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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-Q





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




| |  | For the quarterly period ended March 31, 2002
| |  | ---------------------------------------------




OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




Commission file number 1-1405





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DELMARVA POWER & LIGHT COMPANY


(Exact name of registrant as specified in its charter)





Delaware and Virginia

51-0084283(States of incorporation)

(I.R.S. Employer Identification No.)





800 King Street, P.O. Box 231, Wilmington, Delaware

19899(Address of principal executive offices)

(Zip Code)





Registrants telephone number, including area code  302-429-3018





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





Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest
practicable date.





All 1,000 issued and outstanding shares of Delmarva Power & Light Company common stock, $2.25 per share
par value, are owned by Conectiv.





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DELMARVA POWER & LIGHT COMPANY





TABLE OF CONTENTS





Page No.Part I.    Financial InformationItem 1.

Financial StatementsConsolidated Statements of Income for the three months ended March 31, 2002 and March 31, 2001

1Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001

2-3Consolidated Statements of Cash Flows for the three months ended March 31, 2002, and March 31, 2001

4Notes to Consolidated Financial Statements

5-7Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

8-12Item 3.

Quantitative and Qualitative Disclosures About Market Risk

12Part II.    Other InformationItem 6.

Exhibits and Reports on Form 8-K

13Signature

14




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Part 1.    FINANCIAL INFORMATION





Item 1.Financial Statements





DELMARVA POWER & LIGHT COMPANY





CONSOLIDATED STATEMENTS OF INCOME


(Dollars in Thousands)


(Unaudited)





Three Months Ended March 31,2002


2001OPERATING REVENUESElectric

$
237,161


$
260,643Gains on sales of electric generating plants


11,600



Gas


72,177



102,535Other services


2,674



5,744323,612



368,922OPERATING EXPENSESElectric fuel and purchased energy and capacity


149,661



139,963Gas purchased


52,430



79,731Other services' cost of sales


2,260



5,354Operation and maintenance


43,684



26,673Depreciation and amortization


20,906



26,643Taxes other than income taxes


8,958



8,953277,899



287,317OPERATING INCOME


45,713



81,605OTHER INCOME


2,359



3,149INTEREST EXPENSEInterest charges


11,331



17,758Allowance for borrowed funds used during construction and capitalized interest


(137
)


(162
)11,194



17,596PREFERRED DIVIDEND REQUIREMENT ON PREFERRED SECURITIES OF A SUBSIDIARY TRUST


1,422



1,422INCOME BEFORE INCOME TAXES


35,456



65,736INCOME TAXES


14,601



26,803NET INCOME


20,855



38,933DIVIDENDS ON PREFERRED STOCK


409



1,300EARNINGS APPLICABLE TO COMMON STOCK

$
20,446


$
37,633





See accompanying Notes to Consolidated Financial Statements.




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DELMARVA POWER & LIGHT COMPANY





CONSOLIDATED BALANCE SHEETS


(Dollars in Thousands)


(Unaudited)





March 31, 2002

December 31, 2001ASSETSCurrent AssetsCash and cash equivalents

$
202,132

$
174,876Accounts receivable, net of allowances of $17,953 and $17,270, respectively


197,626


187,309Inventories, at average costFuel (coal, oil and gas)


5,044


16,353Materials and supplies


14,704


13,636Prepayments


40,050


35,154Deferred energy supply costs


2,102


25,525461,658


452,853Investments


4,930


5,192Property, Plant and EquipmentElectric transmission and distribution


1,532,669


1,510,640Gas transmission and distribution


294,630


291,053Other electric and gas facilities


167,569


167,612Other property, plant and equipment


5,231


5,2312,000,099


1,974,536Less: Accumulated depreciation


783,904


770,287Net plant in service


1,216,195


1,204,249Construction work-in-progress


69,726


76,718Goodwill, net


48,459


48,4591,334,380


1,329,426Deferred Charges and Other AssetsRegulatory assetsDeferred recoverable stranded costs


64,991


65,702Other regulatory assets


49,601


53,702Prepaid employee benefits costs


193,168


192,181Unamortized debt expense


9,753


10,084Other


1,873


2,586319,386


324,255Total Assets

$
2,120,354

$
2,111,726





See accompanying Notes to Consolidated Financial Statements.




