PAYMENT AND GUARANTEE AGREEMENT


         THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"),  dated as
of  June  6,  1997,  is  executed  and  delivered  by  PECO  Energy  Company,  a
Pennsylvania  corporation (the "Guarantor"),  for the benefit of the Holders (as
defined  below) of the Series C Preferred  Securities (as defined below) of PECO
Energy Capital,  L.P., a Delaware limited  partnership  ("PECO Energy Capital"),
the  general  partner  of which  is PECO  Energy  Capital  Corp.  (the  "General
Partner"),  a  Delaware  corporation  and  a  wholly  owned  subsidiary  of  the
Guarantor.

         WHEREAS,  PECO Energy Capital is issuing on the date hereof $50,000,000
aggregate stated liquidation preference of limited partner interests of a series
designated the 8% Cumulative Monthly Income Preferred Securities,  Series C (the
"Series C Preferred  Securities"),  and the Guarantor desires to enter into this
Guarantee Agreement for the benefit of the Holders, as provided herein;

         WHEREAS, the Guarantor will issue Series C Subordinated  Debentures (as
defined  below) in  accordance  with the  Indenture  (as defined  below) to PECO
Energy Capital in an amount equal to the aggregate stated liquidation preference
of the Series C Preferred Securities and the capital contribution of the General
Partner to PECO Energy Capital (the "G.P. Capital Contribution"); and

         WHEREAS, the Guarantor desires to irrevocably and unconditionally agree
to the extent set forth herein to pay to the Holders the Guarantee  Payments (as
defined  below)  and  to  make  certain  other  undertakings  on the  terms  and
conditions set forth herein.

         NOW,   THEREFORE,   in   consideration   of  the   premises  and  other
consideration, receipt of which is hereby acknowledged, the Guarantor, intending
to be legally bound hereby, agrees as follows:

                                    ARTICLE I

         As used in this Guarantee Agreement,  each term set forth below, unless
the  context  otherwise  requires,   shall  have  the  following  meaning.  Each
capitalized  term used but not otherwise  defined  herein shall have the meaning
assigned to such term in the Amended and Restated Limited Partnership  Agreement
of PECO Energy  Capital dated as of July 25, 1994 (as amended from time to time,
the "Limited Partnership Agreement").

         "Guarantee  Payments"  shall  mean  the  following  payments,   without
duplication,  to the extent not paid by PECO Energy Capital: (i) any accumulated
and unpaid monthly distributions on



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the Series C Preferred  Securities out of moneys legally available therefor held
by PECO Energy  Capital,  (ii) the  Redemption  Price (as defined below) payable
with respect to any Series C Preferred  Securities called for redemption by PECO
Energy  Capital out of moneys  legally  available  therefor  held by PECO Energy
Capital,  and (iii) upon  liquidation of PECO Energy Capital,  the lesser of (a)
the Liquidation  Distribution (as defined below) and (b) the amount of assets of
PECO Energy Capital  available for distribution to the Holders in liquidation of
PECO Energy Capital.

         "Holders" shall mean the persons or entities in whose name any Series C
Preferred Securities are registered on the registration books maintained by PECO
Energy Capital;  provided,  however,  that in determining whether the Holders of
the  requisite  percentage  of  Series C  Preferred  Securities  have  given any
request,  notice,  consent or waiver  hereunder,  "Holder" shall not include the
Guarantor or any entity owned more than 50% by the Guarantor, either directly or
indirectly.

         "Indenture"  shall  mean the  Indenture,  dated as of July 1, 1994 (the
"Original  Indenture"),  as  supplemented by the First  Supplemental  Indenture,
dated as of December 1, 1995,  between the  Guarantor  and First Union  National
Bank, as successor trustee, and the Second Supplemental  Indenture,  dated as of
June 1, 1997,  between the Guarantor and First Union  National Bank, as trustee,
pursuant  to which the  Guarantor  has  issued  and will  issue  its  Deferrable
Interest Subordinated Debentures in series.

         "Liquidation  Distribution"  shall  mean the  aggregate  of the  stated
liquidation   preference  of  $25  per  Series  C  Preferred  Security  and  all
accumulated and unpaid distributions to the date of payment.

         "Preferred  Trust Receipts" shall mean the trust receipts issued by the
Trust each representing a Series C Preferred Security.

         "Redemption  Price"  shall  mean  the  aggregate  of $25 per  Series  C
Preferred  Security and all  accumulated  and unpaid  distributions  to the date
fixed for redemption.

         "Special  Representative"  shall mean any representative of the Holders
appointed pursuant to Section 13.02(d) of the Limited Partnership Agreement.

         "Supplemental  Indenture" shall mean the Second Supplemental Indenture,
dated as of June 1, 1997,  between the Guarantor and First Union  National Bank,
as  trustee,  pursuant  to which the  Guarantor  has  issued  its 8%  Deferrable
Interest  Subordinated   Debentures,   Series  C  (the  "Series  C  Subordinated
Debentures") in an amount equal to the aggregate stated  

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liquidation preference of the Series C Preferred Securities and the G.P. Capital
Contribution.

         "Trust" shall mean PECO Energy  Capital  Trust II, a Delaware  business
trust.

