Document:

<PAGE>
                                                                     EXHIBIT 4.2

                 ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC,

                                     Issuer

                                       and

                              THE BANK OF NEW YORK,

                                     Trustee

                         ------------------------------

                            2002-1 SERIES SUPPLEMENT

                           Dated as of ________, 2002

                         ------------------------------

<PAGE>

     2002-1 SERIES SUPPLEMENT dated as of _______, 2002 (this "Supplement"), by
and between ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC, a Delaware limited
liability company (the "Issuer"), and The Bank of New York, a New York banking
corporation (the "Trustee"), as Trustee under the Indenture dated as of
________, 2002, between the Issuer and the Trustee (the "Indenture").

                              PRELIMINARY STATEMENT

     Section 9.01 of the Indenture provides, among other things, that the Issuer
and the Trustee may at any time and from time to time enter into one or more
indentures supplemental to the Indenture for the purposes of authorizing the
issuance by the Issuer of a Series of Transition Bonds and specifying the terms
thereof. The Issuer has duly authorized the execution and delivery of this
Supplement and the creation of a Series of Transition Bonds with an initial
aggregate principal amount of $____________ to be known as the Issuer's
Transition Bonds, Series 2002-1 (the "Series 2002-1 Transition Bonds"). All acts
and all things necessary to make the Series 2002-1 Transition Bonds, when duly
executed by the Issuer and authenticated by the Trustee as provided in the
Indenture and this Supplement and issued by the Issuer, the valid, binding and
legal obligations of the Issuer and to make this Supplement a valid and
enforceable supplement to the Indenture have been done, performed and fulfilled,
and the execution and delivery hereof have been in all respects duly and
lawfully authorized. The Issuer and the Trustee are executing and delivering
this Supplement in order to provide for the Series 2002-1 Transition Bonds.

     In order to secure the payment of principal of and interest on the Series
2002-1 Transition Bonds issued and to be issued under the Indenture and/or any
Series Supplement, the Issuer hereby confirms the Grant to the Trustee, for the
benefit of the Holders of the Series 2002-1 Transition Bonds from time to time
issued and Outstanding, of all of the Issuer's right, title and interest in, to
and under the Collateral, including without limitation the Bondable Transition
Property transferred by the Seller to the Issuer as of the Initial Transfer Date
pursuant to the Sale Agreement and all proceeds thereof.

     The Trustee, on behalf of the Holders of the Series 2002-1 Transition
Bonds, acknowledges the confirmation of such Grant, accepts the trusts hereunder
in accordance with the provisions hereof and agrees to perform its duties
required in the Indenture and this Supplement.

     SECTION 1. DEFINITIONS.

     All terms used in this Supplement that are defined in the Indenture, either
directly or by reference therein, have the meanings assigned to them therein,
except to the extent such terms are defined or modified in this Supplement or
the context clearly requires otherwise.

     SECTION 2. OTHER DEFINITIONAL PROVISIONS.

     "Authorized Denominations" means $1,000 and integral multiples of $1.00
above that amount, provided, however, that one Series 2002-1 Transition Bond of
each Class may have a denomination of less than $1,000.

<PAGE>

     "Expected Amortization Schedule" means Schedule A to this Supplement.

     "Expected Final Payment Date" means, with respect to any Class of the
Series 2002-1 Transition Bonds, the expected final Payment Date indicated for
such Class in Section 4 of this Supplement.

     "Final Maturity Date" means, with respect to any Class of the Series 2002-1
Transition Bonds, the final maturity date indicated for such Class in Section 4
of this Supplement.

     "Interest Rate" means, for any Class of the Series 2002-1 Transaction
Bonds, the percentage amount indicated for such Class in Section 4 of this
Supplement.

     "Overcollateralization Amount" has the meaning set forth in Section 5(d) of
this Supplement.

     "Record Date" means, with respect to any Payment Date, the Business Day
prior to such Payment Date or, with respect to any Definitive Transition Bonds,
the last Business Day of the month preceding such Payment Date.

     "Required Capital Amount" has the meaning set forth in Section 5(e) of this
Supplement.

     "Series Issuance Date" has the meaning set forth in Section 3(b) of this
Supplement.

     SECTION 3. DESIGNATION; SERIES ISSUANCE DATES.

          (a) Designation. The Series 2002-1 Transition Bonds shall be
designated generally as the Issuer's Transition Bonds, Series 2002-1, and
further denominated as Class A-1, Class A-2, Class A-3 and Class A-4.

          (b) Series Issuance Date. The Series 2002-1 Transition Bonds that are
authenticated and delivered by the Trustee to or upon the order of the Issuer on
________, 2002 (the "Series Issuance Date") shall have as their date of
authentication ________, 2002.

     SECTION 4. INITIAL PRINCIPAL AMOUNT; INTEREST RATE; EXPECTED FINAL PAYMENT
DATE; FINAL MATURITY DATES.

     The Transition Bonds of each Class of the Series 2002-1 Transition Bonds
shall have the initial principal amounts, bear interest at the respective
Interest Rates and have the respective Expected Final Payment Dates and Final
Maturity Dates set forth below:

          Initial
         Principal                      Expected Final        Final
Class     Amount       Interest Rate     Payment Date     Maturity Date
-----   -----------    -------------    --------------    -------------
A-1     $__________         ___%          ___________      ___________
A-2     $__________         ___%          ___________      ___________
A-3     $__________         ___%          ___________      ___________
A-4     $__________         ___%          ___________      ___________

                                       2
<PAGE>

     SECTION 5. PAYMENT DATES; EXPECTED AMORTIZATION SCHEDULE FOR PRINCIPAL;
INTEREST; OVERCOLLATERALIZATION AMOUNT; REQUIRED CAPITAL AMOUNT.

          (a) Payment Dates. The Payment Dates for each Class of the Series
2002-1 Transition Bonds are ________, ________, ________ and ________ of each
year, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing on ________, 2003 and continuing until the earlier of repayment
of such Class in full and the applicable Final Maturity Date.

          (b) Expected Amortization Schedule for Principal. Except in the case
of an optional redemption pursuant to Section 10.01 of the Indenture, unless an
acceleration upon an Event of Default has occurred and is continuing and the
unpaid principal amount of all Series of Transition Bonds has been declared to
be due and payable together with accrued and unpaid interest thereon, on each
Payment Date the Trustee shall distribute to the Series 2002-1 Transition
Bondholders of record as of the related Record Date the amounts payable as
principal on the Series 2002-1 Transition Bonds in accordance with the Expected
Amortization Schedule; provided that if as of such Payment Date one or more
Classes of Series 2002-1 Transition Bonds did not receive a scheduled payment of
principal on a previous Payment Date and amounts are payable in respect of more
than one such Class in accordance with the Expected Amortization Schedule,
principal payments shall be allocated in a sequential manner as follows: (i) to
the holders of Series 2002-1 Transition Bonds, Class A-1, until this Class is
retired in full; (ii) to the holders of Series 2002-1 Transition Bonds, Class
A-2, until this Class is retired in full; (iii) to the holders of Series 2002-1
Transition Bonds, Class A-3, until this Class is retired in full; and (iv) to
the holders of Series 2002-1 Transition Bonds, Class A-4, until this Class is
retired in full; provided, further, that no principal payment shall be made on
any Class of Series 2002-1 Transition Bonds in excess of the amount necessary to
reduce the Outstanding Amount of such Class to the amount specified for such
Class and such Payment Date in the Expected Amortization Schedule. In the case
of an optional redemption pursuant to Section 10.01 of the Indenture or an
acceleration upon an Event of Default pursuant to Section 5.02 of the Indenture,
if the amounts available to make payments of principal on the Series 2002-1
Transition Bonds are insufficient to make such payments in full, the Trustee
shall pay principal on each Class of the Series 2002-1 Transition Bondholders
pro rata based on the Outstanding Amount of each such Class as of such date, if
such date is a Payment Date, and otherwise as of the most recent Payment Date
after giving effect to all payments of principal made to the Holders of
Transition Bonds as of such most recent Payment Date.

          (c) Interest. On the initial Payment Date, interest shall be payable,
on each Class of the Series 2002-1 Transition Bonds, in an amount equal to the
product of:

          (1) the fraction (x) whose numerator is number of days (determined on
     the basis of a 360-day year of twelve 30-day months) from and including the
     Series Issuance Date to but excluding the initial Payment Date and (y)
     whose denominator is 360, times

          (2) the product of (x) the Interest Rate for such Class times (y) the
     Outstanding Amount of such Class as of the Series Issuance Date.

                                       3
<PAGE>

On each succeeding Payment Date, interest shall be payable, on each Class of the
Series 2002-1 Transition Bonds, in an amount equal to the product of:

          (1) the fraction (x) whose numerator is number of days (determined on
     the basis of a 360-day year of twelve 30-day months) from and including the
     preceding Payment Date to but excluding the current Payment Date and (y)
     whose denominator is 360, times

          (2) the product of (x) the Interest Rate for such Class times (y) the
     Outstanding Amount of such Class as of the close of business on the
     preceding Payment Date after giving effect to all payments of principal
     made to the Holders of such Class on such preceding Payment Date.

If the amounts available to make payments of interest on the Series 2002-1
Transition Bonds are insufficient to make such payments in full, the Trustee
shall make payments of interest to each Class of such Transition Bonds pro rata
based on the respective amounts of interest payable on each such Class. Interest
on the Series 2002-1 Transition Bonds shall be calculated on the basis of a
360-day year of twelve 30-day months.

          (d) Overcollateralization Amount. The Overcollateralization Amount for
the Series 2002-1 Transition Bonds with respect to each Payment Date shall be as
set forth in Schedule B hereto.