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DELMARVA POWER & LIGHT COMPANY





CONSOLIDATED BALANCE SHEETS


(Dollars in Thousands)


(Unaudited)





March 31, 2002

December 31, 2001CAPITALIZATION AND LIABILITIESCurrent LiabilitiesLong-term debt due within one year

$
47,961

$
75,461Variable rate demand bonds


104,830


104,830Accounts payable


61,319


64,407Accounts payable to affiliated companies


24,996


20,002Taxes accrued


167,091


119,231Interest accrued


14,334


11,093Other


62,275


79,348482,806


474,372Deferred Credits and Other LiabilitiesDeferred income taxes, net


288,328


290,319Deferred investment tax credits


14,268


14,504Above-market purchased energy contracts and other electric restructuring liabilities


63,611


68,711Other


13,774


16,258379,981


389,792CapitalizationCommon stock, $2.25 par value; 1,000,000 shares authorized; 1,000 shares outstanding


2


2Additional paid-in-capital


213,405


213,405Retained earnings


374,768


364,871Total common stockholder's equity


588,175


578,278Preferred stock not subject to mandatory redemption


29,583


29,583Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely company debentures


70,000


70,000Long-term debt


569,809


569,7011,257,567


1,247,562Commitments and Contingencies (Note 7)Total Capitalization and Liabilities

$
2,120,354

$
2,111,726





See accompanying Notes to Consolidated Financial Statements.




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DELMARVA POWER & LIGHT COMPANY





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars in Thousands)


(Unaudited)


Three Months Ended March 31,2002


2001CASH FLOWS FROM OPERATING ACTIVITIESNet income

$
20,855


$
38,933Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


20,942



26,670Deferred income taxes, net


(3,169
)


3,556Investment tax credit adjustments, net


(236
)


(556
)Deferred energy supply costs


23,423



(7,103
)Net change in:Accounts receivable


(10,317
)


48,351Inventories


10,241



3,976Accounts payable


(7,905
)


(7,119
)Taxes accrued


47,860



21,730Other current assets and liabilities(1)


(2,981
)


(9,730
)Other, net


(6,692
)


(8,644
)Net cash provided by operating activities


92,021



110,064CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures


(21,619
)


(20,552
)Other, net


284



330Net cash used by investing activities


(21,335
)


(20,222
)CASH FLOWS FROM FINANCING ACTIVITIESCommon dividends paid


(14,371
)


(5,960
)Preferred dividends paid


(409
)


(1,261
)Long-term debt redeemed


(27,500
)


Other, net


(1,150
)


(27
)Net cash used by financing activities


(43,430
)


(7,248
)Net change in cash and cash equivalents


27,256



82,594Cash and cash equivalents at beginning of period


174,876



94,604Cash and cash equivalents at end of period

$
202,132


$
177,198


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|(1) |  | Other than debt and deferred income taxes classified as current.
|--- |  | ----------------------------------------------------------------




See accompanying Notes to Consolidated Financial Statements.




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DELMARVA POWER & LIGHT COMPANY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note 1.    Financial Statement Presentation





The consolidated condensed interim financial
statements contained herein include the accounts of Delmarva Power & Light Company (DPL) and its wholly owned subsidiary and reflect all adjustments, consisting of only normal recurring adjustments, necessary in the opinion of management for a
fair presentation of interim results. In accordance with regulations of the Securities and Exchange Commission (SEC), disclosures that would substantially duplicate the disclosures in DPLs 2001 Annual Report on Form 10-K have been omitted.
Accordingly, DPLs consolidated condensed interim financial statements contained herein should be read in conjunction with DPLs 2001 Annual Report on Form 10-K.





