            |  |                  | 102,556 |      |  |          | 108,727 |          |  |  | (6,171 | ) |  |  | (5.7 | )%
|                                       |  |                  |         |      |  |          |         |          |  |  |        |   |  |  |      |   



---



|    |  |                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 electric sales.                                                                                        
|   
|(b) |  | Sales in 2004 do not include 11,638 GWhs which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes retail electric sales of Exelon
    Energy Company in 2004.

Trading volumes of 10,437 GWhs and 17,446 GWhs
for the six months ended June 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

149



---



##### 



Generations average margin and other
operating data for the six months ended June 30, 2004 and
2003 are as follows:

|                                                             |                                         |                  |       |       |  |          |       |       |  |  |      |      |   
|------------------------------------------------------------ | --------------------------------------- | ---------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | --
|                                                             |                                         |                  |       |      
|                                                             |                                         | Six Months Ended |       |      
|                                                             |                                         | June 30,         |       |      
|                                                             |                                         |                  |       |      
|($/MWh)                                                      |                                         | 2004             |       | 2003  |  | % Change
|                                                             |                                         |                  |       |       |  |         
|Average revenue                                              |                                         |                  |       |       |  |          |       |       |  |  |      |     
|                                                             | Electric sales to affiliates(a)         |                  | $     | 31.83 |  |          | $     | 32.06 |  |  |      | (0.7 | )%
|                                                             | Wholesale and retail electric sales(b)  |                  |       | 35.58 |  |          |       | 34.22 |  |  |      | 4.0  | % 
|                                                             | Total  excluding the trading portfolio |                  |       | 33.62 |  |          |       | 33.07 |  |  |      | 1.7  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                         | $                | 20.77 |       |  | $        | 21.60 |       |  |  | (3.8 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $                | 12.85 |       |  | $        | 11.47 |       |  |  | 12.0 | %   



---



|    |  |                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail 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.                                                                         

The changes in Generations operating
revenues for the six months ended June 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                    |  |          |      |  
|----------------------------------- |  | -------- | ---- | -
|                                    |  | Variance
|                                    |  |         
|Retail gas revenue                  |  | $        | 260  |  
|Electric sales to affiliates        |  |          | (136 | )
|Wholesale and retail electric sales |  |          | (12  | )
|Other                               |  |          | 23   |  
|                                    |  |          |      |  
|Increase in operating revenues      |  | $        | 135  |  
|                                    |  |          |      |  

Retail Gas Revenue.Retail gas revenue increased as a result of the transfer of
Exelon Energy Company to Generation as of January 1, 2004.

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

|                                                |  |          |      |  
|----------------------------------------------- |  | -------- | ---- | -
|                                                |  | Variance
|                                                |  |         
|Effects of EITF 03-11 adoption(a)               |  | $        | (444 | )
|Boston Generating                               |  |          | 74   |  
|Exelon Energy Company and AmerGen operations    |  |          | 182  |  
|Other operations                                |  |          | 176  |  
|                                                |  |          |      |  
|Decrease in wholesale and retail electric sales |  | $        | (12  | )
|                                                |  |          |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $8 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

As previously described, the adoption of
EITF 03-11 on January 1, 2004 resulted in the netting
of certain revenues and the associated purchase power and fuel
expense in 2004. The acquisition of Exelon Energy and AmerGen
resulted in increased market and retail electric sales of
approximately $182 million compared to the same period in
the prior year.

The other increase in wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market and higher prices in the spot wholesale market.
Market prices in the Midwest region were primarily driven by
higher coal prices, while the Mid-Atlantic region market prices
were driven primarily by higher oil and gas prices.

150



---



##### 



Electric Sales to
Affiliates.Revenue from sales to
affiliates decreased primarily as a result of Exelon Energy
Companys assets and operations being transferred to
Generation effective January 1, 2004. Sales to Exelon
Energy Company are no longer reported as affiliate revenue by
Generation. Revenue from sales to Exelon Energy Company for the
six months ended June 30, 2003 was $108 million.

The decrease in revenue from sales to affiliates
included $40 million in lower sales to Energy Delivery. The
lower sales to Energy Delivery was primarily due to customers
purchasing energy from alternative electric suppliers and
unfavorable weather conditions in the ComEd and PECO service
territories compared to the prior year.

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



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

Generations supply source is summarized
below:

|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|------------------------------------ |  | ---------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                     |  |                  |         |      |  |         
|                                     |  | Six Months Ended |         |      |  |         
|                                     |  | June 30,         |         |      |  |         
|                                     |  |                  |         |      |  |         
|Supply Source (in GWhs)              |  | 2004(c)          |         | 2003 |  | Variance |         | % Change
|                                     |  |                  |         |      |  |          |         |         
|Nuclear generation(a)                |  |                  | 67,665  |      |  |          | 58,949  |          |  |  | 8,716   |   |  |  | 14.8  | % 
|Purchases  non-trading portfolio(b) |  |                  | 23,595  |      |  |          | 39,373  |          |  |  | (15,778 | ) |  |  | (40.1 | )%
|Fossil and hydroelectric generation  |  |                  | 11,296  |      |  |          | 10,405  |          |  |  | 891     |   |  |  | 8.6   | % 
|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total supply                         |  |                  | 102,556 |      |  |          | 108,727 |          |  |  | (6,171  | ) |  |  | (5.7  | )%
|                                     |  |                  |         |      |  |          |         |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen for 2003. AmerGen generated
    9,761 GWhs during the six months ended June 30, 2004.                                                                                                                                                                  
|   
|(b) |  | Sales in 2004 do not include 11,638 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes PPAs with AmerGen, which
    represented 6,219 GWhs in 2003.

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 accounted for an increase of 2,688 GWhs offset by
decreases in other fossil generating facilities.

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

|                                               |  |          |      |  
|---------------------------------------------- |  | -------- | ---- | -
|                                               |  | Variance
|                                               |  |         
|Effects of the adoption of EITF 03-11          |  | $        | (452 | )
|Volume                                         |  |          | 129  |  
|Price                                          |  |          | (47  | )
|Midwest Generation                             |  |          | (48  | )
|AmerGen and Exelon Energy Company              |  |          | 101  |  
|Sithe Energies, Inc.                           |  |          | 62   |  
|Boston Generating                              |  |          | 75   |  
|Mark-to-market adjustments on hedging activity |  |          | 19   |  
|Other                                          |  |          | (58  | )
|                                               |  |          |      |  
|Decrease in purchased power and fuel expense   |  | $        | (219 | )
|                                               |  |          |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power of
$444 million and fuel expense of $8 million.

151



---



##### 



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

Price.The decrease
primarily reflects lower average fossil fuel costs of
$47 million during the six months ended June 30, 2004
as compared to the same period in 2003. Natural gas, oil and
coal prices all decreased during this period.

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.