          (e) Required Capital Amount; Series 2002-1 Capital Subaccount. The
Required Capital Amount for the Series 2002-1 Transition Bonds shall be $______.

          (f) No Premium. No premium shall be payable in connection with the
early redemption of the Series 2002-1 Transition Bonds.

     SECTION 6. AUTHORIZED DENOMINATIONS. The Series 2002-1 Transition Bonds
shall be issuable in the Authorized Denominations.

     SECTION 7. REDEMPTION.

          (a) Mandatory Redemption. The Series 2002-1 Transition Bonds shall not
be subject to mandatory redemption.

          (b) Optional Redemption. The Issuer may redeem the Series 2002-1
Transition Bonds at its option, on any Payment Date in accordance with Section
10.01 of the Indenture if, after giving effect to payments that would otherwise
be made on such Payment Date, the Outstanding Amount of such Series has been
reduced to less than five percent of the initial Outstanding Amount of such
Series.

     SECTION 8. CREDIT ENHANCEMENT. No credit enhancement (other than the
Overcollateralization Amount, the Required Capital Amount and any adjustments to
the Transition Bond Charge approved by the BPU as contemplated in the Servicing
Agreement) is provided for the Series 2002-1 Transition Bonds.

                                       4
<PAGE>

     SECTION 9. DELIVERY AND PAYMENT FOR THE SERIES 2002-1 TRANSITION BONDS;
FORM OF THE SERIES 2002-1 TRANSITION BONDS. The Trustee shall deliver the Series
2002-1 Transition Bonds to the Issuer when authenticated in accordance with
Section 2.02 of the Indenture. The Series 2002-1 Transition Bonds shall be in
the form of Exhibit A.

     SECTION 10. LISTING AGENT, PAYING AGENT, TRANSFER AGENT. For so long as any
Series 2002-1 Transition Bonds are listed on the Luxembourg Stock Exchange and
the rules and regulations of such exchange so require, the Issuer shall retain a
listing agent, a transfer agent and a paying agent in Luxembourg appointed
pursuant to Section 3.02(b) of the Indenture.

     SECTION 11. CONFIRMATION OF INDENTURE. As supplemented by this Supplement,
the Indenture is in all respects ratified and confirmed and the Indenture, as so
supplemented by this Supplement, shall be read, taken and construed as one and
the same instrument.

     SECTION 12. COUNTERPARTS. This Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.

     SECTION 13. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.

                                       5
<PAGE>

         IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Supplement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.

                                              ATLANTIC CITY ELECTRIC TRANSITION
                                              FUNDING LLC, as Issuer

                                              By: ______________________________
                                                  Name: ________________________
                                                  Title: Manager

                                              THE  BANK OF NEW YORK, not
                                                   in its individual
                                                   capacity but solely as
                                                   Trustee on behalf of
                                                   the Transition
                                                   Bondholders,

                                              By: ______________________________
                                                   Name: _______________________
                                                   Title: ______________________

                                       6
<PAGE>

                                   SCHEDULE A
                         Expected Amortization Schedule
                       Scheduled Amortization Requirement

                    All amounts are in United States Dollars

  Payment        Class A-1      Class A-2      Class A-3      Class A-4
    Date          Balance        Balance        Balance        Balance
-------------  -------------  -------------  -------------  -------------
   Closing
   03/15/03    -------------  -------------  -------------  -------------
   06/15/03    -------------  -------------  -------------  -------------
   09/15/03    -------------  -------------  -------------  -------------
   12/15/03    -------------  -------------  -------------  -------------
   03/15/04    -------------  -------------  -------------  -------------
   06/15/04    -------------  -------------  -------------  -------------
   09/15/04    -------------  -------------  -------------  -------------
   12/15/04    -------------  -------------  -------------  -------------
   03/15/05    -------------  -------------  -------------  -------------
   06/15/05    -------------  -------------  -------------  -------------
   09/15/05    -------------  -------------  -------------  -------------
   12/15/05    -------------  -------------  -------------  -------------
   03/15/06    -------------  -------------  -------------  -------------
   06/15/06    -------------  -------------  -------------  -------------
   09/15/06    -------------  -------------  -------------  -------------
   12/15/06    -------------  -------------  -------------  -------------
   03/15/07          -        -------------  -------------  -------------
   06/15/07          -        -------------  -------------  -------------
   09/15/07          -        -------------  -------------  -------------
   12/15/07          -        -------------  -------------  -------------
   03/15/08          -        -------------  -------------  -------------
   06/15/08          -        -------------  -------------  -------------
   09/15/08          -        -------------  -------------  -------------
   12/15/08          -        -------------  -------------  -------------
   03/15/09          -        -------------  -------------  -------------
   06/15/09          -              -        -------------  -------------
   09/15/09          -              -        -------------  -------------
   12/15/09          -              -        -------------  -------------
   03/15/10          -              -        -------------  -------------
   06/15/10          -              -        -------------  -------------
   09/15/10          -              -        -------------  -------------
   12/15/10          -              -        -------------  -------------
   03/15/11          -              -        -------------  -------------
   06/15/11          -              -        -------------  -------------
   09/15/11          -              -        -------------  -------------
   12/15/11          -              -        -------------  -------------
   03/15/12          -              -        -------------  -------------
   06/15/12          -              -        -------------  -------------
   09/15/12          -              -        -------------  -------------
   12/15/12          -              -        -------------  -------------
   03/15/13          -              -        -------------  -------------
   06/15/13          -              -        -------------  -------------
   09/15/13          -              -        -------------  -------------

<PAGE>
  Payment        Class A-1      Class A-2      Class A-3      Class A-4
    Date          Balance        Balance        Balance        Balance
-------------  -------------  -------------  -------------  -------------
   12/15/13          -              -        -------------  -------------
   03/15/14          -              -        -------------  -------------
   06/15/14          -              -        -------------  -------------
   09/15/14          -              -        -------------  -------------
   12/15/14          -              -        -------------  -------------
   03/15/15          -              -        -------------  -------------
   06/15/15          -              -        -------------  -------------
   09/15/15          -              -        -------------  -------------
   12/15/15          -              -        -------------  -------------
   3/15/16           -              -              -        -------------
   6/15/16           -              -              -        -------------
   9/15/16           -              -              -        -------------
   12/15/16          -              -              -        -------------
   3/15/17           -              -              -        -------------
   6/15/17           -              -              -        -------------
   9/15/17           -              -              -        -------------
   12/15/17          -              -              -        -------------
   3/15/18           -              -              -        -------------
   6/15/18           -              -              -        -------------
   9/15/18           -              -              -        -------------
   12/15/18          -              -              -        -------------
   3/15/19           -              -              -        -------------
   6/15/19           -              -              -        -------------
   9/15/19           -              -              -        -------------
   12/15/19          -              -              -        -------------
   3/15/20           -              -              -        -------------
   6/15/20           -              -              -        -------------
   9/15/20           -              -              -        -------------
   12/15/20          -              -              -        -------------

                                  Schedule A-2

<PAGE>

                                   SCHEDULE B
                  Schedule of Overcollateralization Requirement

                    All amounts are in United States Dollars

      Overcollateralization                Overcollateralization
    Date        Account Balance          Date         Account Balance
  --------      ---------------        --------       ---------------
  03/15/03      ---------------        03/15/12       ---------------
  06/15/03      ---------------        06/15/12       ---------------
  09/15/03      ---------------        09/15/12       ---------------
  12/15/03      ---------------        12/15/12       ---------------
  03/15/04      ---------------        03/15/13       ---------------
  06/15/04      ---------------        06/15/13       ---------------
  09/15/04      ---------------        09/15/13       ---------------
  12/15/04      ---------------        12/15/13       ---------------
  03/15/05      ---------------        03/15/14       ---------------
  06/15/05      ---------------        06/15/14       ---------------
  09/15/05      ---------------        09/15/14       ---------------
  12/15/05      ---------------        12/15/14       ---------------
  03/15/06      ---------------        03/15/15       ---------------
  06/15/06      ---------------        06/15/15       ---------------
  09/15/06      ---------------        09/15/15       ---------------
  12/15/06      ---------------        12/15/15       ---------------
  03/15/07      ---------------         3/15/16       ---------------
  06/15/07      ---------------         6/15/16       ---------------
  09/15/07      ---------------         9/15/16       ---------------
  12/15/07      ---------------        12/15/16       ---------------
  03/15/08      ---------------         3/15/17       ---------------
  06/15/08      ---------------         6/15/17       ---------------
  09/15/08      ---------------         9/15/17       ---------------
  12/15/08      ---------------        12/15/17       ---------------
  03/15/09      ---------------         3/15/18       ---------------
  06/15/09      ---------------         6/15/18       ---------------
  09/15/09      ---------------         9/15/18       ---------------
  12/15/09      ---------------        12/15/18       ---------------
  03/15/10      ---------------         3/15/19       ---------------
  06/15/10      ---------------         6/15/19       ---------------
  09/15/10      ---------------         9/15/19       ---------------
  12/15/10      ---------------        12/15/19       ---------------
  03/15/11      ---------------         3/15/20       ---------------
  06/15/11      ---------------         6/15/20       ---------------
  09/15/11      ---------------         9/15/20       ---------------
  12/15/11      ---------------        12/15/20       ---------------

<PAGE>

                         Exhibit A to Series Supplement

                                  Form of Bond

REGISTERED         $

No. R-1 CUSIP NO.