As previously reported in Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of DPLs 2001 Annual Report on Form 10-K, under an Agreement and Plan of
Merger, Potomac Electric Power Company (Pepco) will acquire Conectiv, and Conectiv and Pepco will become wholly-owned subsidiaries of Pepco Holdings Inc. (the Conectiv/Pepco Merger). The Maryland Public Service Commission (MPSC) and the Delaware
Public Service Commission (DPSC) issued orders on April 11 and 16, 2002, respectively, approving the Conectiv/Pepco Merger. The MPSC and DPSC orders also approved conditions provided for in settlement agreements, which are discussed under
Maryland and Delaware in Note 7 to the Consolidated Financial Statements included in Item 8 of Part II of DPLs 2001 Annual Report on Form 10-K. Management currently expects the Conectiv/Pepco Merger to close in the
second or third quarter of 2002, subject to timely receipt of various statutory and regulatory approvals.





On April 30, 2002,
the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No.
145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt (an amendment of APB Opinion No. 30). SFAS No. 4 had required that material gains and losses on extinguishment of debt be classified as an extraordinary
item. Under SFAS No. 145, SFAS No. 4 is rescinded effective for fiscal years beginning after May 15, 2002. Due to the rescission of SFAS No. 4, it is less likely that a gain or loss on extinguishment of debt would be classified as an extraordinary
item in DPLs Consolidated Statement of Income. Among other things, SFAS No. 145 also amends SFAS No. 13, Accounting for Leases, to require that certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.





Effective January 1, 2002, DPL implemented
SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). Under SFAS No. 142, goodwill that has not been included in the rates of a regulated utility subject to SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation, is no longer amortized. The portion of goodwill included in regulated utility rates ($16.8 million as of March 31, 2002 and $17.5 million as of December 31, 2001) has been reclassified from goodwill to other non-current
regulatory assets and continues to be amortized as a regulatory asset.





For the three months ended March 31, 2001, net
income was $38.9 million and net income adjusted to exclude the $0.2 million charge for goodwill amortization was $39.1 million.




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DELMARVA POWER & LIGHT COMPANY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







DPLs goodwill balance of $48.5 million as of March 31, 2002 and December 31, 2001 is associated with
Conectivs Power Delivery business segment. During the first quarter of 2002, Conectiv redefined its business segments. Conectivs Power Delivery business segment, which had previously included the operating results for delivering
electricity to DPLs customers now also includes the operating results for supplying electricity to DPLs customers. As a result, all material aspects of DPLs operations are conducted in Conectivs Power Delivery business
segment.





Based on the requirements of SFAS No. 142, DPL is conducting a test for the impairment of goodwill as of January 1,
2001, by comparing the fair value of its Power Delivery business to its book value carrying amount. If the fair value exceeds the book value carrying amount, then no impairment exists under SFAS No. 142, which requires the test be completed by June
30, 2002.





Note 2.    Related Party Transactions





For background information concerning DPLs contracts with Conectiv Energy Supply, Inc. (CESI) for the purchase of electric energy and capacity, see Note 2 to the Consolidated
Financial Statements included in Item 8 of Part II to DPLs 2001 Annual Report on Form 10-K.





DPLs operating expenses
and revenues include amounts for transactions with CESI and other Conectiv subsidiaries. DPL purchased electric energy and capacity from CESI in the amounts of $137.3 million during the first quarter of 2002 and $7.9 million during the first quarter
of 2001. DPL also leased certain assets to other Conectiv subsidiaries and operating revenues included $2.3 million for the first quarter of 2002 and $5.5 million for the first quarter of 2001 for these transactions.