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, purchased power decreased
$160 million. In prior periods, Generation reported energy
purchased from AmerGen as purchased power expense. Due to the
transfer of Exelon Energy Company to Generation effective
January 1, 2004, fuel expense increased $261 million
as fuel purchases made by Exelon Energy Company did not
previously impact Generations results.

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

Boston Generating.The increase in fuel and purchased power expense for Boston
Generating is due primarily to the Mystic 8 and 9 generating
facilities which began commercial operations at the end of the
second quarter of 2003, and the Fore River generating facilities
which began commercial operations during the third quarter of
2003. See Note 3 of the Combined Notes to Consolidated
Financial Statements for additional information regarding Boston
Generating. The increase was 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
$18 million for the six months ended June 30, 2004
compared to gains of $1 million for the same period of
2003. Hedging activities in 2004 relating to Boston Generating
operations accounted for a gain of $4 million and hedging
activities for other Generation operations in 2004 accounted for
a loss of $22 million.

Other.Other
decreases in purchased power and fuel were primarily due to
$46 million in lower transmission expense resulting from
reduced inter-region transmission as a result of ComEds
integration into PJM in the second quarter of 2004, offset by
$16 million of additional nuclear fuel amortization
recorded in 2003 as a result of the replacement of
underperforming fuel at the Quad Cities Station.



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

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

|                                                                      |  |          |     |  
|--------------------------------------------------------------------- |  | -------- | --- | -
|                                                                      |  | Variance
|                                                                      |  |         
|AmerGen and Exelon Energy Company(a)                                  |  | $        | 197 |  
|Refueling outage costs                                                |  |          | 38  |  
|Boston Generating                                                     |  |          | 33  |  
|Decommissioning accretion costs(b)                                    |  |          | 25  |  
|Sithe Energies, Inc.                                                  |  |          | 22  |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |          | (23 | )
|Other                                                                 |  |          | 38  |  
|                                                                      |  |          |     |  
|Increase in operating and maintenance expense                         |  | $        | 330 |  
|                                                                      |  |          |     |  

152



---



##### 





---



|    |  |                                                                               
|--- |  | ------------------------------------------------------------------------------
|(a) |  | Includes refueling outage expense of
    $24 million at AmerGen.              
|   
|(b) |  | Includes $20 million due to AmerGen asset
    retirement obligation accretion.

The increase in operating and maintenance expense
is due primarily to the inclusion of AmerGen, Exelon Energy
Company and Sithe in 2004. Also, operating and maintenance
expenses increased at Boston Generating due to Mystic 8 and 9
and Fore River commencing commercial operations in the second
and third quarters of 2003. Decommissioning accretion costs also
increased primarily due to the inclusion of AmerGen in this
period as compared to the prior year. A reduction in
payroll-related costs associated with the implementation of the
programs associated with The Exelon Way partially offset the
other increases to operating and maintenance expense.

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

|                                                                     |  |                  |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ---------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |                 
|                                                                     |  | Six Months Ended
|                                                                     |  | June 30,        
|                                                                     |  |                 
|                                                                     |  | 2004             |       | 2003
|                                                                     |  |                  |       |     
|Nuclear fleet capacity factor(a)                                     |  |                  | 93.3  | %    |  |   | 94.2  | %
|Nuclear fleet production cost per MWh(a)                             |  | $                | 12.54 |      |  | $ | 12.40 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $                | 45.81 |      |  | $ | 41.68 |  



---



|    |  |                                                                     
|--- |  | --------------------------------------------------------------------
|(a) |  | Includes AmerGen and excludes 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 55 additional
planned refueling outage days, resulting in a $46 million
increase in planned outage costs in the six months ended
June 30, 2004 as compared to the same period in 2003. There
were five planned outages during the six months ended
June 30, 2004, compared to three planned outages during the
same period in 2003. The six months ended June 30, 2004
included twelve unplanned outages compared to eleven 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-EPU generation levels due to performance issues
with their steam dryers. Generation plans additional
expenditures to ensure safe and reliable operations at the EPU
output levels by mid-2005.



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

The increase in depreciation and amortization
expense for the six months ended June 30, 2004 as compared
to the same period in 2003 was primarily attributable to the
impact of capital additions and the consolidation of Sithe,
AmerGen and Exelon Energy. These increases were partially offset
by a decrease in depreciation expense related to the Boston
Generating facilities as the assets were classified as held for
sale during the period.



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

The increase in interest expense was primarily
due to the issuance of $500 million of Senior Notes in
December 2003 and interest expense related to Sithe long-term
debt.



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

The decrease in equity in earnings of
unconsolidated affiliates was primarily due to a
$37 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 Combined Notes to Consolidated Financial
Statements for further discussion of Generations purchase
of British Energys 50% interest in AmerGen.

153



---



##### 





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

The components of other, net for the six months
ended June 30, 2004 as compared to the same period in the
prior year, are as follows:

|                                         |  |                |     |      |  |          |      |          |  |  |     |   |  |  |        |   
|---------------------------------------- |  | -------------- | --- | ---- |  | -------- | ---- | -------- |  |  | --- | - |  |  | ------ | --
|                                         |  |                |     |      |  |         
|                                         |  | Six Months     |     |      |  |         
|                                         |  | Ended June 30, |     |      |  |         
|                                         |  |                |     |      |  |         
|Other, Net                               |  | 2004           |     | 2003 |  | Variance |      | % Change
|                                         |  |                |     |      |  |          |      |         
|Gain on sale of Boston Generating(a)     |  |                | 85  |      |  |          |     |          |  |  | 85  |   |  |  | n.m.   |   
|Decommissioning trust funds(b)           |  |                | 60  |      |  |          | 63   |          |  |  | (3  | ) |  |  | (4.8   | )%
|Decommissioning trust funds  AmerGen(b) |  |                | 20  |      |  |          |     |          |  |  | 20  |   |  |  | n.m.   |   
|Other income from Sithe                  |  |                | 9   |      |  |          |     |          |  |  | 9   |   |  |  | n.m.   |   
|Impairment of Investment in Sithe        |  |                |    |      |  |          | (200 | )        |  |  | 200 |   |  |  | (100.0 | )%
|Other                                    |  |                | 9   |      |  |          | 5    |          |  |  | 4   |   |  |  | 80.0   | % 
|                                         |  |                |     |      |  |          |      |          |  |  |     |   |  |  |        |   
|Total                                    |  |                | 183 |      |  |          | (132 | )        |  |  | 315 |   |  |  | n.m.   |   
|                                         |  |                |     |      |  |          |      |          |  |  |     |   |  |  |        |   



---



|    |  |                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Note 3 of the Combined Notes to the
    Consolidated Financial Statements for further discussion of
    Generations sale of Boston Generating.
|   
|(b) |  | Includes investment income and realized
    gains/(losses)                                                                                         

n.m.  not meaningful



| |                          
| | -------------------------
| | Effective Income Tax Rate

The effective income tax rate was 38% for the six
months ended June 30, 2004 compared to 44% for the same
period in 2003. This decrease was primarily attributable to the
impairment charges recorded in 2003 related to Generations
investment in Sithe that resulted in a pre-tax loss. In
addition, the rate decreased due to the additional nuclear
decommissioning investment income associated with AmerGen and
its related taxes. See Note 12 of the Combined Notes to the
Consolidated Financial Statements for further discussion of the
change in the effective income tax rate.