                       SEE REVERSE FOR CERTAIN DEFINITIONS

     THE PRINCIPAL OF THIS CLASS A-[ ] TRANSITION BOND SHALL BE PAID IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS CLASS A-[ ] TRANSITION BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF. THE HOLDER OF THIS CLASS A-[ ] TRANSITION BOND HEREBY
COVENANTS AND AGREES THAT, PRIOR TO THE DATE WHICH IS ONE (1) YEAR AND ONE (1)
DAY AFTER THE PAYMENT IN FULL OF THE CLASS A-[ ] TRANSITION BONDS, IT WILL NOT
INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER
ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION
PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR
ANY STATE OF THE UNITED STATES. TRANSFERS OF THIS GLOBAL TRANSITION BOND SHALL
BE LIMITED TO TRANSFERS IN THE CLEARING AGENCY OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL TRANSITION BOND
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE.

<PAGE>

                  ATLANTIC CITY ELECTRIC TRANSITION FUNDING LLC

                  TRANSITION BONDS, SERIES 2002-1, CLASS A-[ ].

Interest    Original Principal     Expected Final
Rate        Amount                 Payment Date            Maturity Date

     ATLANTIC CITY ELECTRIC Transition Funding LLC, a limited liability company
formed and existing under the laws of the State of Delaware (herein referred to
as the "Issuer"), for value received, hereby promises to pay to the Registered
Holder hereof, or registered assigns, the principal amount shown above in
[quarterly/semiannual] installments on the Payment Dates (as defined below) and
in the amounts determined as specified on the reverse hereof or, if less, the
amounts determined pursuant to Section 8.02(e) of the Indenture referred to on
the reverse hereof, in each year, commencing on ________, 2003 and ending on or
before the Final Maturity Date, to pay the entire unpaid principal hereof on the
Final Maturity Date and to pay interest, at the Interest Rate shown above at a
fixed rate, on each _________, _________, _________ and _________, or, if any
such day is not a Business Day, the next succeeding Business Day, commencing on
________, 2003 and continuing until the earlier of the payment of the principal
hereof and the Final Maturity Date hereof (each a "Payment Date"), on the
principal amount of this Class A-[ ] Transition Bond outstanding from time to
time. Interest shall be computed (i) for the initial Payment Date, on the basis
of the number of days (determined on the basis of a 360-day year of twelve
30-day months) from and including the Series Issuance Date to but excluding the
initial Payment Date, divided by 360, multiplied by [ ]%, multiplied by the
Outstanding Amount of the Class A-[ ] Transition Bonds as of the Series Issuance
Date and (ii) for each succeeding Payment Date, on the basis of the number of
days (determined on the basis of a 360-day year of twelve 30-day months) from
and including the preceding Payment Date to but excluding the current Payment
Date, divided by 360, multiplied by [ ]%, multiplied by the Outstanding Amount
of the Class A-[ ] Transition Bonds as of the close of business on the preceding
Payment Date after giving effect to all payments of principal made to the
Holders of the Class A-[ ] Transition Bonds on such preceding Payment Date. Such
principal of and interest on this Class A-[ ] Transition Bond shall be paid in
the manner specified on the reverse hereof.

     The principal of and interest on this Class A-[ ] Transition Bond are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All payments
made by the Issuer with respect to this Class A-[ ] Transition Bond shall be
applied first to interest due and payable on this Class A-[ ] Transition Bond as
provided above and then to the unpaid principal of this Class A-[ ] Transition
Bond, all in the manner set forth in Section 8.02 of the Indenture and the
Series Supplement referred to on the reverse hereof.

     Reference is made to the further provisions of this Class A-[ ] Transition
Bond set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Class A-[ ] Transition Bond.

                                  Exhibit A-2

<PAGE>

     Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Class A-[ ]
Transition Bond shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

     IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an authorized Manager of the Issuer.

Dated: [           ], 2002

                                           ATLANTIC CITY ELECTRIC TRANSITION
                                           FUNDING LLC

                                           By: ________________________________
                                               Name: __________________________
                                               Title: Manager

                                  Exhibit A-3

<PAGE>

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

Dated: [           ], 2002

     This is one of the Class A-[ ] Transition Bonds of the Series 2002-1
Transition Bonds, designated above and referred to in the within-mentioned
Indenture.

                                           THE  BANK OF NEW YORK, not in its
                                             individual capacity but solely as
                                             Trustee on behalf of the Transition
                                             Bondholders,

                                           By: _________________________________
                                               Name: ___________________________
                                               Title: __________________________

                                  Exhibit A-4

<PAGE>

                           REVERSE OF TRANSITION BOND

     This Class A-[ ] Transition Bond is one of a duly authorized issue of
Transition Bonds of the Issuer, designated as its Transition Bonds (herein
called the "Transition Bonds"), issued and to be issued in one or more Series,
which Series are issuable in one or more Classes. The Series 2002-1 Transition
Bonds consist of [four] Classes, including the Class A-[ ] Transition Bonds
(herein called the "Class A-[ ] Transition Bonds"). The Class A-[ ] Transition
Bonds have been issued under an indenture dated as of __________, 2002, and a
series supplement thereto dated as of ________, 2002 (such series supplement, as
supplemented or amended, the "Series Supplement" and, collectively with such
indenture, as supplemented or amended, the "Indenture"), each between the Issuer
and The Bank of New York, a New York banking corporation, as Trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the Collateral pledged, the nature and extent of the
security, the respective rights, obligations and immunities thereunder of the
Issuer, the Trustee and the Holders of the Transition Bonds and the terms and
conditions under which additional Transition Bonds may be issued. All terms used
in this Class A-[ ] Transition Bond that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in the
Indenture.

     The Class A-[ ] Transition Bonds, the other Classes of Series 2002-1
Transition Bonds and any other Series of Transition Bonds issued by the Issuer
are and will be equally and ratably secured by the Collateral pledged as
security therefor as provided in the Indenture.

     The principal of this Class A-[ ] Transition Bond shall be payable on each
Payment Date only to the extent that amounts in the Collection Account are
available therefor, and only until the outstanding principal balance of the
Class A-[ ] Transition Bonds on such Payment Date (after giving effect to all
payments of principal made on such Payment Date) has been reduced to the
principal balance specified in the Expected Amortization Schedule attached to
the Series Supplement as Schedule A, unless payable earlier either because

          (i) an Event of Default has occurred and is continuing and the Trustee
     or the Holders of Transition Bonds representing not less than a majority of
     the Outstanding Amount of the Transition Bonds of all Series have declared
     the Transition Bonds to be immediately due and payable in accordance with
     Section 5.02 of the Indenture, or

          (ii) the Issuer, at its option, has called for the redemption of the
     Series 2002-1 Transition Bonds in whole pursuant to Section 7(b) of the
     Series Supplement and Section 10.01 of the Indenture.

However, actual principal payments may be made in lesser than expected amounts
and at later than expected times as determined pursuant to Section 8.02(e) of
the Indenture. The entire unpaid principal amount of this Class A-[ ] Transition
Bond shall be due and payable on the earlier of the Final Maturity Date hereof
and the Redemption Date, if any. Notwithstanding the foregoing, the entire
unpaid principal amount of the Transition Bonds shall be due and payable, if not
then previously paid, on the date on which an Event of Default shall have
occurred and be continuing and the Trustee or the Holders of the Transition
Bonds of all Series representing not less than a majority of the Outstanding
Amount of the Transition Bonds have declared the

                                  Exhibit A-5

<PAGE>

Transition Bonds to be immediately due and payable in accordance with Section
5.02 of the Indenture.

Except in the case of an optional redemption pursuant to Section 10.01 of the
Indenture, unless an acceleration upon an Event of Default has occurred and is
continuing and the unpaid principal amount of all Series of Transition Bonds has
been declared to be due and payable together with accrued and unpaid interest
thereon, on each Payment Date the Trustee shall distribute to the Series 2002-1
Transition Bondholders of record as of the related Record Date the amounts
payable as principal on the Series 2002-1 Transition Bonds in accordance with
the Expected Amortization Schedule; provided that if as of such Payment Date one
or more Classes of Series 2002-1 Transition Bonds did not receive a scheduled
payment of principal on a previous Payment Date and amounts are payable in
respect of more than one such Class in accordance with the Expected Amortization
Schedule, principal payments shall be allocated in a sequential manner as
specified in, and subject to the limitations set forth in, Section 5(b) of the
Series Supplement. In the case of an optional redemption pursuant to Section
10.01 of the Indenture or an acceleration upon an Event of Default pursuant to
Section 5.02 of the Indenture, if the amounts available to make payments of
principal on the Series 2002-1 Transition Bonds are insufficient to make such
payments in full, the Trustee shall pay principal on each Class of the Series
2002-1 Transition Bondholders pro rata based on the Outstanding Amount of each
such Class as of such date, if such date is a Payment Date, and otherwise as of
the most recent Payment Date after giving effect to all payments of principal
made to the Holders of Transition Bonds as of such most recent Payment Date.

     Payments of interest on this Class A-[ ] Transition Bond due and payable on
each Payment Date, together with the installment of principal, if any, payable
on this Class A-[ ] Transition Bond on such Payment Date, shall be made by check
mailed first-class, postage prepaid, to the Person whose name appears as the
Registered Holder of this Class A-[ ] Transition Bond (or one or more
predecessors of such Transition Bond) in the Transition Bond Register as of the
close of business on the Record Date or in such other manner as may be provided
in the Series Supplement, except that with respect to Class A-[ ] Transition
Bonds registered on the Record Date in the name of a Clearing Agency, payments
shall be made by wire transfer in immediately available funds to the account
designated by such Clearing Agency and except for the final installment of
principal payable with respect to this Class A-[ ] Transition Bond on a Payment
Date which shall be payable as provided below. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears in the
Transition Bond Register as of the applicable Record Date without requiring that
this Class A-[ ] Transition Bond be submitted for notation of payment. Any
reduction in the principal amount of this Class A-[ ] Transition Bond (or any
one or more predecessors to such Transition Bond) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Class A-[ ]
Transition Bond and of any Class A-[ ] Transition Bond issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Class A-[ ] Transition Bond on a Payment Date, then the Trustee, in the
name of and on behalf of the Issuer, shall notify the Person who was the
Registered Holder hereof as of the second preceding Record Date to such Payment
Date by notice mailed no later than five days prior to such final Payment Date
and shall specify that such final installment will be payable to the Registered
Holder hereof as of the Record Date

                                  Exhibit A-6

<PAGE>

immediately preceding such final Payment Date and only upon presentation and
surrender of this Class A-[ ] Transition Bond and shall specify the place where
this Class A-[ ] Transition Bond may be presented and surrendered for payment of
such installment.