Note 3.    Supplemental Cash Flow Information





Three Months Ended March 31,2002


2001(Dollars in thousands)Cash paid (received) for:Interest, net of amounts capitalized

$
7,099


$
13,861Income taxes, net of refunds

$
(25,931
)

$
360





Note 4.    Income Taxes





The amounts computed by multiplying Income before income taxes by the federal statutory rate is reconciled in the table below to income tax expense on continuing
operations.





Three Months Ended March 31,2002


2001Amount


Rate


Amount


Rate(Dollars in Thousands)Statutory federal income tax expense

$
12,410


35
%

$
23,008


35
%State income taxes, net of federal benefit


1,916


5



3,625


6Depreciation


500


1



770


1Amortization of investment tax credits


(236
)





(556
)

(1
)Other, net


11






(44
)

Income tax expense

$
14,601


41
%

$
26,803


41
%




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DELMARVA POWER & LIGHT COMPANY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Note 5.    Adjustment to the 2001 Gain on Sales of Electric Generating Plants





As disclosed in Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of DPLs 2001 Annual
Report on Form 10-K, DPL realized a gain during the second quarter of 2001 on the sale of ownership interests in fossil fuel-fired electric generating plants (954 megawatts of capacity), including the Indian River plant. The gain in the second
quarter of 2001 was recorded net of estimated selling expenses, including anticipated environmental clean-up costs for the Indian River electric generating plant. In the first quarter of 2002, DPL reached an agreement with an insurer to settle
DPLs insurance claim for environmental clean-up costs associated with the Indian River electric generating plant. Due to DPLs insurance claim settlement and revised estimates of certain selling expenses, the estimated 2001 gain on the
sale of the plants was increased by $11.6 million before income taxes ($6.9 million after income taxes) in the first quarter of 2002 and is included in operating revenues.





Note 6.    Debt





On February 1, 2002, DPL redeemed $27.5 million of
First Mortgage Bonds, due February 1, 2022.





Note 7.    Contingencies





DPL is subject to regulation with respect to the environmental effect of its operations, including air and water quality control, solid and hazardous waste disposal, and limitation
on land use by various federal, regional, state, and local authorities. Federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or uncontrolled hazardous waste sites. Costs may be
incurred to clean up facilities found to be contaminated due to past disposal practices. DPLs liability for clean-up costs is affected by the activities of these governmental agencies and private land-owners, the nature of past disposal
practices, the activities of others (including whether they are able to contribute to clean-up costs), and the scientific and other complexities involved in resolving clean up-related issues (including whether DPL or a corporate predecessor is
responsible for conditions on a particular parcel).





DPL is currently a potentially responsible party at three federal superfund
sites. At one of these sites, DPL has resolved its liability for clean up costs through a de minimis settlement with the government. At this site, DPL may be liable for a claim by the state or federal government for natural resource damages. DPL
also is alleged to be a third-party contributor at three other federal superfund sites. In addition, DPL has two former coal gasification sites in Delaware and one former coal gasification site in Maryland, each of which is a state superfund site.
Also, the Delaware Department of Natural Resources and Environmental Control (DNREC) notified DPL in 1998 that it is a potentially responsible party liable for clean-up of the Wilmington Public Works Yard as a former owner of the property.
DPLs current liabilities included $14.3 million as of March 31, 2002 ($14.5 million as of December 31, 2001) for clean-up and other potential costs related to these sites. The accrued liability as of March 31, 2002 includes $10.8 million for
remediation and other costs associated with environmental contamination that resulted from an oil release at the Indian River power plant (which was sold on June 22, 2001) and reflects the terms of a related consent agreement reached with DNREC
during 2001. DPL does not expect such future costs to have a material effect on DPLs financial position or results of operations.