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

Net income for the six months ended June 30,
2004 reflects income of $32 million, net of income taxes,
related to the consolidation of Sithe pursuant to FIN
No. 46-R which resulted from the reversal of certain
guarantees on behalf of Sithe that had been recorded at
Generation prior to December 31, 2003, while net income for
the six months ended June 30, 2003 reflects income of
$108 million, net of income taxes, for the adoption of
SFAS No. 143. See Note 2 of the Combined Notes to
Consolidated Financial Statements for further information
regarding the adoptions of FIN No. 46-R and
SFAS No. 143.

Liquidity and Capital Resources

Generations business is capital intensive
and requires considerable capital resources. Generations
capital resources are primarily provided by internally generated
cash flows from operations and, to the extent necessary,
external financing, including the issuance of commercial paper,
participation in the intercompany money pool or capital
contributions from Exelon. Generations access to external
financing at reasonable terms is dependent on its credit ratings
and general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
Generation no longer has access to the capital markets at
reasonable terms, Generation has access to a revolving credit
facility. See the Credit Issues section of
Liquidity and Capital Resources for further
discussion. Capital resources are used primarily to fund
Generations capital requirements, including construction,
repayments of maturing debt, the payment of distributions to
Exelon, contributions to Exelons pension plans and
investments in new and existing ventures. Future acquisitions
could require external financing or borrowings or capital
contributions from Exelon.

154



---



##### 





| |                                         
| | ----------------------------------------
| | 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 six months
ended June 30, 2004 and 2003 were $616 million and
$539 million, respectively. Changes in Generations
cash flows from operations are generally consistent with changes
in its results of operations, as further adjusted by changes in
working capital in the normal course of business and non-cash
charges.

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



| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Receivables from Exelon Delivery under the PPA
    increased $31 million for the six months ended
    June 30, 2004, compared to a decrease of $157 million
    during the same period in 2003.
|
| |  | Net cash received for collateral for the six
    months ended June 30, 2004 was $2 million, compared to
    $136 million paid during the same period in 2003.                                  
|
| |  | Discretionary contributions to Exelons
    defined benefit pension plans were $121 million for the six
    months ended June 30, 2004 compared to $98 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 $11 million to satisfy IRS minimum funding
requirements. Of the $419 million, $170 million is
expected to be funded by Generation during 2004.



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

Cash flows used in investing activities were
$438 million and $534 million for the six months ended
June 30, 2004 and 2003, respectively. Generations
capital expenditures for the six months ended June 30, 2004
and 2003 were $366 million and $424 million,
respectively. Generations capital expenditures represent
additions to nuclear fuel and additions and upgrades to existing
facilities. Capital expenditures for the six months ended
June 30, 2003 are stated net of proceeds from liquidated
damages of $86 million. 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 nine 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
$141 million for the six months ended June 30, 2004,
compared to cash flows provided by financing activities of
$11 million for the same period in 2003. The increase in
cash flows used in financing activities was primarily a result
of a net repayment of intercompany borrowings of
$218 million during the six months ended June 30,
2004, compared to a $58 million net increase in
intercompany borrowings during the same period in 2003 and a
$64 million increase in distributions to Exelon during the
six months ended June 30, 2004 as compared to the same
period in 2003. This use of cash was partially offset by the
issuance of $211 million of commercial paper during the six
months ended June 30, 2004 and the partial repayment of the
acquisition note payable to Sithe of $27 million during the
six months ended June 30, 2004, compared a
$210 million payment during the same period in 2003.

From time to time and as market conditions
warrant, Generation may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of Generations balance sheet.

155



---



##### 





| |              
| | -------------
| | 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. On July 16, 2004, the
$750 million 364-day facility was replaced with a
$1 billion five-year facility and the $750 million
three-year facility was reduced to $500 million. These
credit agreements, and Generations participation therein,
are described above under Credit Issues  Exelon
Credit Facility in Exelon Corporation 
Liquidity and Capital Resources.

Capital Structure.Generations capital structure at June 30, 2004 is
described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money
Pool.A description of the
intercompany money pool, and Generations participation
therein, is set forth above under Credit
Issues  Intercompany Money Pool in Exelon
Corporation  Liquidity and Capital Resources.
For the six months ended June 30, 2004, Generation paid
$1.5 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 June 30, 2004,
Generation had undistributed earnings of $773 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 June 30, 2004 were materially unchanged,
other than in the normal course of business, from the amounts
set forth in the 2003 Form 10-K except for the following:



| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In connection with the transfer of Exelon Energy
    Company to Generation effective January 1, 2004, Generation
    acquired $162 million in energy marketing contract
    guarantees.
|
| |  | Generation acquired a $50 million letter of
    credit to support the contractual obligations of Sithe and its
    subsidiaries.                                                       

156



---



##### 








|        |                                                              
|------- | -------------------------------------------------------------
|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 Generations commitment to Energy
Delivery. Market price risk exposure is the risk of a change in
the value of unhedged positions. Absent any opportunistic
efforts to mitigate market price exposure, the estimated market
price exposure for Generations non-trading portfolio
associated with a 10% reduction in the annual average
around-the-clock market price of electricity is approximately a
$19 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 six months ended
June 30, 2004 was a loss $2 million (before taxes)
which included a $1 million unrealized mark-to-market loss.
The daily Value-at-Risk (VaR) on proprietary trading activity
averaged $200,000 of exposure

157



---



##### 



over the last 18 months. Because of the
diminutive nature of the proprietary trading portfolio in
comparison to Generations total gross margin of
$1,771 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
proprietary trading and non-trading marketing activities of
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 of 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 and
six months ended June 30, 2004 and 2003. Normal operations
and hedging activities represent the marketing of electricity
available from Generations owned or contracted generation,
including generation used to serve 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 June 30,
|                                                                      |                                                             |               
|                                                                      |                                                             | 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                  |                |     | 115  |   |   |     | 108 |  
|                                                                      | Changes in valuation techniques and assumptions             |                |     |     |   |   |     |    |  
|                                                                      | Reclassification to realized at settlement of
    contracts |                |     | (125 | ) |   |     | (78 | )
|                                                                      |                                                             |                |     |      |   |   |     |    
|                                                                      | Total change in unrealized fair value(a)                    |                |     | (10  | ) |   |     | 30  |  
|Realized net settlement of transactions subject
    to mark-to-market |                                                             |                | 125 |      |   |   | 78  |    
|                                                                      |                                                             |                |     |      |   |   |     |    
|Total mark-to-market activities gross margin                          |                                                             | $              | 115 |      |   | $ | 108 |    
|                                                                      |                                                             |                |     |      |   |   |     |    