     The Issuer shall pay interest on overdue installments of interest on this
Class A-[ ] Transition Bond at the Interest Rate for Class A-[ ] to the extent
lawful.

     The Class A-[ ] Transition Bonds may be redeemed, in whole but not in part,
in certain circumstances as provided in Section 7(b) of the Series Supplement
and Section 10.01 of the Indenture.

     This Class A-[ ] Transition Bond is a "transition bond" as such term is
defined in the Competition Act. Principal and interest due and payable on this
Transition Bond are payable from and secured primarily by bondable transition
property authorized by a bondable stranded costs rate order issued by the State
of New Jersey Board of Public Utilities pursuant to the Competition Act. The
bondable transition property securing the Transition Bonds includes the
irrevocable right to impose and collect a nonbypassable, usage-based charge
(defined in the Competition Act as a "transition bond charge") to be included in
electric utility bills of customers of Atlantic City Electric Company, a New
Jersey corporation.

     The Competition Act provides that:

          "The State of New Jersey does hereby pledge and agree with the holders
          of any transition bonds issued under the authority of this act, with
          the pledgee, owner or assignee of bondable transition property, with
          any financing entity which has issued transition bonds with respect to
          which a bondable stranded costs rate order has been issued and with
          any person who may enter into agreements with an electric public
          utility or an assignee or pledgee thereof or a financing entity
          pursuant to this act, that the State will not limit, alter or impair
          any bondable transition property or other rights vested in an electric
          public utility or an assignee or pledgee thereof or a financing entity
          or vested in the holders of any transition bonds pursuant to a
          bondable stranded costs rate order until such transition bonds,
          together with the interest and acquisition or redemption premium, if
          any, thereon, are fully paid and discharged or until such agreements
          are fully performed on the part of the electric public utility, any
          assignee or pledgee thereof or the financing entity or in any way
          limit, alter, impair or reduce the value or amount of the bondable
          transition property approved by a bondable stranded costs rate order
          ...."

     As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Class A-[ ] Transition Bond may be registered in
the Transition Bond Register upon surrender of this Class A-[ ] Transition Bond
for registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Holder hereof or his attorney duly authorized in writing, with such signature
guaranteed by an Eligible

                                  Exhibit A-7

<PAGE>

Guarantor Institution, and thereupon one or more new Class A-[ ] Transition
Bonds of any Authorized Denominations and in the same aggregate initial
principal amount shall be issued to the designated transferee or transferees. No
service charge shall be charged for any registration of transfer or exchange of
this Class A-[ ] Transition Bond, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange.

     Prior to the due presentment for registration of transfer of this Class A-[
] Transition Bond, the Issuer, the Trustee and any agent of the Issuer or the
Trustee may treat the Person in whose name this Class A-[ ] Transition Bond is
registered (as of the day of determination) as the owner hereof for the purpose
of receiving payments of principal of and interest on this Class A-[ ]
Transition Bond and for all other purposes whatsoever, whether or not this Class
A-[ ] Transition Bond may be overdue, and neither the Issuer, the Trustee nor
any such agent shall be affected by notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Transition Bonds under the Indenture
at any time by the Issuer with the consent of the Holders of Transition Bonds
representing a majority of the Outstanding Amount of all Transition Bonds at the
time Outstanding of each Series or Class to be affected and upon satisfaction of
the Rating Agency Condition. The Indenture also contains provisions permitting
the Holders of Transition Bonds representing specified percentages of the
Outstanding Amount of the Transition Bonds of all Series, on behalf of the
Holders of all the Transition Bonds, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Class A-[ ] Transition Bond (or any one of more predecessors of such
transition bonds) shall be conclusive and binding upon such Holder and upon all
future Holders of this Class A-[ ] Transition Bond and of any Class A-[ ]
Transition Bond issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof whether or not notation of such consent or waiver is
made upon this Class A-[ ] Transition Bond. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Transition Bonds issued
thereunder.

     The Issuer is permitted by the Indenture, under certain circumstances, to
merge, consolidate or sell substantially all of its assets, subject to the
rights of the Trustee and the Holders of Transition Bonds under the Indenture.
The term "Issuer" as used in this Class A-[ ] Transition Bond includes any
successor to the Issuer under the Indenture.

     The Class A-[ ] Transition Bonds are issuable only in registered form in
Authorized Denominations as provided in the Indenture and the Series Supplement,
subject to certain limitations therein set forth.

     This Class A-[ ] Transition Bond, the Indenture and the Series Supplement
shall be construed in accordance with the laws of the State of New Jersey,
without reference to its conflict of law provisions, and the obligations, rights
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.

                                  Exhibit A-8

<PAGE>

     No reference herein to the Indenture, and no provision of this Class A-[ ]
Transition Bond or of the Indenture, shall alter or impair the right of the
Holder hereof, which is absolute and unconditional and which shall not be
impaired without the consent of such Holder: (a) to receive payment of (i) the
interest on this Transition Bond on or after the due dates thereof expressed in
this Transition Bond or in the Indenture, (ii) the unpaid principal of this
Transition Bond on or after the Final Maturity Date herefor and (iii) in the
case of redemption, the unpaid principal and interest on this Transition Bond on
or after the Redemption Date hereof; and (b) to institute suit for the
enforcement of any such payment.

                                  Exhibit A-9

<PAGE>

                                   ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee:

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __

                         (name and address of assignee)

the within Class A-[ ] Transition Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints

                         (name and address of appointee)

attorney, to transfer said Class A-[ ] Transition Bond on the books kept for
registration thereof, with full power of substitution in the premises.

Dated:
                                                                  *
-----------------       -----------------------------------------
                  Signature Guaranteed:

-----------------       -----------------------------------------

*    NOTE: The signature to this assignment must correspond with the name of the
     registered owner as it appears on the face of the within Class A-[ ]
     Transition Bond in every particular, without alteration, enlargement or any
     change whatsoever.

                                  Exhibit A-10<PAGE>
                                                                    EXHIBIT 10.5

                                                           Agenda Date:  9/18/02
                                                                Agenda Item:  2B

                               STATE OF NEW JERSEY
                            Board of Public Utilities
                               Two Gateway Center
                                Newark, NJ 07102

IN THE MATTER OF THE PETITION OF ATLANTIC CITY    )
ELECTRIC COMPANY FOR A BONDABLE STRANDED          )
COSTS RATE ORDER IN ACCORDANCE WITH N.J.S.A.      )
48:3-49 et seq., TO AUTHORIZE THE IMPOSITION OF A )
NON-BYPASSABLE TRANSITION BOND CHARGE AND A       )
RELATED MARKET TRANSITION CHARGE-TAX              )
COMPONENT, TO AUTHORIZE THE RECOVERY AND          )
REFINANCING OF CERTAIN OF ITS RECOVERY-ELIGIBLE   )         BONDABLE
STRANDED COSTS AND THE SALE OF BONDABLE           )      STRANDED COSTS
TRANSITION PROPERTY, TO AUTHORIZE THE ISSUANCE    )        RATE ORDER
AND SALE OF TRANSITION BONDS UP TO AN             )
AGGREGATE PRINCIPAL AMOUNT CONSISTENT WITH        )
N.J.S.A. 48:3-62 TO RECOVER PETITIONER'S RECOVERY-)  DOCKET NO. EF01060394
ELIGIBLE STRANDED COSTS, AND TO AUTHORIZE THE     )
APPLICATION OF TRANSITION BOND PROCEEDS TO BUY    )
DOWN OR BUY OUT LONG-TERM POWER PURCHASE          )
CONTRACTS, TO RETIRE OUTSTANDING DEBT, EQUITY     )
OR BOTH, AND TO APPROVE THE METHODOLOGY FOR       )
THE CALCULATION AND ADJUSTMENT OF THE             )
TRANSITION BOND CHARGE AND MARKET TRANSITION      )
CHARGE-TAX RELATED THERETO.                       )

                             (SERVICE LIST ATTACHED)

     LeBoeuf, Lamb, Greene & MacRae, LLP, Stephen B. Genzer, Esq. and Colleen A.
          Foley, Esq., Newark, New Jersey, Counsel for Atlantic City Electric
          Company.

     Fred S. Grygiel, Chief Economist, and Mark C. Beyer, Manager, Office of the
          Economist, and Larry P. Gentieu, Division of Energy, on behalf of the
          Staff of the Board of Public Utilities and Ray Lamboy, Deputy Attorney
          General.

     Badrhn Ubushin, Deputy Ratepayer Advocate, Division of the Ratepayer
          Advocate.