         "Trust  Agreement"  shall mean the Amended and Restated Trust Agreement
of PECO Energy Capital Trust II, as amended from time to time, among PECO Energy
Capital,  L.P.,  as Grantor,  First Union  National  Bank,  as trustee,  and the
General  Partner,  for the limited purpose stated  therein,  dated as of June 6,
1997.

         "Trustee"  shall mean First Union National Bank or a successor  trustee
under the Trust Agreement.


                                   ARTICLE II

         SECTION 2.01.  The Guarantor  hereby  irrevocably  and  unconditionally
agrees to pay in full to the Holders  the  Guarantee  Payments,  as and when due
(except  to the extent  paid by PECO  Energy  Capital),  to the  fullest  extent
permitted by law,  regardless of any defense,  right of set-off or  counterclaim
which the Guarantor may have or assert against PECO Energy Capital,  the General
Partner,  the  Trust  or the  Trustee.  The  Guarantor's  obligation  to  make a
Guarantee  Payment may be  satisfied by direct  payment by the  Guarantor to the
Holders or by payment of such  amounts by PECO  Energy  Capital to the  Holders.
Notwithstanding  anything to the contrary herein,  the Guarantor  retains all of
its rights under Section 4.01(b) of the Indenture to extend the interest payment
period on the Series C Subordinated  Debentures  and the Guarantor  shall not be
obligated hereunder to pay during an Extension Period any monthly  distributions
on the Series C Preferred  Securities  which are not paid by PECO Energy Capital
during such Extension Period.

         SECTION 2.02. The Guarantor  hereby waives notice of acceptance of this
Guarantee  Agreement  and of any  liability  to which it  applies  or may apply,
presentment,  demand  for  payment,  protest,  notice of  nonpayment,  notice of
dishonor, notice of redemption and all other notices and demands.

         SECTION 2.03.  Except as otherwise set forth herein,  the  obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening  from time to
time of any of the following:

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

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               (b) the extension of time for the payment by PECO Energy  Capital
of all or  any  portion  of the  distributions,  Redemption  Price,  Liquidation
Distribution or any other sums payable under the terms of the Series C Preferred
Securities or the extension of time for the performance of any other  obligation
under, arising out of, or in connection with, the Series C Preferred Securities;

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

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

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

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

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

         SECTION  2.04.  The  Guarantor  expressly  acknowledges  that  (i) this
Guarantee  Agreement will be deposited  with the General  Partner to be held for
the benefit of the Holders;  (ii) in the event of the  appointment  of a Special
Representative,  the Special Representative may enforce this Guarantee Agreement
for such purpose;  (iii) if no Special  Representative  has been appointed,  the
General  Partner has the right to enforce this Guarantee  Agreement on behalf of
the Holders;  (iv) the holders of Preferred  Trust  Receipts,  together with the
holders of the Series C Preferred Securities other than the Trust,  representing
not less than 10% in aggregate  stated  liquidation  preference  of the Series C
Preferred  Securities  have the right to direct  the time,  method  and place of
conducting any proceeding for any remedy  available in respect of this Guarantee
Agreement  including  the giving of  directions  to the  General  Partner or the
Special Representative as the case may be; and (v) if the General Partner or the
Special  Representative  fails to  enforce  this  Guarantee  Agreement  as above
provided, any holder of Preferred Trust Receipts representing Series C Preferred
Securities may institute a legal  proceeding  directly  against the Guarantor to
enforce its

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rights  under  this  Guarantee  Agreement,  without  first  instituting  a legal
proceeding against PECO Energy Capital or any other person or entity.

         SECTION 2.05. This is a guarantee of payment and not of collection. The
General Partner or Special  Representative may enforce this Guarantee  Agreement
directly against the Guarantor, and the Guarantor will waive any right or remedy
to require that any action be brought  against PECO Energy  Capital or any other
person or entity before proceeding  against the Guarantor.  The Guarantor agrees
that this Guarantee  Agreement shall not be discharged  except by payment of the
Guarantee  Payments in full (to the extent not paid by PECO Energy  Capital) and
by complete  performance of all  obligations of the Guarantor  contained in this
Guarantee Agreement.

         SECTION  2.06.  The  Guarantor  will be subrogated to all rights of the
Holders  against  PECO  Energy  Capital in respect  of any  amounts  paid to the
Holders by the Guarantor under this Guarantee Agreement and shall have the right
to waive  payment by PECO Energy  Capital  pursuant to Section  2.01;  provided,
however,  that the  Guarantor  shall  not  (except  to the  extent  required  by
mandatory  provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity,  reimbursement or other agreement, in all cases as
a result of a payment  under this  Guarantee  Agreement,  if, at the time of any
such payment,  any amounts remain due and unpaid under this Guarantee Agreement.
If any amount  shall be paid to the  Guarantor  in  violation  of the  preceding
sentence, the Guarantor agrees to pay over such amount to the Holders.

