AGREEMENT

                      AMONG DELMARVA POWER & LIGHT COMPANY,

                     PECO ENERGY COMPANY AND PUBLIC SERVICE

                  ELECTRIC AND GAS COMPANY REGARDING LIABILITY

                AND PERFORMANCE OBLIGATIONS OF THE PLANT OPERATOR

         This  Agreement  dated May 27,  1997 is by and among  Delmarva  Power &
Light Company (hereinafter referred to as "DP&L"), PECO Energy Company (formerly
the Philadelphia Electric Company) hereinafter referred to as "PECO") and Public
Service  electric  and  Gas  Company  (and  Public  Services   Enterprise  Group
Incorporated)  (hereinafter  referred to as "PSE&G").  DP&L, PECO Energy Company
and PSE&G are hereinafter collectively referred to as the "Parties."

                                    RECITALS:

         WHEREAS, DP&L and PECO Energy Company filed a lawsuit against PSE&G and
Public  Services  Enterprise  Group  Incorporated  in the United States District
Court for the Eastern  District of  Pennsylvania  styled  Delmarva Power & Light
Company,  et al. V. Public  Service  Enterprise  Group,  Inc.,  et al., C.A. No.
96-CV-1705 (E.D. Pa.) (hereinafter referred to as the "Litigation");

         WHEREAS,  DP&L,  PECO  and  PSE&G  are  parties  to  the  Salem  Owners
Agreement, as amended, and are co-owners of the Salem Nuclear Generating Station
Units 1, 2 and 3 ("Salem Station");

         WHEREAS,  DP&L,  PECO and PSE&G are parties to the Peach Bottom  Owners
Agreement,  as amended,  and are  co-owners  of the Peach  Bottom  Atomic  Power
Station Units 2 and 3 ("Peach Bottom Station");

<PAGE>


         WHEREAS,  in an order dated March 28, 1997,  Judge Clarence C. Newcomer
encouraged the Parties to enter into settlement negotiations,  and supported the
use of an alternative dispute resolution process;

         WHEREAS,  the  Parties  engaged in an  alternative  dispute  resolution
process with the assistance of the Honorable Harold R. Tyler,  Jr., of New York,
New York,  former United States District Judge for the Southern  District of New
York; and

         WHEREAS,  in consideration for the settlement of the litigation and for
the additional  consideration provided in this Agreement,  the Parties desire to
minimize the possibility of future  litigation among the Owners of the Salem and
Peach Bottom  Stations and to establish for the remainder of the operating lives
of the Salem and Peach  Bottom  Stations  the  extent of  responsibility  of the
Owner-operator  to the  Non-operating  Owner  Parties  of each  Station  for all
management or operating  errors and  omissions or the failure to generate  power
and energy at either Station as economically and reliably as is practicable.

         NOW,  THEREFORE,  as  part  of the  settlement  of the  Litigation,  in
consideration  of the  mutual  covenants  made by and  between  the  Parties  in
settling  the  Litigation  and for other  valuable  consideration,  the Parties,
intending to be legally bound, hereby agree as follows:

                                   DEFINITIONS

         Unless  otherwise  defined  herein,  the  following  terms used in this
Agreement shall have the meanings ascribed to them as set forth below:

         (a)  "Agreement"  shall mean this Agreement  Among DP&L, PECO and PSE&G
Regarding Liability and Performance Obligations of the Plant Operator.

         (b) "Court" shall mean the United States District Court for the Eastern
District of Pennsylvania.

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<PAGE>

         (c)  "Litigation"  shall mean the lawsuit  described in the recitals to
this Agreement and all contentions and claims made therein.

         (d) "Salem Station" shall mean the Salem Nuclear Generating Station.

         (e) "Peach  Bottom  Station"  shall mean the Peach Bottom  Atomic Power
Station.

         (f) "Salem Owners  Agreement" shall mean the owners Agreement for Salem
Nuclear  Generating  Station  Units No. 1, 2 and 3, dated  November 24, 1971, as
amended.