158



---



##### 



|                                                             |                                       |                |       |       |  |   |       |       | 
|------------------------------------------------------------ | ------------------------------------- | -------------- | ----- | ----- |  | - | ----- | ----- | 
|                                                             |                                       |               
|                                                             |                                       | Three Months  
|                                                             |                                       | Ended June 30,
|                                                             |                                       |               
|                                                             |                                       | 2004           |       | 2003 
|                                                             |                                       |                |       |      
|Accrual activities:                                          |                                       |                |       |       |  |   |       |      
|Accrual activities revenue                                   |                                       | $              | 1,132 |       |  | $ | 1,107 |      
|Hedge gains reclassified from OCI                            |                                       |                | 684   |       |  |   | 616   |      
|                                                             |                                       |                |       |       |  |   |       |      
|                                                             | Total revenue  accrual activities    |                |       | 1,816 |  |   |       | 1,723 | 
|                                                             |                                       |                |       |       |  |   |       |      
|Purchased power and fuel                                     |                                       |                | 200   |       |  |   | 388   |      
|Hedges of purchased power and fuel reclassified
    from OCI |                                       |                | 808   |       |  |   | 705   |      
|                                                             |                                       |                |       |       |  |   |       |      
|                                                             | Total purchased power and fuel        |                |       | 1,008 |  |   |       | 1,093 | 
|                                                             |                                       |                |       |       |  |   |       |      
|                                                             | Total accrual activities gross margin |                |       | 808   |  |   |       | 630   | 
|                                                             |                                       |                |       |       |  |   |       |      
|Total gross margin(b)                                        |                                       | $              | 923   |       |  | $ | 738   |      
|                                                             |                                       |                |       |       |  |   |       |      



---



|    |  |                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes $2 million of unrealized losses due
    to proprietary trading activity during the three months ended
    June 30, 2003.
|   
|(b) |  | Total gross margin represents revenue, net of
    purchased power and fuel expense.                                              

|                                                                      |                                                             |                  |       |       |   |   |       |       |  
|--------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------- | ----- | ----- | - | - | ----- | ----- | -
|                                                                      |                                                             |                 
|                                                                      |                                                             | Six Months Ended
|                                                                      |                                                             | June 30,        
|                                                                      |                                                             |                 
|                                                                      |                                                             | 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)               |                  |       | 150   |   |   |       | 132   |  
|                                                                      | Changes in valuation techniques and assumptions             |                  |       |      |   |   |       |      |  
|                                                                      | Reclassification to realized at settlement of
    contracts |                  |       | (200  | ) |   |       | (135  | )
|                                                                      |                                                             |                  |       |       |   |   |       |      
|                                                                      | Total change in unrealized fair value(b)                    |                  |       | (50   | ) |   |       | (3    | )
|Realized net settlement of transactions subject
    to mark-to-market |                                                             |                  | 200   |       |   |   | 135   |      
|                                                                      |                                                             |                  |       |       |   |   |       |      
|Total mark-to-market activities gross margin                          |                                                             | $                | 150   |       |   | $ | 132   |      
|                                                                      |                                                             |                  |       |       |   |   |       |      
|                                                                     
|Accrual activities:                                                   |                                                             |                  |       |       |   |   |       |      
|Accrual activities revenue                                            |                                                             | $                | 2,527 |       |   | $ | 2,459 |      
|Hedge gains reclassified from OCI                                     |                                                             |                  | 1,185 |       |   |   | 1,014 |      
|                                                                      |                                                             |                  |       |       |   |   |       |      
|                                                                      | Total revenue  accrual activities                          |                  |       | 3,712 |   |   |       | 3,473 |  
|                                                                      |                                                             |                  |       |       |   |   |       |      
|Purchased power and fuel                                              |                                                             |                  | 657   |       |   |   | 980   |      
|Hedges of purchased power and fuel reclassified
    from OCI          |                                                             |                  | 1,434 |       |   |   | 1,208 |      
|                                                                      |                                                             |                  |       |       |   |   |       |      
|                                                                      | Total purchased power and fuel                              |                  |       | 2,091 |   |   |       | 2,188 |  
|                                                                      |                                                             |                  |       |       |   |   |       |      
|                                                                      | Total accrual activities gross margin                       |                  |       | 1,621 |   |   |       | 1,285 |  
|                                                                      |                                                             |                  |       |       |   |   |       |      
|Total gross margin(c)                                                 |                                                             | $                | 1,771 |       |   | $ | 1,417 |      
|                                                                      |                                                             |                  |       |       |   |   |       |      



---



|    |  |                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes hedge ineffectiveness of $1 million
    recorded in earnings.                                                                                               
|   
|(b) |  | Includes $1 million and $4 million of
    unrealized losses due to proprietary trading activity during the
    six months ended June 30, 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 June 30, 2004.
It indicates the drivers behind changes in the

159



---



##### 



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 June 30, 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             |  |   | 148  |  
|Reclassification to realized at settlement of
    contracts recorded in earnings         |  |   | (199 | )
|Reclassification to realized at settlement from
    OCI                                  |  |   | 248  |  
|Effective portion of changes in fair
    value  recorded in OCI                         |  |   | (535 | )
|Purchase/sale/disposal of existing contracts or
    portfolios subject to mark-to-market |  |   | 147  |  
|                                                                                         |  |   |      |  
|Total mark-to-market energy contract net assets
    (liabilities) at June 30, 2004       |  | $ | (407 | )
|                                                                                         |  |   |      |  

The following table details the balance sheet
classification of the mark-to-market energy contract net assets
(liabilities) recorded as of June 30, 2004 and
December 31, 2003:

|                                                                  |                                                  |          |      |              |   |   |      |      |  
|----------------------------------------------------------------- | ------------------------------------------------ | -------- | ---- | ------------ | - | - | ---- | ---- | -
|                                                                  |                                                  | June 30, |      | December 31,
|                                                                  |                                                  | 2004     |      | 2003        
|                                                                  |                                                  |          |      |             
|Current assets                                                    |                                                  | $        | 433  |              |   | $ | 322  |     
|Noncurrent assets                                                 |                                                  |          | 390  |              |   |   | 100  |     
|                                                                  |                                                  |          |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract assets      |          |      | 823          |   |   |      | 422  |  
|                                                                  |                                                  |          |      |              |   |   |      |     
|Current liabilities(a)                                            |                                                  |          | (805 | )            |   |   | (505 | )   
|Noncurrent liabilities                                            |                                                  |          | (425 | )            |   |   | (133 | )   
|                                                                  |                                                  |          |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract liabilities |          |      | (1,230       | ) |   |      | (638 | )
|                                                                  |                                                  |          |      |              |   |   |      |     
|Total mark-to-market energy contract net assets
    (liabilities) |                                                  | $        | (407 | )            |   | $ | (216 | )   
|                                                                  |                                                  |          |      |              |   |   |      |     



---



|    |  |                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Mark-to-market energy contract liabilities at
    December 31, 2003 do not reflect a $76 million
    interest rate swap which was included in current mark-to-market
    derivative liabilities within Generations Consolidated
    Balance Sheet.