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





Forward-Looking Statements





The Private Securities Litigation Reform Act of 1995 (Litigation Reform Act)
provides a safe harbor for forward-looking statements to encourage such disclosures without the threat of litigation, provided those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements have been made in this report. Such statements are based on managements beliefs as well as
assumptions made by and information currently available to management. When used herein, the words intend, will, anticipate, estimate, expect, believe, and similar expressions
are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from
those contemplated in any forward-looking statements include, among others, the following: the effects of deregulation of electricity generation, including the unbundling of delivery services; the ability to purchase power on acceptable terms;
volatility in market demand and prices for energy, capacity, and fuel; changes in weather and economic conditions affecting energy usage; competition; asset sales; energy sales retention and growth; federal and state regulatory actions and
legislation affecting the energy industry; future litigation results; costs of construction; operating restrictions; effects of environmental regulations on operations and construction; and interest rate fluctuations and credit market concerns. DPL
undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing list of factors pursuant to the Litigation Reform Act should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made prior to the effective date of the Litigation Reform Act.





Earnings Results Summary





Earnings applicable to common stock decreased $17.2 million to $20.4 million for the
first quarter of 2002, from $37.6 million for the first quarter of 2001. In the second quarter of 2001, gains on sales of electric generating plants were recorded net of estimated selling expenses, including anticipated environmental clean-up costs
for the Indian River electric generating plant. Due to an insurance claim settlement for environmental clean-up costs and revised estimates of certain other selling expenses, earnings for the first quarter of 2002 included a $6.9 million after-tax
gain for an adjustment to the second quarter 2001 gains on sales of electric generating plants. Earnings for the first quarter of 2001 included a $9.8 million after-tax gain from termination of DPLs membership in a nuclear mutual insurance
company, as discussed in Note 9 to the Consolidated Financial Statements included in Item 8 of Part II of DPLs 2001 Annual Report on Form 10-K.





After adjusting earnings to exclude the $6.9 million and $9.8 million gains in the first quarter of 2002 and the first quarter of 2001, respectively, earnings decreased $14.3 million primarily due to warmer winter
weather, which resulted in lower retail customer usage of electricity and gas for space heating purposes. The cost of replacing the electricity produced by DPLs electric generating plants that were sold in the second quarter of 2001 also
contributed to the earnings decrease. Lower interest expense mitigated the earnings decrease.




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Regulatory Matters





As previously reported in Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of DPLs 2001 Annual Report on Form 10-K, under an Agreement and Plan of Merger, Potomac Electric Power
Company (Pepco) will acquire Conectiv, and Conectiv and Pepco will become wholly-owned subsidiaries of Pepco Holdings Inc. (the Conectiv/Pepco Merger). The MPSC and the DPSC issued orders on April 11 and 16, 2002, respectively, approving the
Conectiv/Pepco Merger. The MPSC and DPSC orders also approved conditions provided for in settlement agreements, which are discussed under Maryland and Delaware in Note 7 to the Consolidated Financial Statements included in
Item 8 of Part II of DPLs 2001 Annual Report on Form 10-K. Management currently expects the Conectiv/Pepco Merger to close in the second or third quarter of 2002, subject to timely receipt of various statutory and regulatory approvals.





Related Party Transactions





For background information concerning DPLs contracts with CESI for the purchase of electric energy and capacity, see Note 2 to the Consolidated Financial Statements included in Item 8 of Part II to DPLs
2001 Annual Report on Form 10-K.





DPLs operating expenses and revenues include amounts for transactions with CESI and
other Conectiv subsidiaries. DPL purchased electric energy and capacity from CESI in the amounts of $137.3 million during the first quarter of 2002 and $7.9 million during the first quarter of 2001. DPL also leased certain assets to other Conectiv
subsidiaries and operating revenues included $2.3 million for the first quarter of 2002 and $5.5 million for the first quarter of 2001 for these transactions.