         SECTION 2.07. The Guarantor acknowledges that its obligations hereunder
are  independent  of the  obligations of PECO Energy Capital with respect to the
Series C  Preferred  Securities  and  that the  Guarantor  shall  be  liable  as
principal and sole debtor hereunder to make Guarantee  Payments  pursuant to the
terms of this Guarantee  Agreement  notwithstanding  the occurrence of any event
referred to in subsections (a) through (f), inclusive, of Section 2.03 hereof.


                                   ARTICLE III

         SECTION  3.01.  So long as any  Series C  Preferred  Securities  remain
outstanding,  neither the  Guarantor  nor any  majority-owned  subsidiary of the
Guarantor shall declare or pay any dividend on, or redeem, purchase,  acquire or
make a liquidation payment with respect to, any of its capital stock (other than
dividends by a wholly owned  subsidiary) if at such time the Guarantor  shall be
in default with respect to its payment or other  obligations  hereunder or there
shall have  occurred  any event that,  with the giving of notice or the lapse of
time or both,  would  constitute  an Event of Default under the  

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Indenture.  The  Guarantor  shall  take all  actions  necessary  to  ensure  the
compliance of its subsidiaries with this Section 3.01.

         SECTION  3.02.  So  long  as any  Series  C  Preferred  Securities  are
outstanding, the Guarantor agrees to maintain its corporate existence;  provided
that the Guarantor may consolidate with or merge with or into, or sell,  convey,
transfer  or  lease  all  or  substantially  all of its  assets  (either  in one
transaction  or  a  series  of  transactions)   to,  any  person,   corporation,
partnership,  limited liability company, joint venture association,  joint stock
company,  trust  or  unincorporated  association  if such  entity  formed  by or
surviving  such  consolidation  or merger  or to which  such  sale,  conveyance,
transfer  or lease  shall have been made,  if other than the  Guarantor,  (i) is
organized  and  existing  under the laws of the United  States of America or any
state thereof or the District of Columbia,  and (ii) shall expressly  assume all
the obligations of the Guarantor under this Guarantee Agreement.

         SECTION 3.03.  This Guarantee  Agreement  will  constitute an unsecured
obligation  of the Guarantor  and will rank  subordinate  and junior in right of
payment to all general liabilities of the Guarantor.


                                   ARTICLE IV

         This Guarantee Agreement shall terminate and be of no further force and
effect  upon full  payment of the  Redemption  Price of all  Series C  Preferred
Securities  or upon full  payment of the  amounts  payable to the  Holders  upon
liquidation  of PECO Energy  Capital;  provided,  however,  that this  Guarantee
Agreement shall continue to be effective or shall be reinstated, as the case may
be, if at any time the Holders must restore  payments of any sums paid under the
Series C Preferred  Securities or under this Guarantee  Agreement for any reason
whatsoever.


                                    ARTICLE V

         SECTION 5.01. All guarantees and agreements contained in this Guarantee
Agreement  shall  bind  the  successors,   assigns,   receivers,   trustees  and
representatives  of the Guarantor and shall inure to the benefit of the Holders.
Except as provided in Section 3.02, the Guarantor may not assign its obligations
hereunder  without the prior  approval of the Holders of not less than 662/3% of
the aggregate stated liquidation preference of all Series C Preferred Securities
then outstanding.

         SECTION 5.02. This Guarantee Agreement may only be amended by a written
instrument  executed  by the  Guarantor;  provided  that,  so long as any of the
Series C Preferred Securities remain outstanding,  any amendment that materially

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adversely affects the Holders,  any termination of this Guarantee  Agreement and
any waiver of compliance with any covenant hereunder shall be effected only with
the prior approval of the holders of Preferred Trust Receipts  together with the
holders of Series C Preferred Securities other than the Trust,  representing not
less  than  662/3%  of the  aggregate  liquidation  preference  of all  Series C
Preferred Securities then outstanding.

         SECTION 5.03. All notices, requests or other communications required or
permitted  to be given  hereunder to the  Guarantor  shall be deemed given if in
writing and delivered  personally or by recognized  overnight courier or express
mail  service  or  by  facsimile  transmission  (confirmed  in  writing)  or  by
registered  or  certified  mail  (return  receipt  requested),  addressed to the
Guarantor  at the  following  address  (or at such  other  address  as  shall be
specified by like notice to the Holders):

                           PECO Energy Company
                           2301 Market Street
                           P.O. Box 8699
                           Philadelphia, Pennsylvania  19101

                           Facsimile No.:  (215) 557-9885
                           Attention:  Treasurer

         All notices,  requests or other communications required or permitted to
be given  hereunder  to the  Holders  shall be deemed  given if in  writing  and
delivered  by the  Guarantor  in the same manner as notices  sent by PECO Energy
Capital to the Holders.

         SECTION 5.04. This Guarantee Agreement is solely for the benefit of the
Holders  and  is  not  separately  transferable  from  the  Series  C  Preferred
Securities.

         SECTION  5.05.  This  Guarantee  Agreement  shall  be  governed  by and
construed and  interpreted in accordance  with the laws of the  Commonwealth  of
Pennsylvania without giving effect to the conflict of law principles thereof.

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

                               PECO ENERGY COMPANY


                               By:
                                   Name:   J. Barry Mitchell
                                   Title:  Vice President-Finance

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