         (g) "Peach Bottom owners Agreement" shall mean the Owners Agreement for
the Peach Bottom  Atomic  Power  Station  Units No. 2 and 3, dated  November 24,
1971, as amended.

         (h) "Owners  Agreements"  shall mean the Salem Owners Agreement and the
Peach Bottom Owners Agreement referred to collectively.

         (i) "Owner-operator"  refers to the owner which operates the Station(s)
under each Owners Agreement.  PSE&G is the  Owner-operator of the Salem Station.
PECO is the Owner-operator of the Peach Bottom Station.

         (j)  "Non-operating  owner  Parties"  refers to the owners which do not
operate the Station(s) under each owners Agreement. For Salem, PECO and DP&L are
Non-operating owner Parties;  for Peach Bottom, PSE&G and DP&L are Non-operating
Owner Parties.

         (k) "Current Outage": Salem Station Unit 1 has been off line (i.e., not
producing  electricity)  since may 17, 1995, and Unit 2 since June '/, 1995. The
Current  Outage  for each unit  shall mean from June 1, 1995 to the first day of
the month that is closest to the date of  Synchronization  of that unit with the
grid as described  herein.  In the event the date of  Synchronization  of a unit
with the grid falls on or  between  days 1 through  16 of a month,  the  Current
Outage  for that unit shall mean from June 1, 1995 to the first day of the month
that the  Synchronization  with the grid takes  place.  In the event the date of
Synchronization  of a unit with the grid falls on or between  days 17 through 31
of a month, the Current Outage for that unit shall mean from June 1, 1995 to 

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<PAGE>

the first day of the next month following the date on which Synchronization with
the grid takes place.

         (l) "Synchronization"  shall have the special meaning accorded to it in
the electric  power  industry.  In general  (and without  intending to modify or
alter its special meaning), the term refers to the point during restart at which
the turbine generator of the nuclear plant is synchronously  interconnected with
the  transmission  grid and the first megawatt of sustained,  continuous flow of
electricity begins to flow from the plant to the grid.

         (m)  "Replacement  Power  Costs"  mean the  costs  incurred  to  obtain
electricity,  whether it is generated or  purchased,  to replace the output of a
particular  generation  unit that is wholly or  partially  out of  service.  For
purposes  of this  Agreement,  Replacement  Power  Costs also shall  include any
alternative   measure  of  the  cost  burden  of  maintaining  a  unit  that  is
nonproductive.

         (n) "MDC" shall mean the maximum dependable capacity net. This shall be
defined, for each Station, as the gross electrical output measured at the output
terminals  of the  turbine  generators  during  the  most  restrictive  seasonal
conditions, less the station service load.

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<PAGE>

                              TERMS AND CONDITIONS

         1. This Agreement shall govern the relationship  among the Parties with
respect  to  liability   and   performance   obligations   of  the   undersigned
Owner-operators of the Salem and Peach Bottom Stations.

         2. The  arrangements  provided  herein shall be effective for the Peach
Bottom Station  beginning on January 1, 1998 and for the Salem Station beginning
on the later of the end of the  Current  Outage of Salem Unit 1 or Salem Unit 2.
As to Salem,  if the above occurs prior to January 1, 1998,  then the  beginning
date for the Salem Station shall be January 1, 1998. The  arrangements  provided
herein  shall  continue for each Station  until the date of  retirement  of both
units at that Station.