Electric Revenues





Electric revenues decreased by $23.4 million to $237.2 million for the
first quarter of 2002, from $260.6 million for the first quarter of 2001 due to the following: (i) an $8.6 million retail revenue decrease from lower retail sales due to warmer winter weather, (ii) a $1.9 million increase in retail revenues due to
customers returning to DPL from alternative suppliers, and (iii) a $16.7 million decrease in revenues from interchange and resale sales, mainly due to the sale of DPLs electric generating plants and warmer winter weather.





The gross margin earned from total electric revenues is equal to electric revenues less electric fuel and purchased energy and
capacity. The gross margin earned from electric revenues decreased $33.2 million to $87.5 million for the first quarter of 2002, from $120.7 million for the first quarter of 2001. The $33.2 million decrease in gross margin was attributed to
the unfavorable revenue variances discussed above and the cost of replacing the electricity produced by DPLs electric generating plants that were sold in the second quarter of 2001.





Gas Revenues





Three Months Ended March 31,2002

2001(Dollars in millions)Regulated gas revenues

$
63.6

$
72.1Non-regulated gas revenues


8.6


30.4Total gas revenues

$
72.2

$
102.5




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The table above shows the amounts of gas revenues earned from sources which were subject to
price regulation (regulated) and which were not subject to price regulation (non-regulated). DPLs on-system sales and transportation of natural gas are generally subject to price regulation.





The gross margin (gas revenues less gas purchased) from total gas revenues decreased $3.1 million to $19.7 million for the first quarter of 2002, from
$22.8 million for the first quarter of 2001. The decrease was mainly due to a lower margin from regulated gas deliveries, which reflected lower volume.





Regulated gas revenues decreased by $8.5 million to $63.6 million for the first quarter of 2002, from $72.1 million for the first quarter of 2001. The $8.5 million revenue decrease was primarily due to a
lower volume of natural gas sold to retail customers due to warmer winter weather.





Non-regulated gas revenues
decreased by $21.8 million to $8.6 million for the first quarter of 2002, from $30.4 million for the first quarter of 2001. The revenue decrease was mainly due to reduced off-system sales opportunities due to the warmer winter weather. The gross
margin earned from non-regulated gas revenues was insignificant and the decrease in revenues had little effect on earnings.





Operating Expenses





Electric Fuel and Purchased Energy and Capacity





Electric fuel and purchased energy and capacity increased by $9.7 million to $149.7 million for the first
quarter of 2002, from $140.0 million for the first quarter of 2001. This increase was primarily due to the cost of replacing the electricity produced by DPLs electric generating plants that were sold in the second quarter of 2001, partly
offset by a decrease in energy costs associated with lower volumes of electricity supplied to utility customers.





Gas Purchased





Gas purchased decreased by $27.3 million to $52.4 million for the
first quarter of 2002, from $79.7 million for the first quarter of 2001. This decrease was attributed to a lower volume of gas purchased due to the reduction in demand attributed to warmer winter weather.





Operation and Maintenance Expenses





Operation and maintenance expenses increased $17.0 million for the first quarter of 2002, mainly due to $16.3 million received by DPL in the first quarter of 2001 for termination of its
membership in a nuclear mutual insurance company, higher pension and other postretirement benefits expense, and other increases, partly offset by decreases from the sale of electric generating plants during the second quarter of 2001.





Depreciation and Amortization





Depreciation and amortization expenses decreased $5.7 million for the first quarter of 2002 primarily due to the sale of electric generating plants during the second quarter of 2001.





Income Taxes





Income taxes decreased $12.2 million for the first quarter of 2002 mainly due to lower income before income taxes.




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Liquidity and Capital Resources





Due to $92.0 million of cash provided by operating activities, $21.3 million of cash used by investing activities, and $43.4 million of cash used by financing activities, cash and
cash equivalents increased by $27.3 million during the first quarter of 2002.





The net cash provided by operating activities
decreased by $18.0 million to $92.0 million for the first quarter of 2002, from $110.1 million for the first quarter of 2001. The decrease in cash flow was primarily due to lower revenues and the sale of the electric generating plants which caused
more electricity to be purchased. Also, cash flow in the first quarter of 2001 had benefited from the collection of accounts receivable associated with discontinued competitive retail energy activities.