The majority of Generations contracts are
non-exchange-traded contracts valued using prices provided by
external sources, primarily price quotations available through
brokers or over-the-counter, on-line exchanges. Prices reflect
the average of the bid-ask midpoint prices obtained from all
sources that Generation believes provide the most liquid market
for the commodity. The terms for which such price information is
available vary by commodity, region and product. The remainder
of the assets represents contracts for which external valuations
are not available, primarily option contracts. These contracts
are valued using the Black model, an industry standard option
valuation model. The fair values in each category reflect the
level of forward prices and volatility factors as of
June 30, 2004 and may change as a result of changes in
these factors. Management uses its best estimates to determine
the fair value of commodity and derivative contracts it holds or
sells. These estimates consider various factors including
closing exchange and over-the-counter price quotations, time
value, volatility factors and credit exposure. It is possible,
however, that future market prices could vary from those used in
recording assets and liabilities from energy marketing and
trading activities and such variations could be material.

160



---



##### 



The following table, which presents maturity and
source of fair value of mark-to-market energy contract net
liabilities, provides two fundamental pieces of information.
First, the table provides the source of fair value used in
determining the carrying amount of Generations total
mark-to-market asset or liability. Second, the table provides
the maturity, by year, of Generations net
assets/liabilities, giving an indication of when the
mark-to-market amounts will settle and either generate or
require cash.

|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |      |      |  
|--------------------------------------------------------------- | ------------------------------------------------ | ----------------- | - | -------- | ---- | ---------- | - | ---- | ---- | ------ | - | ----- | --- | - | - | -- | -- | - | - | -- | -- |  | - | ---- | ---- | -
|                                                                |                                                  |                   |   |         
|                                                                |                                                  | Maturities Within |   |         
|                                                                |                                                  |                   |   |         
|                                                                |                                                  |                   |   | 2008 and |      | Total Fair
|                                                                |                                                  | 2004              |   | 2005     |      | 2006       |   | 2007 |      | Beyond |   | Value
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |      
|Normal operations, qualifying cash-flow hedge
    contracts(a): |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 2        |      |            | $ | 1    |      |        | $ |      |     |   | $ |   |    |   | $ |   |    |  | $ | 3    |     
|                                                                | Prices provided by other external sources        |                   |   | (227     | )    |            |   | (217 | )    |        |   | (30   | )   |   |   | (6 | )  |   |   |   |    |  |   | (480 | )   
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | (225 | )          |   | $    | (216 | )      |   | $     | (30 | ) |   | $  | (6 | ) |   | $  |   |  |   | $    | (477 | )
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|Normal operations, other derivative
    contracts(b):           |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 32       |      |            | $ | 8    |      |        | $ | (1    | )   |   | $ |   |    |   | $ |   |    |  | $ | 39   |     
|                                                                | Prices provided by other external sources        |                   |   | (59      | )    |            |   | 11   |      |        |   | 5     |     |   |   |   |    |   |   |   |    |  |   | (43  | )   
|                                                                | Prices based on model or other valuation methods |                   |   | 9        |      |            |   | (13  | )    |        |   | 13    |     |   |   | 9  |    |   |   | 56 |    |  |   | 74   |     
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | (18  | )          |   | $    | 6    |        |   | $     | 17  |   |   | $  | 9  |   |   | $  | 56 |  |   | $    | 70   |  
|                                                                |                                                  |                   |   |          |      |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     



---



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

The table below provides details of effective
cash-flow hedges under SFAS No. 133 included in the
balance sheet as of June 30, 2004. The table gives an
indication of the magnitude of SFAS No. 133 hedges
Generation has in place; however, since under
SFAS No. 133 not all hedges are recorded in OCI, the
table does not provide an all-encompassing picture of
Generations hedges. The table also includes a roll-forward
of accumulated other comprehensive income related to cash-flow
hedges for the six months ended June 30, 2004, providing
insight into the drivers of the changes (new hedges entered into
during the period and changes in the value of existing hedges).
Information related to energy merchant activities is presented
separately from interest-rate hedging activities.

|                                                       |  |                                           |      |                 |  |           |     |   |  |   |      |  
|------------------------------------------------------ |  | ----------------------------------------- | ---- | --------------- |  | --------- | --- | - |  | - | ---- | -
|                                                       |  |                                          
|                                                       |  | Total Cash-Flow Hedge Other Comprehensive
|                                                       |  | Income Activity, Net of Income Tax       
|                                                       |  |                                          
|                                                       |  | Normal                                    |      | Interest Rate   |  | Total    
|                                                       |  | Operations and                            |      | and             |  | Cash Flow
|                                                       |  | Hedging Activities                        |      | Other Hedges(a) |  | Hedges   
|                                                       |  |                                           |      |                 |  |          
|Accumulated OCI derivative loss at
    January 1, 2004 |  | $                                         | (133 | )               |  | $         | (13 | ) |  | $ | (146 | )
|Changes in fair value                                  |  |                                           | (310 | )               |  |           |    |   |  |   | (310 | )
|Reclassifications from OCI to net income               |  |                                           | 151  |                 |  |           | 12  |   |  |   | 163  |  
|Exelon Energy Company opening balance                  |  |                                           | 2    |                 |  |           |    |   |  |   | 2    |  
|Sithe                                                  |  |                                           |     |                 |  |           | (11 | ) |  |   | (11  | )
|                                                       |  |                                           |      |                 |  |           |     |   |  |   |      |  
|Accumulated OCI derivative loss at
    June 30, 2004   |  | $                                         | (290 | )               |  | $         | (12 | ) |  | $ | (302 | )
|                                                       |  |                                           |      |                 |  |           |     |   |  |   |      |  



---



|    |  |                                             
|--- |  | --------------------------------------------
|(a) |  | Includes interest rate hedges at Generation.

161



---



##### 



Credit Risk



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

Generation has credit risk associated with
counterparty performance on energy contracts which includes, but
is not limited to, the risk of financial default or slow
payment. Generation manages counterparty credit risk through
established policies, including counterparty credit limits, and
in some cases, requiring deposits or letters of credit to be
posted by certain counterparties. Generations counterparty
credit limits are based on a scoring model that considers a
variety of factors, including leverage, liquidity,
profitability, credit ratings and risk management capabilities.
Generation has entered into payment netting agreements or
enabling agreements that allow for payment netting with the
majority of its large counterparties, which reduces
Generations exposure to counterparty risk by providing for
the offset of amounts payable to the counterparty against
amounts receivable from the counterparty. The credit department
monitors current and forward credit exposure to counterparties
and their affiliates, both on an individual and an aggregate
basis.