         3. For the Salem Station,  the following  performance  standards  shall
apply:

                  a. The Owner-operator shall compensate the Non-operatinq Owner
         Parties a total of $10 million (PECO: $8,518,000; DP&L: $1,482,000) for
         each year that the three year  historical  average MDC capacity  factor
         (excluding  therefrom  any  period of time to which  the Force  Maleure
         Clause of this  Agreement  applies) for the Salem Station as calculated
         as of  December  31 of that year is less than 40% but equal to or above
         20%.(1)  In the  event  that the  three  year  historical  average  MDC
         capacity  factor  (excluding  therefrom any period of time to which the
         Force Majeure Clause of this  Agreement  applies) for the Salem Station
         calculated as of December 31 of that year falls below 20%, the total

-----------------
(1)  In the event that the  beginning  date for the Salem  Station  occurs after
     January  1,  1998,  the  calculation  for the Salem  Station  shall be made
     initially as of December 31 of the first  calendar year that is at least 24
     months after the end of the Current Outage of the later of Unit 1 or Unit 2
     of the Salem Station.  In such event, the capacity factor calculation shall
     be made for the  period  beginning  on the later of the end of the  Current
     Outage of Salem Unit 1 or Salem Unit 2.

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<PAGE>

         payment to the  Non-operating  Owner  Parties  shall be $25 million per
         year (PECO: $21,295,000; DP&L: $3,705,000).(2)

                  b. The performance  standards provided in paragraph 3(a) shall
         be applied beginning with the month these  arrangements take effect for
         the Salem  Station as set forth in  paragraph 2 above.  Any payments to
         Non-operating  Owner Parties shall be in proportion to their  ownership
         interests  under the respective  Owners  Agreement.  In no event will a
         payment  be owing  prior to two years  from the  effective  date of the
         performance standard as it applies to the Salem Station.

                  c. The  calculation of amounts owed under paragraph 3(a) shall
         be done annually with any amounts owed for the preceding  year becoming
         due and  payable  by the end of the first  month  following  that year.
         Where  one  unit of the  Salem  Station  has been  retired,  1/2 of the
         payments provided in paragraph 3(a) will apply. 

         4. For the Peach Bottom Station,  the following  performance  standards
shall apply:

                  a. The Owner-operator shall compensate the Non-operating Owner
         Parties a total of $10 million (PSE&G:  $8,498,000;  DP&L:  $1,502,000)
         for each year that the  three  year  historical  average  MDC  capacity
         factor  (excluding  therefrom  any  period  of time to which  the Force
         Majeure Clause of this Agreement  applies) for the Peach Bottom Station
         as calculated as of December 31 of that year is less than 40% but equal
         to or above 20%.(3) In the event that the three year historical average
         MDC capacity  factor  (excluding  therefrom any period of time to which
         the Force  

-----------------
(2)  See Footnote 1.
(3)  The first "calculation" date shall be December 31, 2000.

                                       6

<PAGE>

         Majeure Clause of this agreement  applies) for the Peach Bottom Station
         calculated  as of December  31 of that year falls below 20%,  the total
         payment to the  Non-operating  Owner  Parties  shall be S25 million per
         year (PSE&G: $21,245,000; DP&L: $3,755,000).

                  b. The performance  standards provided in paragraph 4(a) shall
         be applied beginning with the month these  arrangements take effect for
         the  Peach  Bottom  Station  as set  forth in  paragraph  2 above.  Any
         payments to Non-operatinq Owner Parties shall be in proportion to their
         ownership interests under the respective Owners Agreement.  In no event
         will a payment be owing prior to three years from the effective date of
         the performance standard as it applies to the Peach Bottom Station.

                  c. The  calculation of amounts owed under paragraph 4(a) shall
         be done annually with any amounts owed for the preceding  year becoming
         due and  payable  by the end of the first  month  following  that year.
         Where one unit of the Peach Bottom Station has been retired, 1/2 of the
         payments  provided in  paragraph  4(a) will  apply- 

         5.  The  performance  standards  set  forth  in  paragraph  3 shall  be
effective  until  December 31, 2011 at the dollar amounts set forth in paragraph
3(a).  After that date, the performance  standards and other  provisions of this
Agreement will remain  effective,  but the dollar amounts in paragraph 3(a) will
be $1.  The  performance  standards  in  paragraph  4 shall be  effective  until
December 31, 2007 at the dollar amounts set forth in paragraph 4(a).  After that
date, the  performance  standards and other  provisions of this Agreement  shall
remain effective, but the dollar amounts in paragraph 4(a) shall be $1.