BY THE BOARD:

<PAGE>

By Petition filed with the Board of Public Utilities (the "Board" or "BPU") on
June 25, 2001 (the "Petition"), Atlantic City Electric Company, (the "Company"
or "Atlantic"), for purposes of recovering the stranded costs deemed eligible
for rate recovery by the Board in the Summary Order dated July 15, 1999, which
was more fully detailed in the Final Decision and Order dated March 30, 2001
("Restructuring Order"), in BPU Docket Nos. E097070455, E097070456 and
E097070457 and OAL Docket Nos. PUC-7311-97 and PUC 7312-97, together with other
bondable stranded costs described in the Electric Discount and Energy
Competition Act (the "Act"), P.L. 1999, c. 23, codified at N.J.S.A. 48:3-49, et
seq., and to enable the Company to comply with the rate reduction requirements
determined by the Board to be necessary and appropriate consistent with the
provisions of Sections 4 and 13 of the Act, requests that the Board issue an
irrevocable Bondable Stranded Costs Rate Order (the "Financing Order") to
authorize: (i) the recovery of $420.833 million of recovery-eligible stranded
costs, and $19.167 million of transaction costs resulting from the issuance of
the transition bonds described herein; (ii) the imposition of a usage-based
nonbypassable transition bond charge (the "TBC"), as provided in Section 18 of
the Act, and the collection of such charge by the Company or another entity
approved by the Board; (iii) the Company to transfer its interest in the
Bondable Transition Property (as defined below) in respect of such TBC to a
financing entity approved by the Board; (iv) the issuance and sale of up to $440
million aggregate principal amount of transition bonds, series 2002-1 (the
"Transition Bonds") by a financing entity approved by the Board to securitize
the recovery of a portion of the Company's bondable stranded costs (the
"Transition Bond Transaction") and to apply the net proceeds of the Transition
Bonds for the purposes of reducing the amount of its otherwise recovery-eligible
stranded costs through the buydown or buyout of long-term power purchase
contracts, or to retire or refinance the Company's outstanding debt, equity or
both; (v) the methodology for the calculation and adjustment of a tax component
(the "MTC-Tax") to be included in its nonbypassable market transition charge
(the "MTC") and the collection of such charge as previously authorized by the
Board in the Restructuring Order to recover federal income and state corporation
business taxes, if applicable, associated with the Bondable Transition Property
(as defined below) and the collection of the TBC and the MTC-Tax (the "MTC-Tax
Component") to reconcile future tax rates and MTC-Tax collections to assure full
recovery of the MTC-Tax Component; and (vi) the methodology for the calculation
and adjustment of the TBC. Additionally, the Company asks that the Board modify
its Order dated July 21, 2000, in Docket No. EM99110870 to permit the Company to
securitize its nuclear generation stranded costs prior to the Board's final
review and determination of the recovery-eligible stranded costs associated with
the Company's fossil generation assets.

The Company states that the proceeds of the Transition Bonds (net of Upfront
Transaction Costs (as defined below)) will be used by or on behalf of the
Company for the purposes of reducing the amount of its otherwise
recovery-eligible stranded costs, through the retirement of debt or equity, or
both, of the Company consistent with Section 14 of the Act, and to buy down or
buy out Board-approved long-term power purchase contracts ("NUG Contracts")/1
consistent with Section 14.

The Company estimates that the Transition Bond Transaction will result in
present value savings over the term of the Transition Bonds. Exhibit A of this
Order sets forth a calculation of the net present value benefits of the
Transition Bond Transaction based on the assumptions contained herein. The
Company's MTC and TBC will be trued up to reflect the terms of the

--------
1 Pursuant to a Board Order dated November 10, 1999, the Company bought out an
existing Board-approved NUG Contract with the Pedricktown Cogeneration Limited
Partnership in BPU Docket No. EE99090685. Pursuant to a Board Order dated
December 6, 2000, the Company bought down an existing Board-approved NUG
Contract with American Ref-Fuel Company of Delaware Valley, L.P. in BPU Docket
No. EM00060388.

ACE Bondable Stranded Costs Rate Order        2        BPU Docket No. EF01060394

<PAGE>

actual Transition Bond Transaction so that, among other things, any incremental
savings from the actual Transition Bond Transaction, beyond those anticipated
and already provided to customers of the Company, will benefit such customers
through adjustments to the TBC and MTC.

1.   PROCEDURAL HISTORY

On April 30, 1997, the Board issued an Order adopting and releasing a document
entitled "Restructuring the Electric Power Industry in New Jersey: Findings and
Recommendations" (the "Final Report"). The Final Report contained the findings
and recommendations concerning the future structure of the electric power
industry in New Jersey, including the recommendation that in the future electric
consumers be offered a choice of electric power suppliers in order to effectuate
substantial economic benefits by way of lower electric bills and the provision
of more service options to the State's residents and businesses.

Recognizing that there were a number of substantial procedural steps necessary
to implement the recommended policies and to prepare for the commencement of
retail competition, the Board directed in the Order adopting the Final Report
that each of the State's four investor owned electric utilities make three
filings: a rate unbundling petition, a stranded cost petition, and a
restructuring plan.

On July 11, 1997, the Board issued an Order Establishing Procedures, wherein it
determined to transmit each utility's rate unbundling and stranded cost filings
to the Office of Administrative Law (the "OAL") for hearings and the issuance of
an Initial Decision. The Board also determined to retain the restructuring plan
filings for its own review and, as necessary, hearings.

On July 15, 1997, the Company filed its response to the Final Report. The
Company's unbundling and stranded costs proceedings were transmitted to the OAL
and assigned to Administrative Law Judge William Gural ("ALJ Gural") (BPU Docket
Nos. EO97070455 and EO97070456 respectively). The restructuring Petition was
retained by the Board (BPU Docket No. EO97070457).

Nine days of evidentiary hearings on the unbundling and stranded costs
proceedings were conducted by ALJ Gural at the OAL between February 17, 1998 and
February 27, 1998. During that time period, witnesses were cross-examined on
their prefiled direct testimony, as well as on any filed rebuttal or surrebuttal
testimony. At the close of hearings, a briefing schedule was adopted by ALJ
Gural. Initial Briefs were filed in March, 1998. Reply Briefs were filed in
April, 1998.

After the Company's unbundling and stranded cost hearings and briefing were
completed at the OAL, approximately twenty additional days of evidentiary
hearings were held before Commissioner Carmen J. Armenti between April 27 and
May 28, 1998. During these dates, the parties presented testimony and conducted
cross-examination on certain identified restructuring issues affecting all four
electric utilities.

Following the close of hearings before Commissioner Armenti, briefs and reply
briefs on the restructuring issues were filed on June 26 and July 17, 1998,
respectively.

After requesting and receiving an extension of time from the Board, ALJ Gural
issued an Initial Decision and Report on the Company's unbundling and stranded
cost filings on August 19,

ACE Bondable Stranded Costs Rate Order        3        BPU Docket No. EF01060394

<PAGE>

1998. The parties filed Exceptions and Replies to Exceptions to the Initial
Decision with the Board in October and November, 1998, respectively.

On February 9, 1999, then-Governor Whitman signed the Act into law. The Act
authorized the Board to permit competition in the electric generation and
natural gas supply marketplaces and such other traditional utility areas as the
Board determines. In addition, all four electric utilities were mandated to
implement specific rate reductions over a period of four years. Among other
things, the Act required the Board, by Order, to provide that by no later than
August 1, 1999 each electric public utility would provide retail choice of
electric power suppliers for its customers, reduce its aggregate level of rates
for each customer class by no less than five percent, unbundle its rate
schedules and establish so-called "shopping credits" applicable to the bills of
retail customers who choose alternative electric power suppliers.

By Order dated February 11, 1999, the Board established guidelines and a
schedule for the commencement of settlement negotiations among the parties in
the Company's stranded costs, rate unbundling, and restructuring proceedings.
The Board set a deadline for the submission to the Board of a negotiated
settlement, which deadline was later extended. No comprehensive settlement was
reached among all the parties; however, on June 9, 1999 a proposed Stipulation
of Settlement ("Stipulation") was filed by the Company and four other parties. A
proposed alternative stipulation of settlement ("Stipulation II") was submitted
to the Board on June 15, 1999 by the Division of the Ratepayer Advocate and
three other parties. The parties were provided the opportunity to submit
comments to the Board on both Stipulations.

At its July 15, 1999 open public agenda meeting, the Board found that with
certain modifications the Stipulation could serve as a reasonable framework for
a fair and reasonable resolution of the matters and issued its Summary Order
dated July 15, 1999 ("Summary Order") memorializing the Board's decision in BPU
Docket Nos. EO97070455, EO97070456 and EO97070457. In that Summary Order, the
Board determined, among other things, that the Company would have an opportunity
to recover its net owned generation stranded costs (established definitively
upon divestiture), as well as 100% of NUG Contract stranded costs, through the
use of securitization, contingent upon such NUG Contract buyout or buydown or
restructuring being approved by the Board and found to be consistent with the
standards in Sections 13 and 14 of the Act.

Pursuant to a Board Order dated November 10, 1999, the Company bought out an
existing Board-approved NUG Contract with the Pedricktown Cogeneration Limited
Partnership in BPU Docket No. EE99090685. Pursuant to a Board Order dated
December 6, 2000, the Company bought down an existing Board-approved NUG
Contract with American Ref-Fuel Company of Delaware Valley, L.P. in BPU Docket
No. EM00060388. On October 18, 2001, the Company closed on the sale of its
nuclear generation assets for approximately $11.3 million, subject to certain
adjustments, in accordance with the Board Orders dated July 21, 2000 and
September 17, 2001 in BPU Docket No. EM99110870. Specifically, the Company sold
its interests in the Salem Nuclear Generating Station Units 1 and 2 ("Salem")
and the Hope Creek Nuclear Generating Station ("Hope Creek") to PSEG Power LLC,
and one-half of its interest in the Peach Bottom Station Units 2 and 3 ("Peach
Bottom") (collectively the "Nuclear Assets") to each of PSEG Power LLC and PECO
Energy Company.

As noted above, the Company filed its Initial Petition in this securitization
matter on June 25, 2001.