The following tables provide information on
Generations wholesale credit exposure, net of collateral,
as of June 30, 2004. The tables further delineate that
exposure by the credit rating of the counterparties and provide
guidance on the concentration of credit risk to individual
counterparties and an indication of the maturity of
Generations credit risk by credit rating of its
counterparties. The figures in the tables below do not include
sales to Generations affiliates or exposure through
Independent System Operators, which are discussed below.

|                     |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |   | 
|-------------------- | --------------------------------------- | ------------- | --- | ---------- |  | -------- | -- | ---------------- |  | ---------------- | --- | -- |  |  | - | - |  | - | --- | - | 
|                     |                                         | Total         |     |            |  |          |    | Number Of        |  | Net Exposure Of 
|                     |                                         | Exposure      |     |            |  |          |    | Counterparties   |  | Counterparties  
|                     |                                         | Before Credit |     | Credit     |  | Net      |    | Greater than 10% |  | Greater than 10%
|Rating(a)            |                                         | Collateral    |     | Collateral |  | Exposure |    | of Net Exposure  |  | of Net Exposure 
|                     |                                         |               |     |            |  |          |    |                  |  |                 
|Investment grade     |                                         | $             | 138 |            |  | $        | 17 |                  |  | $                | 121 |    |  |  | 3 |   |  | $ | 71  |  
|Split rating         |                                         |               |    |            |  |          |   |                  |  |                  |    |    |  |  |  |   |  |   |    |  
|Non-investment grade |                                         |               | 77  |            |  |          | 10 |                  |  |                  | 67  |    |  |  | 1 |   |  |   | 55  |  
|No external ratings  |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  
|                     | Internally rated  investment grade     |               |     | 13         |  |          |    | 2                |  |                  |     | 11 |  |  |   |  |  |   |     |  | 
|                     | Internally rated  non-investment grade |               |     | 1          |  |          |    |                 |  |                  |     | 1  |  |  |   |  |  |   |     |  | 
|                     |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  
|Total                |                                         | $             | 229 |            |  | $        | 29 |                  |  | $                | 200 |    |  |  | 4 |   |  | $ | 126 |  
|                     |                                         |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  



---



|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|(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     |                                         | $                                | 128 |           |  | $              | 10 |               |  | $ |  |   |  | $ | 138 |   
|Split rating         |                                         |                                  |    |           |  |                |   |               |  |   |  |   |  |   |    |   
|Non-investment grade |                                         |                                  | 75  |           |  |                | 2  |               |  |   |  |   |  |   | 77  |   
|No external ratings  |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|                     | Internally rated  investment grade     |                                  |     | 13        |  |                |    |              |  |   |   |  |  |   |     | 13 | 
|                     | Internally rated  non-investment grade |                                  |     | 1         |  |                |    |              |  |   |   |  |  |   |     | 1  | 
|                     |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|Total                |                                         | $                                | 217 |           |  | $              | 12 |               |  | $ |  |   |  | $ | 229 |   
|                     |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   



---



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

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

162



---



##### 



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 $114 million on
its Consolidated Balance Sheets related to the fair market value
of the financial swap agreement with Dynegy that is
marked-to-market under the terms of SFAS No. 133,
Accounting for Derivatives and Hedging Activities.
If Dynegy were unable to fulfill the terms of the financial swap
agreement, Generation would be required to impair the related
asset. Exelon estimates, as a 50% owner of Sithe, that the
impairment would result in an after-tax reduction of its net
income of approximately $21 million.


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

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
Generations 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

163



---



##### 



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 June 30, 2004, ComEd
did not have any interest-rate swaps designated as cash-flow
hedges.


In 2004, ComEd entered into fixed-to-floating
interest-rate swaps in order to maintain its targeted percentage
of variable-rate debt associated with fixed-rate debt issuances
in the aggregate amount of $240 million. At June 30,
2004, these interest-rate swaps, designated as fair-value
hedges, had an aggregate fair market value of $1 million
based on the present value difference between the contract and
market rates at June 30, 2004. If these derivative
instruments had been terminated at June 30, 2004, this
estimated fair value represents the amount that would be paid by
the counterparties to ComEd.

The aggregate fair value of the interest-rate
swaps designated as fair-value hedges that would have resulted
from a hypothetical 50 basis point decrease in the spot
yield at June 30, 2004 is estimated to be $8 million
in ComEds favor. If the derivative instrument had been
terminated at June 30, 2004, this estimated fair value
represents the amount the counterparties would pay ComEd.

The aggregate fair value of the interest-rate
swaps designated as fair-value hedges that would have resulted
from a hypothetical 50 basis point increase in the spot
yield at June 30, 2004 is estimated to be $7 million
in the counterparties favor. If the derivative instrument
had been terminated at June 30, 2004, this estimated fair
value represents the amount ComEd would pay the counterparties.

In April 2004, ComEd settled certain
interest-rate swaps designated as fair-value hedges in the
aggregate amount of $485 million for total proceeds of
approximately $32 million, which included the
$26 million settlement amount and $6 million of
accrued interest. The $26 million settlement amount will be
amortized as a reduction to interest expense over the remaining
life of the related debt.



| |     
| | ----
| | PECO

In March 2004, PECO entered into a
forward-starting interest rate swap in the aggregate amount of
$75 million to lock in interest rate levels in anticipation
of a future financing. The debt issuance that this swap was
hedging was considered probable in March 2004 and closed in
April 2004; therefore, PECO accounted for this interest-rate
swap transaction as a hedge. In April 2004, PECO settled this
interest-rate swap designated as a cash-flow hedge for net
proceeds of approximately $5 million. The proceeds were
recorded in other comprehensive income and are being amortized
over the life of the debt issuance.



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

Generation uses a combination of fixed-rate and
variable-rate debt to reduce interest rate exposure. Generation
also uses interest-rate swaps when deemed appropriate to adjust
exposure based upon market conditions. These strategies are
employed to achieve a lower cost of capital. As of June 30,
2004, a hypothetical 10% increase in the interest rates
associated with variable- rate debt would not have a material
impact on Generations pre-tax earnings.

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 June 30, 2004,
decommissioning trust funds are reflected at fair value on
Generations Consolidated Balance Sheets. The mix of
securities in the trust funds is designed to provide returns to
be used to fund decommissioning and to compensate for
inflationary increases in decommissioning costs. However, the
equity securities in the trust funds are exposed to price
fluctuations in equity markets, and the value of fixed-rate,
fixed-income securities are exposed to changes in interest
rates. Generation actively monitors the investment performance
of the trust funds and periodically reviews asset allocation in
accordance with Generations nuclear decommissioning trust
fund investment policy. A hypothetical 10% increase in interest
rates and decrease in equity prices would result in a
$308 million reduction in the fair value of the trust
assets.

164



---



##### 








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

During the second 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 June 30, 2004, the
principal executive officer and principal financial officer of
each registrant concluded that such registrants disclosure
controls and procedures were effective to accomplish their
objectives. Each registrant continually strives to improve its
disclosure controls and procedures to enhance the quality of its
financial reporting and to maintain dynamic systems that change
as conditions warrant.