         6. The Parties agree that paragraphs 2-5 of this Agreement shall be the
Non-operating  Owner  Parties,  sole and exclusive  remedy for all management or
operating  errors or  omissions  or the failure to generate  power and energy at
either  

                                       7

<PAGE>

Station as economically and reliably as is practicable.  The  Owner-operator  of
the  Salem  Station  or the  Peach  Bottom  Station  shall  not be liable to the
Non-operating Owner Parties in contract, or in tort (including,  but not limited
to negligence or gross negligence),  or otherwise based upon facts,  matters, or
occurrences  relating  to  or  arising  out  of  the  construction,  management,
operation  or  maintenance  of the  Salem or Peach  Bottom  Stations  or for any
failures of the Owner-operator to perform any of its responsibilities except for
Willful  Action  and  then  only up to a  combined  total of $5  million  to the
Non-operating  Owner  Parties  for all such  facts,  matters or  occurrences  or
failures to perform based upon Willful  Action(s)  during any one annual period,
which amount  shall be reduced to $2.5  million  where one unit of a Station has
been  retired.  Each Party shall bear the entire  amount of its own  Replacement
Power Costs.  "Willful  Action" is defined as: action knowingly or intentionally
taken or not taken by the chief  nuclear  officer and approved by his  superior,
which  action or  non-action  and  approval  is taken with intent that injury or
damage would result or would probably result therefrom or with intent to defraud
another Party.

         7. Each Party  waives and  covenants  not to assert  against  any other
Party all  rights  under  the  Owners  Agreements  to the  extent  that they are
inconsistent  with this  Agreement.  This Agreement does not alter or change the
duties of all Parties to share the costs of the Salem and Peach Bottom  Stations
as  specified  in Article 3 of the Owners  Agreements  (and  related  budget and
accounting articles of the Owners Agreements).

         The Parties to this Agreement do not intend,  and this Agreement  shall
not be  construed  to affect the  currently  existing  rights and  interests  of
Atlantic Energy, Inc. or Atlantic City Electric Company (hereinafter referred to
collectively as "Atlantic")  that arise from Atlantic's  ownership  interests in
the Salem and Peach Bottom Stations.

         8. Times during which the operation of a Station is adversely  affected
by Force Majeure  Conditions  shall not form any part of the basis for a payment
for low 

                                       8

<PAGE>

capacity  factors as set forth in paragraphs 3 and 4 of this  Agreement.  "Force
Majeure  Conditions"  as used herein means the following:  acts of God,  floods,
earthquakes,  tornadoes, hurricanes;  terrorism, or acts of public enemies; war,
insurrections, riots or other civil disturbances; failure of or the necessity to
replace equipment for reasons of obsolescence or defect in design or manufacture
where the condition is generic to the equipment involved and for such time as is
reasonably  required  therefor;  plant  shutdown,  modification,   derating,  or
decommissioning  requirement  which is  necessary  to  comply  with any  Nuclear
Regulatory  Commission  or other  governmental  action that is applicable to any
generic category of plants or is based on considerations external to the Station
itself   (including,   but  not  limited  to,   seismological,   meteorological,
hydrological,  demographic or soil conditions). Any outage required to repair or
replace  steam  generators  shall  conclusively  be deemed to constitute a Force
Majeure condition.

         9. Any dispute over the application of the performance standards or any
other disputes  under the Owners  Agreements for Salem and Peach Bottom shall be
the subject of non-binding  mediation prior to resort to any legal process.  All
Parties waive the right to trial by jury in any court  proceeding  involving any
such dispute.

                            MISCELLANEOUS PROVISIONS

         10. Intent to Be Legally Bound

         The  Parties  intend that this  Agreement  create  legally  binding and
enforceable  obligations,  and  that  each  of  the  covenants  and  obligations
contained herein may be legally enforced.