ACE Bondable Stranded Costs Rate Order        4        BPU Docket No. EF01060394

<PAGE>

On July 26, 2002, the Company filed with the Board a copy of Amendment No. 1 to
the Registration Statement of Atlantic City Electric Transition Funding LLC, a
Delaware limited liability company (the "SPE"), the equity in which is wholly
owned by the Company on Form S-3 (the "SEC Filing") relating to the Transition
Bonds.

On September 12, 2002, a public legislative-type hearing was held before
Commissioner Butler and Commissioner Hughes. Any party wishing to do so was
afforded the opportunity to participate and present comments. The parties who
participated in the hearing were the Company, the Board's Staff and the Division
of the Ratepayer Advocate. Those testifying included a Company-sponsored panel
of witnesses, including witnesses from Morgan Stanley & Co. Incorporated and
Fitch Ratings, Inc. Witnesses from the Division of the Ratepayer Advocate and
Bear, Stearns & Co. Inc., the Board's financial advisor, also appeared.

During the public legislative-type hearing, the Division of the Ratepayer
Advocate stated that it did not oppose the proposed securitization transaction,
but raised concerns about various alleged benefits of securitization to the
Company, as well as certain issues related to stranded costs. The Company and
the Ratepayer Advocate have agreed that those matters related to stranded costs
should be addressed in the Company's pending deferral proceeding in BPU Docket
No. ER02080510./2 The Board finds that such matters may be addressed in the
deferral proceeding or other appropriate proceeding, however, the Bondable
Transition Property described herein will not be altered by such consideration.
Further, the Board believes that, to the extent there are any additional
benefits as alleged by the Ratepayer Advocate, they can and will be reviewed in
the Company's next electric base rate case. Any adjustments that are found to be
appropriate following such review can be made at that time. We note that this
approach is consistent with the approach taken in the Bondable Stranded Costs
Rate Order, dated September 17, 1999, issued in connection with the Public
Service Electric and Gas Company securitization transaction in BPU Docket No.
EF99060390, and with the Bondable Stranded Costs Rate Order, dated February 6,
2002, issued in connection with the Jersey Central Power & Light Company
securitization transaction in BPU Docket No. EF99080615.

2.   TRANSITION BOND TRANSACTION

a.   Proposed Structure

A general description of the Transition Bond Transaction structure proposed by
the Company follows. This proposed structure is subject to modification,
depending upon the requirements of tax authorities, input from underwriters in
connection with the marketing of the Transition Bonds and negotiations with
nationally recognized statistical rating organizations (collectively the "rating
agencies") selected by the Company to assign credit ratings to the Transition
Bonds. The Company states that the proposed structure is intended to ensure that
the Company's customers pay the lowest TBC consistent with market conditions at
the time of pricing and the terms of this Financing Order, in compliance with
the requirement of Section 14(b)(4) of the Act. The Company has also requested
that the Board authorize the execution of hedging arrangements at the time of
pricing as described in Section 2(e) hereof. Pricing of the Transition Bonds
will be determined by the Company in consultation with the underwriters and
approved by a designee of the Board (the "Designee") subject to the guidelines
contained in Appendix F hereto. The structure and terms of the Transition Bond
Transaction will be fixed based on such approved pricing.

--------
2 The Company, the Division of the Ratepayer Advocate and the Board's Staff have
agreed to address in the deferral proceeding the final accounting related to the
transaction costs in the NUG Contract buyout and buydown, and the stranded costs
related to the nuclear asset sale.

ACE Bondable Stranded Costs Rate Order        5        BPU Docket No. EF01060394

<PAGE>

The Company states that the Bondable Stranded Costs to be securitized in this
transaction are attributable to the Company's actual net investment in the
Nuclear Assets and to the buyout and buydown of Board-approved NUG Contracts,
net of (i) deferred income taxes attributable to the plants and (ii) certain
other tax benefits. Such Bondable Stranded Costs are approximately $420.833
million, and the transaction costs are currently estimated at $19.167 million.

Section 14(c) of the Act permits the Board to authorize the issuance of
Transition Bonds for utility generation plant stranded costs in an amount up to
75 percent of the total amount of an electric public utility's recovery-eligible
utility generation plant stranded costs. Pursuant to prior Board orders cited
herein and in Appendix I, the Board has found that for the purpose of
determining the 75 percent the securitizable amount may be measured relative to
the recoverable utility generation plant grossed up to account for the tax
liability the Company will incur associated with the recovery of the net-of-tax
stranded costs. Therefore, the Company's nuclear generation plant
recovery-eligible stranded costs, based on a statutory federal and state tax
rate of 40.85% and a net-of-tax recoverable stranded cost amount of $277.946
million, is approximately $470 million. The requested level of nuclear
generation plant stranded cost securitization of $277.946 million represents
approximately 59% of the total amount of the recovery-eligible nuclear
generation related stranded costs, and thereby meets the requirements of Section
14(c) of the Act./3

The Company has requested the authority to recover its aforementioned Bondable
Stranded Costs, and, in addition, the following bondable stranded costs relating
to the Transition Bonds: (1) the costs (including, but not limited to,
redemption premiums, unamortized costs of issuance, interest and preferred
dividends accruing on or after the issuance of the Transition Bonds and other
fees, costs and charges relating thereto), estimated at $9.734 million, of
retiring the Company's debt or preferred equity, or both, with the proceeds of
the Transition Bonds ("Capital Reduction Costs"); (2) the costs, estimated at
$9.433 million, incurred to issue the Transition Bonds ("Upfront Transaction
Costs"); and (3) principal and interest on the Transition Bonds, together with
the costs of paying, refinancing, administering and servicing, credit enhancing,
overcollateralizing and hedging the Transition Bonds as more fully described
herein ("Ongoing Transition Bond Costs"). The Company has also requested
approval of the methodology for the calculation and adjustment of the TBC and
MTC-Tax related thereto.

The Company has also requested that, pursuant to this Financing Order, the
Company be granted authority to recover through the sale of the Bondable
Transition Property up to $440 million of its bondable stranded costs, including
Capital Reduction Costs and Upfront Transaction Costs. Ongoing Transition Bond
Costs will be recovered by the SPE through the assessment and collection of the
TBC, a separate, nonbypassable, usage-based charge assessed and collected from
all of the Company's customers and/or the customers of any electric distribution
company that succeeds to all or a significant part of the electric distribution
business within the Company's service territory as it exists today ("Successor
Utility"), subject to Section 28 of the Act, which specifies when the TBC may be
imposed on power produced by on-site generation facilities.

The bondable stranded costs whose recovery is approved pursuant to this
Financing Order are referred to in this Financing Order as the "Bondable
Stranded Costs."

--------
3 On September 10, 2002, the Company provided a certification indicating that,
based on preliminary information from prospective bidders, "it seems highly
likely that the sale of ACE's fossil assets will result in additional utility
generation plant stranded costs." See Certification of Charles F. Morgan, Jr.,
paragraph 4 (dated September 10, 2002).

ACE Bondable Stranded Costs Rate Order        6        BPU Docket No. EF01060394

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The Company states that the principal asset supporting the Transition Bonds will
be bondable transition property, which is property created by the Act and this
Financing Order that includes (a) the irrevocable right to charge, collect,
receive and be paid from collections of, the TBC, in the amount necessary to
provide for the full recovery of Ongoing Transition Bond Costs and all other
bondable stranded costs determined to be recoverable in this Financing Order,
(b) all rights of the Company under this Financing Order, including, without
limitation, all rights to obtain periodic adjustments of the TBC pursuant to
Section 15(b) of the Act and (c) all revenues, collections, payments, money and
proceeds arising under, or with respect to, all of the foregoing. The bondable
transition property created by the Act and this Financing Order is herein
referred to as the "Bondable Transition Property." For convenience of usage in
this Financing Order, there are numerous references to the holding and transfer
of the Bondable Transition Property by the Company and others. However, the
Bondable Transition Property arises, and constitutes a vested, presently
existing property right, only upon (i) its transfer to an assignee and (ii)
receipt of consideration therefor. It will be vested in the SPE as an original
right and not by assignment from any other entity. Pursuant to Section 16 of the
Act, this Financing Order and the TBC are irrevocable upon this Financing Order
becoming effective pursuant to Section 19 of the Act, and this Financing Order
cannot be rescinded, altered, repealed, modified or amended by the Board or any
other governmental entity, nor can it be impaired by the State of New Jersey, as
pledged by the State of New Jersey in Section 17 of the Act.

The Company will sell its interest in the Bondable Transition Property to
implement the Transition Bond Transaction to the SPE, a newly formed,
nonutility, bankruptcy-remote special purpose entity, which is a Delaware
limited liability company, the equity in which will be wholly-owned by the
Company, in exchange for the net proceeds received by the SPE from the sale of
the Transition Bonds. The Company will also make a cash capital contribution to
the SPE in an amount that will at least equal 0.5% of the aggregate initial
principal amount of the Transition Bonds. The capitalization amount for the
Transition Bonds will be held in a separate subaccount (the "Capital
Subaccount") as described in more detail below. The SPE will remit to the
Company the proceeds from the sale of the Transition Bonds, in payment for the
Bondable Transition Property.

Under Section 23 of the Act, the transfer to the SPE will be treated, for
bankruptcy purposes, as a true sale and absolute transfer to the SPE,
notwithstanding: (1) the fact that the Company acts as the collector or servicer
of the TBC; (2) the treatment of such transfer as a financing for federal, state
or local tax purposes or financial accounting purposes; (3) the capitalization
of the SPE by the Company; or (4) the retention or acquisition of any rights
listed in Section 23(a)(4) of the Act. The SPE will be a "financing entity" for
purposes of the Act. The Company states that Board approval of the SPE and the
Transition Bond Transaction in this Financing Order will constitute a finding
that the SPE's activities will not violate any affiliate relation standards
currently in effect or that the Board may adopt in the future.