PART II  OTHER
INFORMATION





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

ComEd

See Retail Rate Law within the
litigation section of Note 15 of the Combined Notes to
Consolidated Financial Statements for a discussion of legal
proceeding developments.

Generation

See Raytheon and Mitsubishi
Litigation and Oyster Creek within the
litigation section of Note 15 of the Combined Notes to
Consolidated Financial Statements for a discussion of legal
proceeding developments.

165



---



##### 








|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds



| |          
| | ---------
| | (e)Exelon

The attached table gives information on a monthly
basis regarding purchases made by Exelon of its common stock.
All share and per-share amounts included in the table below have
been adjusted to reflect the stock split.

|                               |  |              |           |                |  |                     |       |                  |  |  |           |  |  |  |    |  
|------------------------------ |  | ------------ | --------- | -------------- |  | ------------------- | ----- | ---------------- |  |  | --------- |  |  |  | -- | -
|                               |  |              |           |                |  |                     |       | Maximum Number  
|                               |  |              |           |                |  |                     |       | (or Approximate 
|                               |  |              |           |                |  | Total Number of     |       | Dollar Value) of
|                               |  |              |           |                |  | Shares Purchased    |       | Shares that May 
|                               |  | Total Number |           |                |  | As Part of Publicly |       | Yet Be Purchased
|                               |  | of Shares    |           | Average Price  |  | Announced Plans     |       | Under the Plans 
|Period                         |  | Purchased(a) |           | Paid per Share |  | or Programs(b)      |       | or Programs     
|                               |  |              |           |                |  |                     |       |                 
|January 1  January 31, 2004   |  |              | 157,785   |                |  | $                   | 32.57 |                  |  |  |          |  |  |  |   |  
|February 1  February 29, 2004 |  |              | 14,491    |                |  |                     | 33.36 |                  |  |  |          |  |  |  |   |  
|March 1  March 31, 2004       |  |              | 18,657    |                |  |                     | 33.92 |                  |  |  |          |  |  |  |   |  
|April 1  April 30, 2004       |  |              |          |                |  |                     |      |                  |  |  |          |  |  |  | (a | )
|May 1  May 31, 2004           |  |              | 1,809,817 |                |  |                     | 31.87 |                  |  |  | 1,809,000 |  |  |  | (a | )
|June 1  June 30, 2004         |  |              | 523,966   |                |  |                     | 33.05 |                  |  |  | 518,100   |  |  |  | (a | )
|                               |  |              |           |                |  |                     |       |                  |  |  |           |  |  |  |    |  
|Total                          |  |              | 2,524,716 |                |  |                     | 32.18 |                  |  |  | 2,327,100 |  |  |  | (a | )
|                               |  |              |           |                |  |                     |       |                  |  |  |           |  |  |  |    |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Shares other than those purchased as a part of a
    publicly announced plan primarily represent restricted shares
    surrendered by employees to satisfy tax obligations arising upon
    the vesting of restricted shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(b) |  | In April 2004, Exelons Board of Directors
    approved a discretionary share repurchase program that allows
    Exelon to repurchase shares of its common stock on a periodic
    basis in the open market. The share repurchase program is
    intended to mitigate, in part, the dilutive effect of shares
    issued under Exelons employee stock option plan and
    Exelons Employee Stock Purchase Plan (ESPP). The aggregate
    shares of common stock repurchased pursuant to the program
    cannot exceed the economic benefit received after
    January 1, 2004 due to stock option exercises and share
    purchases pursuant to Exelons ESPP. The economic benefit
    consists of direct cash proceeds from purchases of stock and tax
    benefits associated with exercises of stock options. The share
    repurchase program has no specified limit and no specified
    termination date.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

Exelon

Exelon held its 2004 Annual Meeting of
Shareholders on April 27, 2004.

Proposal 1 was the election of four
Class I directors to serve three-year terms expiring in
2007. The following directors were elected:

|                      |  |           |             |                |  |  |            | 
|--------------------- |  | --------- | ----------- | -------------- |  |  | ---------- | 
|                      |  | Votes For |             | Votes Withheld
|                      |  |           |             |               
|Nicholas DeBenedictis |  |           | 259,939,186 |                |  |  | 10,816,919 | 
|G. Fred DiBona, Jr.   |  |           | 264,314,416 |                |  |  | 6,441,689  | 
|Sue L. Gin            |  |           | 262,458,220 |                |  |  | 8,297,885  | 
|Edgar D. Jannotta     |  |           | 265,237,110 |                |  |  | 5,518,995  | 

Proposal 2 was the ratification of
PricewaterhouseCoopers LLP as independent accountants for Exelon
and its subsidiaries for 2004. The shareholders approved the
proposal with 262,663,675 votes cast for, 784,220 votes cast
against and 2,308,210 votes abstaining.

Proposal 3 was the approval of the Exelon
Corporation Annual Incentive Plan (the Plan) for Senior
Executives effective January 1, 2004, as described in the
proxy statement. The shareholders approved the Plan with
246,985,526 votes cast for, 18,996,405 votes cast against and
4,804,174 votes abstaining.

166



---



##### 



PECO

PECO held its 2004 Annual Meeting of Shareholders
on May 27, 2004. At the PECO annual meeting, the only
proposal was the election of two Class III directors to
serve three-year terms expiring in 2007. Denis P. OBrien
and Robert S. Shapard were elected with 170,478,507 votes cast
for each director, no votes cast against and no votes abstaining.






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

(a) ComEd, PECO and Generation



| |                          
| | -------------------------
| | Regulatory Issues (ComEd)

See Note 7 of the Combined Notes to
Consolidated Financial Statements and ComEds
Managements Discuss and Analysis of Financial
Condition and Results of Operations  Executive
Overview for a discussion of regulatory developments.



| |                       
| | ----------------------
| | Labor Relations (PECO)

As previously reported in the 2003
Form 10-K, on August 15, 2002, the International
Brotherhood of Electrical Workers (IBEW) filed a petition
with the National Labor Relations Board (NLRB) to conduct a
unionization vote of certain of PECOs employees. On
May 21, 2003, the PECO union election was held and a
majority of PECO workers voted against union representation. The
results of the election were not certified due to pending
challenges and objections. On March 22, 2004, the IBEW
withdrew its objections to the May 21, 2003 election, and
asked the NLRB to allow for a new election at PECO. On
April 22, 2004, the NLRB granted IBEWs request. A new
election was held on July 21, 2004, and a majority of PECO
employees eligible to vote voted in favor of representation by
the IBEW. The NLRB will certify the election on July 29,
2004.



| |                                                      
| | -----------------------------------------------------
| | Jointly Owned Electric Utility Plant
    (Generation)

On January 28, 2004, the NRC issued a letter
requesting PSE&G to conduct a review of its Salem facility,
of which Generation owns 42.59%, to assess the workplace
environment for raising and addressing safety issues. PSE&G
responded to the letter on February 28, 2004, and had
independent assessments of the work environment at the facility
performed. Assessment results were provided to the NRC in May.
The assessments concluded that Salem was safe for continued
operation, but also identified issues that need to be addressed.
At an NRC public meeting on June 16, 2004, PSE&G
outlined its action plans to address these issues, which focus
on safety conscious work environment, the corrective action
program, and work management. A letter documenting these plans
and commitments was sent to the NRC on June 25, 2004.