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<PAGE>

         11. Warranty of Enforceabilitv

         Each Party represents,  agrees, and warrants, that this Agreement,  and
each instrument  required hereby to be executed and delivered by it,  constitute
legally valid, binding obligations, and shall be enforceable against each Party.

         12. Assignment

         This  Agreement  may not be  assigned by any Party  hereto  without the
express  written  consent  of each  other  Party  hereto.  The  representations,
warranties,  covenants,  and agreements  contained in this Agreement are for the
sole benefit of the Parties hereto and their  successors and permitted  assigns,
and shall not be  construed  to confer  any right or to avail any  remedy to any
other person.

         13. Governing Law

         This Agreement shall be governed by,  construed,  and interpreted,  and
the rights of the Parties  determined in accordance with, the laws of New Jersey
as it applies to the Salem Station and the laws of Pennsylvania as it applies to
the Peach Bottom Station.

         14 Entire Agreement

         This Agreement contains the entire  understanding of the Parties hereto
in respect of the subject matter  contained  herein.  There are no restrictions,
promises, representations,  warranties, covenants and undertakings governing the
subject  matter  of this  Agreement  other  than  those  expressly  set forth or
referred to herein. To the extent the terms and conditions of this Agreement can
be construed to be  inconsistent  with the terms and conditions of either of the
Owners Agreements, this Agreement supersedes the Owners Agreements and any other
prior agreements and understandings among the Parties hereto with respect to the
rights  and  obligations  of the  Parties  under the Owners  Agreements  and the
obligations of the Owner-operators of the Salem and Peach Bottom Stations.

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<PAGE>

         15. Waiver of Compliance

         Any  failure  of any  Party  hereto  to  comply  with  any  obligation,
covenant,  agreement or condition herein may be expressly waived in writing,  to
the extent  permitted  under  applicable  law,  by the Party or  Parties  hereto
entitled to the benefit of such obligation,  covenant, agreement or condition. A
waiver or failure to insist  upon  strict  compliance  with any  representation,
warranty,  covenant,  agreement or  condition  shall not operate a waiver of, or
estoppel with respect to, any subsequent or other failure.

         16. Counterparts

         This  Agreement may be executed in any number of  counterparts  and any
Party hereto may execute any such  counterpart,  each of which when executed and
delivered shall be deemed to be an original and all of which  counterparts taken
together  shall  constitute  but one and the same  instrument.  it shall  not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.

         17. Severance

         The Parties agree that if any  provision of this  Agreement is declared
invalid in whole or in part, it will have no effect on the validity of the other
provisions of the Agreement.

         18. Joint Drafting

         This Agreement is the product of the joint drafting of the parties. The
parties agree that no provision of this Agreement shail be construed against any
party as the drafter.

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<PAGE>


         19. Recitals

The  Recitals  to this  Agreement  are  incorporated  into  and are part of this
Agreement.

                                      PUBLIC SERVICE ELECTRIC
                                      AND GAS COMPANY

Attest:                               By: /s/ R. Edwin Selover
                                          --------------------------------------
                                      Its:    Senior Vice President
                                              and General Counsel

/s/ E.J. BIGGINS, Jr.
Corporate Secretary

                                      PUBLIC SERVICE ELECTRIC
                                      AND GAS COMPANY

Attest:                               By: /s/ R. Edwin Selover 
                                          --------------------------------------
                                      Its:    Vice President
                                              and General Counsel

/s/ E.J. BIGGINS, Jr.
Corporate Secretary

                                      PECO ENERGY COMPANY

Attest:                               By: /s/ Dikinson M. Smith 
                                          --------------------------------------
                                      Its:  President, PECO Nuclear,
                                            PECO Energy Company

/s/ Katherine K. Combs
Corporate Secretary

                                      DELMARVA POWER & LIGHT COMPANY

Attest:                               By: /s/ H. E. Cosgrove
                                          --------------------------------------
                                      Its: Chairman, President and C.E.O.

/s/ D. P. Connelly
SECRETARY

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