The Company states that the SPE will issue and sell Transition Bonds, which will
be either fixed or floating rate instruments, under an indenture ("Indenture")
between the SPE and an institutional trustee (the "Transition Bond Trustee")
supplemented by a supplemental indenture for the series 2002-1 bonds (the
"Series Supplement"), and will purchase the Bondable Transition Property from
the Company with the net proceeds received from the sale of the Transition
Bonds. The SPE will issue and sell the Transition Bonds in a negotiated, fully
underwritten public offering as asset-backed securities ("ABS"). According to
the Company, all prior securitizations of utility stranded costs in other
jurisdictions have been structured as ABS and sold on a negotiated basis and the
expertise of an underwriter is critical to the structuring,

ACE Bondable Stranded Costs Rate Order        7        BPU Docket No. EF01060394

<PAGE>

pricing and marketing of securities in the ABS market. Indeed, in other states
where competitive bidding requirements generally exist, such as Massachusetts,
competitive bidding of stranded cost securitization transactions either has been
waived or has not been required. The Company asserts that a negotiated sale, as
opposed to one accomplished through competitive bidding, should result in lower
interest costs and will ensure that the Company's customers pay the lowest TBC
consistent with market conditions at time of pricing and the terms of this
Financing Order, in compliance with the requirement of Section 14(b)(4) of the
Act. If the Company sells floating rate instruments, it intends to enter into
appropriate hedging arrangements, including interest rate caps, swaps or
collars, which will have the effect of creating fixed interest rate obligations
for the SPE.

The Company states that all of the assets of the SPE, including, without
limitation, the Bondable Transition Property and the other collateral of the SPE
(the "Other SPE Collateral"), will be pledged as collateral to secure the
Transition Bonds. The Company notes that the Other SPE Collateral may include
(without limitation): (i) the rights of the SPE under certain of the Transition
Bond Transaction documents, including (a) a sale agreement and related bill of
sale by which the SPE acquires the Bondable Transition Property and receives
certain indemnification from the Company, (b) a servicing agreement (the
"Servicing Agreement") by which the Company or any successor in that capacity
acts as servicer of the Bondable Transition Property (the "Servicer"), and (c)
an administration agreement by which the SPE will be administered will be with
an affiliate of Atlantic; (ii) various trust accounts of the SPE, including, but
not necessarily limited to, the Capital Subaccount, the overcollateralization
subaccount for the series 2002-1 bonds (the "Overcollateralization Subaccount"),
the reserve subaccount for the series 2002-1 bonds (the "Reserve Subaccount"),
the series subaccount for the series 2002-1 bonds (the "Series Subaccount"),
under which the Capital Subaccount, the Overcollateralization Subaccount and the
Reserve Subaccount will be established, and the collection account (the
"Collection Account"), under which will be established the foregoing accounts
(as well as similar accounts for any other series of transition bonds later
issued by the SPE) and a general subaccount (the "General Subaccount"); (iii)
any investment earnings on amounts held by the Transition Bond Trustee, other
than investment earnings released to the SPE or to counterparties under swap
agreements, if any, in accordance with the Indenture and Series Supplement.

The Company requests, in accordance with Section 14 of the Act, that the Board
approve Transition Bonds with scheduled amortizations upon issuance (1) not
exceeding 15 years from the date of issuance in the case of Transition Bonds the
proceeds of which will be used to reduce stranded costs related to utility-owned
generation and (2) not exceeding the remaining term of a NUG Contract in the
case of Transition Bonds the proceeds of which will be used to buy down or buy
out such NUG Contract. The Company also requests that the Board approve stated
maturities of up to two years (or, in the case of the Transition Bonds referred
to in clause (2) above, three years) beyond the expected final scheduled
maturity date of each class of Transition Bonds in order to minimize
overcollateralization requirements and enhance the prospects of securing the
highest possible credit rating for the Transition Bonds.

b.   Recovery of Upfront Transaction Costs

In order to issue Transition Bonds to achieve net savings for the benefit of its
customers, the Company will incur Upfront Transaction Costs. Based on the
currently estimated initial offering of $440 million of Transition Bonds, the
Company has estimated that such amount will include Upfront Transaction Costs of
approximately $9.433 million which may vary, in part, based on the factors
described below. The Company states that these Upfront Transaction Costs will
include,

ACE Bondable Stranded Costs Rate Order        8        BPU Docket No. EF01060394

<PAGE>

among other items, the underwriting fee, rating agency fees, financial advisory
fees, accounting fees, SEC registration fees, printing and marketing expenses,
trustees' fees, legal fees, servicing set-up fees and the administrative cost of
forming the SPE. The Company has requested authority to recover the Upfront
Transaction Costs from the proceeds of the sale of the Transition Bonds and to
include such costs as Bondable Stranded Costs so that the right to recover such
amounts will constitute a portion of the Bondable Transition Property. The
Company indicates that to the extent payment of any Upfront Transaction Costs is
required prior to the issuance of the Transition Bonds, the Company will pay
such costs and then will be reimbursed from the proceeds of the Transition
Bonds.

c.   Recovery of Capital Reduction Costs

The Company has requested recovery of approximately $9.734 million of Capital
Reduction Costs of retiring the Company's debt and/or preferred equity, or both,
including, but not limited to, any accrued interest or dividends accrued from
and after the date of sale of the Transition Bonds, premium and other fees,
costs and charges relating thereto, from the proceeds of the sale of the
Transition Bonds and to include such Capital Reduction Costs as Bondable
Stranded Costs so that the right to recover such amounts will constitute a
portion of the Bondable Transition Property.

d.   Recovery of Ongoing Transition Bond Costs

The Company has requested recovery of Ongoing Transition Bond Costs through the
TBC. The Company states that the primary Ongoing Transition Bond Costs are the
periodic payments of principal and interest on the Transition Bonds (including
past due and deferred amounts), and that other such costs include principally
the annual servicing fee of .10% of the initial principal amount of all series
of transition bonds that the SPE has issued (the "Servicing Fee") payable
monthly in 12 equal amounts to the Company, in its capacity as the Servicer (as
defined below), or such higher fee as may be payable to a successor Servicer (in
an amount of up to 1.25% of the initial principal balance of all series of
transition bonds that the SPE has issued), the ongoing cost of credit
enhancement and the costs of overcollateralization. The Company states that
there will also be a small amount of additional, ongoing costs associated with
the Transition Bond Transaction, such as the administration fee, legal and
accounting fees, directors' or managers' fees, rating agency fees, trustees'
fees and other costs of operating the SPE. The Company states that these costs
should be included as Bondable Stranded Costs to be recovered through the TBC in
accordance with Section 14 of the Act, and the right to recover these costs as
Bondable Stranded Costs will constitute a portion of the Bondable Transition
Property.

e.   Approval of Final Terms and Conditions: Transition Bond Transaction

The Company states that upon the pricing of the Transition Bonds, it will
cooperate with and provide such information to the Board's Designee as is
reasonably requested in order that the Designee may make the certifications
required below. To assist the Designee in making his or her required
certifications, upon the pricing of the Transition Bonds, the Company will file
with the Board's Designee a Pricing Advice Certificate, substantially in the
form of Appendix D hereto. This document may be based in part on the advice of
the Company's lead underwriter and will certify in substance that the structure
and pricing of the Transition Bonds (including any hedging arrangement priced at
the time of the pricing of the Transition Bonds as described below) assures that
the Company's customers pay the lowest TBC consistent with then current market
conditions and the terms of this Financing Order.

ACE Bondable Stranded Costs Rate Order        9        BPU Docket No. EF01060394

<PAGE>

The Company also states that prior to the approval by the Board's Designee of
pricing of the Transition Bonds (including any hedging arrangement priced at the
time of the pricing of the Transition Bonds), the Company's lead underwriter
will provide a certificate substantially in the form of Appendix G hereto to the
effect that, in its judgment and subject to the assumptions, qualifications and
limitations contained therein, the structuring and pricing of the Transition
Bonds (and any such hedging arrangement at the time of pricing) is reasonable in
the light of then current market conditions and the terms of this Financing
Order and will result in customers of the Company paying the lowest TBC
consistent with then current market conditions and the terms of this Financing
Order. Upon the filing of the Pricing Advice Certificate (at the time of the
pricing of the Transition Bonds and any such hedging arrangement), the Company
requests that the Board's Designee file with the Board a certificate (the
"Designee Certification") substantially in the form of Appendix A hereto, (i)
approving the pricing and the terms and conditions of the Transition Bonds (and
any hedging arrangement), including (a) scheduled amortizations upon issuance
(1) not exceeding 15 years from the date of issuance in the case of Transition
Bonds the proceeds of which will be used to reduce stranded costs related to
utility-owned generation and (2) not exceeding the remaining term of a long-term
power purchase agreement with a non-utility generator in the case of Transition
Bonds the proceeds of which will be used to buy down or buy out such power
purchase agreement and (b) stated maturities of up to two years (or, in the case
of the Transition Bonds referred to in clause (a)(2) above, three years) beyond
the expected final scheduled maturity date of each class of Transition Bonds and
(ii) stating that the structure and pricing of the Transition Bonds assures that
the Company's customers pay the lowest TBC consistent with market conditions and
the terms of this Financing Order. The Designee Certification will represent the
Designee's final and irrevocable approval of the pricing of the Transition Bonds
(including any hedging arrangement priced at the time of pricing Transition
Bonds, as described below) and the terms and conditions of the Transition Bond
Transaction. The Company states that such terms and conditions, including the
expected principal amortization schedule (the "Expected Amortization Schedule"),
will be fixed based on such approved pricing, and will include (a) scheduled
amortizations upon issuance (1) not exceeding 15 years from the date of issuance
in the case of Transition Bonds the proceeds of which will be used to reduce
stranded costs related to utility-owned generation and (2) not exceeding the
remaining term of a long-term power purchase agreement with a non-utility
generator in the case of Transition Bonds the proceeds of which will be used to
buy down or buy out such power purchase agreement, and such longer legal
maturities as are required to obtain the highest possible credit rating on the
Transition Bonds (up to two years (or, in the case of the Transition Bonds
referred to in clause (a)(2) above, three years) beyond the expected final
scheduled maturity date of each class of Transition Bonds). Payments on the
Transition Bonds will be made semi-annually or quarterly, depending upon market
conditions or rating agency considerations at the time of pricing. Exhibit C-1
of the Company's Petition contains forecasted principal and interest payments
each year in the Transition Bond Transaction based upon the forecasted level of
the Transition Bonds to be issued. Exhibit B hereto is an updated version of
Exhibit C-1 to the Company's Petition. The ultimate Expected Amortization
Schedule may be altered as a result of market conditions or rating agency
requirements, and will be subject to the Designee's Guidelines contained in
Appendix F hereto. The associated MTC-Tax collections may be adjusted from time
to time to reflect the changing principal and interest components of the
Transition Bond debt service.