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

(b) Exelon, ComEd, PECO and Generation

None.

167



---



##### 








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

(a) Exhibits:

|     |  |   |  |                                                                                                                                                                                                                                                                                                            
|---- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3-1  |  |  |  | Amendment to Articles of Incorporation for Exelon
    Corporation effective as of April 19, 2004.                                                                                                                                                                                                          
|10-1 |  |  |  | Amended and Restated Power Purchase Agreement
    between Exelon Generation Company, LLC and Commonwealth Edison
    Company as of April 30, 2004.                                                                                                                                                         
|10-2 |  |  |  | $1,000,000,000 Five Year Credit Agreement dated
    as of July 16, 2004 among Exelon Corporation, Commonwealth
    Edison Company, PECO Energy Company and Exelon Generation
    Company, LLC as Borrowers and Various Financial Institutions as
    Lenders.                                              
|10-3 |  |  |  | First Amendment dated as of July 16, 2004 to
    Three Year Credit Agreement dated as of October 31, 2003
    among Exelon Corporation, Commonwealth Edison Company, PECO
    Energy Company, Exelon Generation Company, LLC, various
    financial institutions and Bank One, NA, as administrative agent.

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 June 30, 2004 filed by the following officers for the
following companies:

|     |  |   |  |                                                                       
|---- |  | - |  | ----------------------------------------------------------------------
|31-1 |  |  |  | Filed by John W. Rowe for Exelon Corporation                          
|31-2 |  |  |  | Filed by Robert S. Shapard for Exelon Corporation                     
|31-3 |  |  |  | Filed by John L. Skolds for Commonwealth Edison
    Company           
|31-4 |  |  |  | Filed by J. Barry Mitchell for Commonwealth
    Edison Company        
|31-5 |  |  |  | Filed by John L. Skolds for PECO Energy Company                       
|31-6 |  |  |  | Filed by J. Barry Mitchell for PECO Energy Company                    
|31-7 |  |  |  | Filed by 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 June 30, 2004
filed by the following officers for the following companies:

|     |  |   |  |                                                                       
|---- |  | - |  | ----------------------------------------------------------------------
|32-1 |  |  |  | Filed by John W. Rowe for Exelon Corporation                          
|32-2 |  |  |  | Filed by Robert S. Shapard for Exelon Corporation                     
|32-3 |  |  |  | Filed by John L. Skolds for Commonwealth Edison
    Company           
|32-4 |  |  |  | Filed by J. Barry Mitchell for Commonwealth
    Edison Company        
|32-5 |  |  |  | Filed by John L. Skolds for PECO Energy Company                       
|32-6 |  |  |  | Filed by J. Barry Mitchell for PECO Energy Company                    
|32-7 |  |  |  | Filed by Oliver D. Kingsley Jr. for Exelon
    Generation Company, LLC
|32-8 |  |  |  | Filed by J. Barry Mitchell for Exelon Generation
    Company, LLC     

168



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##### 



(b) Reports on Form 8-K:

Exelon, ComEd, PECO and/or Generation filed
Current Reports on Form 8-K during the three months ended
June 30, 2004 regarding the following items:

|                 |                |                              |  |                                                                                                                                                                                                                                                    
|---------------- | -------------- | ---------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date of Earliest |                |                             
|Event Reported   |                | Description of Item Reported
|                 |                |                             
|                 | April 8, 2004  |                              |  | ITEM 5. OTHER EVENTS filed for Exelon
    announcing the record and distribution dates for the previously
    announced 2-for-1 stock split.                                                                                                     
|                 | April 16, 2004 |                              |  | ITEM 5. OTHER EVENTS and ITEM
    7. FINANCIAL STATEMENTS AND EXHIBITS filed for PECO
    regarding an Underwriting Agreement entered into due to the
    issuance of First and Refunding Mortgage Bonds.                                      
|                 | April 27, 2004 |                              |  | ITEM 5. OTHER EVENTS filed for Exelon
    announcing the declaration of a quarterly dividend and an equity
    plan share repurchase program.                                                                                                    
|                 | May 10, 2004   |                              |  | ITEM 5. OTHER EVENTS filed for Exelon
    and Generation regarding the FERCs authorization of the
    transfer of ownership of BG to the lenders special purpose
    entity.                                                                   
|                 | May 25, 2004   |                              |  | ITEM 5. OTHER EVENTS filed for Exelon
    and Generation regarding the completion of the transfer of
    ownership of Boston Generating to the lenders special
    purpose entity.                                                              
|                 | May 25, 2004   |                              |  | ITEM 2. ACQUISITION OR DISPOSITION OF
    ASSETS AND ITEM 7. FINANCIAL STATEMENTS AND
    EXHIBITS filed for Exelon and Generation including pro
    forma financial information related to the transfer of ownership
    of Boston Generating.

169



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##### 






SIGNATURES

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




EXELON CORPORATION

|                                             |  |                                                                                            |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | 
|                                            
|/s/ JOHN W. ROWEJohn W. Rowe                 |  | Chairman and Chief Executive Officer
    (Principal Executive Officer)                    
|                                            
|/s/ ROBERT S. SHAPARDRobert S. Shapard       |  | Executive Vice President and Chief Financial
    Officer
    (Principal Financial Officer)
|                                            
|/s/ MATTHEW F. HILZINGERMatthew F. Hilzinger |  | Vice President and Corporate Controller
    (Principal Accounting Officer)                

July 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/ MATTHEW F. HILZINGERMatthew F. Hilzinger |  | Vice President and Corporate Controller,
    Exelon
    (Principal Accounting Officer)            
|                                            
|/s/ FRANK M. CLARKFrank M. Clark             |  | President, ComEd                                                                                  

July 28, 2004

170



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##### 



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




PECO ENERGY COMPANY

|                                             |  |                                                                                                    |  | 
|-------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | 
|                                            
|/s/ JOHN L. SKOLDSJohn L. Skolds             |  | President, Exelon Energy Delivery
    (Principal Executive Officer)                               
|                                            
|/s/ J. BARRY MITCHELLJ. Barry Mitchell       |  | Senior Vice President, Treasurer and Chief
    Financial Officer
    (Principal Financial Officer)
|                                            
|/s/ MATTHEW F. HILZINGERMatthew F. Hilzinger |  | Vice President and Corporate Controller,
    Exelon
    (Principal Accounting Officer)            
|                                            
|/s/ DENIS P. OBRIENDenis P. OBrien         |  | President, PECO                                                                                   

July 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)                                  

July 28, 2004

171