DPLs capital expenditures during the first quarter of 2002 of $21.6 million were primarily for the electric transmission and distribution systems
of DPL.





The $43.4 million of net cash used by financing activities for the first quarter of 2002 included $14.4 million of
dividends on common stock paid to Conectiv, $0.4 million of dividends paid to preferred stockholders, redemption of $27.5 million of First Mortgage Bonds (due February 1, 2022), and $1.1 million of other miscellaneous uses.





DPLs capital structure expressed as a percentage of total capitalization, is shown below as of March 31, 2002, and December 31, 2001.





March 31, 2002


December 31, 2001Common stockholders equity

41.7
%

40.5
%Preferred stock

2.1
%

2.1
%Preferred trust securities

5.0
%

4.9
%Long-term debt and variable rate demand bonds

47.8
%

47.2
%Current maturities of long-term debt

3.4
%

5.3
%





DPLs ratio of earnings to fixed charges and ratio of earnings to fixed
charges and preferred dividends under the SEC Methods are shown below. See Exhibit 12-A, Ratio of Earnings to Fixed Charges, and Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends, for additional information.





3 Months Ended March 31, 2002

Year Ended December 31,2001

2000

1999

1998

1997Ratio of Earnings to Fixed Charges (SEC Method)

3.58

5.74

3.47

3.65

2.92

2.83Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (SEC Method)

3.41

5.28

3.20

3.37

2.72

2.63




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On May 8, 2002, Moodys Investor Service (Moodys) issued a press release confirming
the securities ratings of DPL. The ratings confirmation makes the assumption that the Conectiv/Pepco Merger will occur as planned.





On May 14, 2002, Standard & Poors (S&P) issued a press release lowering the corporate credit ratings of DPL and announcing ratings actions for DPLs securities, some of which include downgrades. S&P stated that the
ratings are based upon the receipt of the remaining regulatory approvals for the Conectiv/Pepco Merger. S&P also stated that the ratings actions reflect the consolidated credit measures of Pepco and Conectiv and also reflects the expected
issuance of additional debt at Pepco Holdings, Inc. to finance the Conectiv/Pepco merger.





The credit ratings assigned to
securities of DPL are shown in the table below:





Type of Security

Moodys

S&PCorporate credit rating

A3

A-Senior secured debt

A2

ASenior unsecured debt

A3

BBB+Short-term debt

P-1

A-2Preferred stock

Baa2

BBBPreferred trust securities

Baa1

BBB





The previous ratings for securities of DPL can be found in Item 7 of Part II of
DPLs 2001 Annual Report on Form 10-K. Securities ratings are not a recommendation to buy, sell or hold securities. Ratings are subject to revision or withdrawal at any time by the respective rating agencies. Each rating should be evaluated
independently of any other rating. Changes in credit ratings could affect DPLs cost of capital and access to capital markets.





Item
3.Quantitative and Qualitative Disclosures About Market Risk





As previously disclosed under
Quantitative and Qualitative Disclosures About Market Risk beginning on page II-13 to DPLs 2001 Annual Report on Form 10-K, DPL is subject to certain market risks. There were no material changes in DPLs level of market risks
as of March 31, 2002 compared to December 31, 2001.







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PART II.    OTHER INFORMATION





Item 6.Exhibits and Reports on Form 8-K





(a)  Exhibits





Exhibit 12-A, Ratio of Earnings to Fixed Charges





Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends





(b)  Reports on Form 8-K





None.




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SIGNATURE





Pursuant to the 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.





DELMARVA POWER & LIGHT COMPANY (Registrant)By:

/s/    JOHN C. VAN
RODENJohn C. van Roden, Senior Vice President and
Chief Financial Officer





Date:    May 15, 2002




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