If the structure, pricing, terms and conditions meet the requirements discussed
above, the Company will be authorized under this Financing Order to undertake
the Transition Bond Transaction. Prior to the pricing of the Transition Bonds,
the Designee may obtain from the Board's financial advisor, Bear, Stearns & Co.
(the "Financial Advisor"), recent secondary market trading levels of existing
utility stranded cost securitization bonds, to the extent such

ACE Bondable Stranded Costs Rate Order       10        BPU Docket No. EF01060394

<PAGE>

information is available through public sources. To the extent such information
is available, the Company anticipates that such information may, in part, be
considered in connection with the pricing of the Transition Bonds. Finally, the
Company has invited the Designee to be present at pricing, either in person or
by telephone.

The Company states that one or more classes of the Transition Bonds may be
issued as variable rate instruments under which the SPE will pay a fixed
interest rate through the execution of an interest rate exchange agreement, an
interest rate cap agreement or similar hedging arrangement. If, at the time of
pricing of the Transition Bonds, the Company and its lead underwriter determine
that such a hedging arrangement is expected to result in a lower interest cost
on such classes of bonds or on all classes of an issue taken as a whole, the
hedging arrangement will be competitively bid, will be described in the Pricing
Advice Certificate (see Appendix D hereto) and the Company's lead underwriter
will provide a certificate as to its reasonableness in accordance with Appendix
G hereto, after which the arrangement will be subject to approval by the
Designee in the Designee Certification. Any counterparty to such a hedging
arrangement must have a credit rating consistent with achieving the highest
possible ratings on the Transition Bonds.

The Company states that not later than five business days after the issuance and
sale of the Transition Bonds, the Company will confirm to the Board, in an
"Issuance Advice Letter", substantially in the form of Appendix B hereto, the
actual interest rates (or formula for determining variable interest rates) on
the Transition Bonds, the Expected Amortization Schedule, the Required
Overcollateralization Schedule (as defined in Section 2(f) below) and the
initial TBC and MTC-Tax, which will be calculated using the methodology approved
hereby and described in Appendix C hereto. At such time, the Company will also
file revised tariff sheets with the Board setting forth the initial TBC and
MTC-Tax. The initial TBC and MTC-Tax and related revised tariff sheets will
become effective the same day the Company files the Issuance Advice Letter and
the revised tariff sheets, without further action by the Board.

f.   TBC

In accordance with Section 18 of the Act, the Company states the TBC will apply
equally to each customer of the Company, regardless of class, based on the
amount of electricity delivered to each customer through the transmission and
distribution system of the Company or any Successor Utility within the Company's
service territory as it exists today, subject to Section 28 of the Act, which
specifies when the TBC may be imposed upon power produced by on-site generation
facilities. Pursuant to Section 15(b) of the Act, the Company states that the
TBC will be periodically adjusted from time to time, in accordance with the
methodology approved in this Financing Order, to ensure that it is set at a
level intended to recover the Ongoing Transition Bond Costs, including, without
limitation: (1) the principal of (determined in accordance with the Expected
Amortization Schedule as detailed in the Issuance Advice Letter), and interest
on, the Transition Bonds authorized by the Board in this Financing Order; (2)
the costs of operating and administering the SPE; (3) the costs of servicing the
Transition Bonds, including servicing and trustee fees, expenses and
indemnities, substantially as described in the SEC Filing; (4) amounts required
to fund or replenish the Overcollateralization Subaccount in accordance with the
overcollateralization schedule ("Required Overcollateralization Schedule"), or
to fund or replenish any similar account which provides credit enhancement for
the Transition Bonds, all as confirmed in the Issuance and Advice Letter; (5)
the reimbursement of any amounts drawn from the Capital Subaccount pursuant to
the Indenture, substantially as described in the SEC Filing, or the
reimbursement of any drawn amounts from any similar account which provides

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credit enhancement for the Transition Bonds; and (6) the ongoing expenses, if
any, of any other credit enhancement arrangements.

In Appendix C, the Company sets forth the general methodology by which it
proposes to establish and adjust from time to time the TBC and the MTC-Tax. The
Company states that the TBC and the MTC-Tax will be set and adjusted based on
assumptions described in Appendix C, as those assumptions are adjusted from time
to time based on various factors including, but not limited to, energy sales
forecasts, customer payment and charge-off patterns, defaults by third party
suppliers (as described herein), the Ongoing Transition Bond Costs (including
unpaid amounts from prior periods and replenishment of credit enhancement, if
applicable) and, with respect to the MTC-Tax, the applicable income tax rates in
effect from time to time. In Exhibit B hereto, the Company has projected the
initial TBC and the MTC-Tax using the methodology described in Appendix C and
assuming the Ongoing Transition Bond Costs as described herein.

In accordance with Section 15(c) of the Act, the Company requests that the TBC
remain in effect until the Bondable Stranded Costs, including, without
limitation, the principal of, and accrued interest and acquisition or redemption
premium on, any Transition Bonds issued to finance such Bondable Stranded Costs,
have been paid in full and all other obligations and undertakings with respect
thereto have been fully satisfied.

The Company states that each customer's monthly bill will reflect, either
explicitly, or through a notation, that a portion of the charges on such bill
represents amounts being collected on behalf of the SPE as owner of the Bondable
Transition Property.

g.   Periodic Adjustments to the TBC and MTC-Tax

Section 15(b) of the Act requires that this Financing Order provide for
mandatory periodic adjustments (each, a "TBC True-Up") to be made by the Board
at least annually upon petition of the Company, its assignee or a financing
entity, to ensure receipt of revenues sufficient to make payments related to
Ongoing Transition Bond Costs (including unpaid amounts from prior periods and
replenishment of credit enhancements, if applicable) by the payment dates
designated by the Company in its TBC True-Up filing, such that the Transition
Bonds will be retired in accordance with the Expected Amortization Schedule.
Each TBC True-Up must be formula-based, and the Company intends to use the
formula-based methodology described in Appendix C hereto. As Servicer, the
Company states that it will be responsible for filing with the Board
documentation for any TBC True-Up. (The Company, as Servicer under the Servicing
Agreement, and any successor to the Company as servicer, are herein referred to
as the "Servicer".)

Although the Company, as Servicer, will file for TBC True-Ups at least annually,
the Company has requested authorization to file for adjustments of the TBC as
often as monthly or quarterly, as may be determined from time to time in the
future to be necessary to maintain the highest possible credit rating (all as
set forth in the Servicing Agreement). Under Section 15(b) of the Act, the
Servicer shall propose such TBC True-Up in a filing with the Secretary of the
Board at least 30 days in advance of the date upon which it is requested to be
effective. The TBC True-Up shall become effective on an interim basis on the
date on which it is requested to be effective, in the absence of a Board Order
to the contrary. Under Section 15(b) of the Act, in the absence of a Board order
to the contrary, the periodic adjustment shall become final and nonappealable 60
days after the filing. The Company has requested that TBC True-ups go into
effect at least annually, and that the Board confirm that the TBC True-Up will
become effective or final, as the case may be, absent a finding by the Board of
manifest error (for purposes of this

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Financing Order, "manifest error" is an arithmetic error evident on the face of
such filing) in the application of the adjustment methodology approved herein.
In the event of a finding of manifest error, the rate to be made effective will
be the arithmetically corrected rate or, in the absence of agreement on the
arithmetically corrected rate, the rate in effect for the prior period will
remain in effect until the arithmetically corrected rate is made effective. The
Company asserts that this standard for effectiveness is consistent with the
other provisions of Section 15(b) of the Act that require that the TBC True-Up
be implemented to ensure "timely payment" of, among other things, principal of,
and interest and acquisition or redemption premium on, the Transition Bonds. The
Company further asserts that in order to achieve the highest possible credit
ratings on the Transition Bonds and, thus, to reduce costs to customers, the TBC
True-Ups must be made final and nonappealable based upon this objective
standard.

The Company will be entitled to request, and the Board will approve, mandatory
periodic adjustments of the MTC-Tax (each, an "MTC-Tax True-Up"). Each MTC-Tax
True-Up will be made at least annually to reconcile the income tax recovered to
the income taxes required to be assessed to the Company on the taxable net
revenue from the TBC and MTC-Tax. The reconciliation will be made in the same
manner and at the same time as the TBC True-Up to ensure receipt of revenues
sufficient to assure recovery of the MTC-Tax. Upon petition of the Company, the
MTC-Tax will be adjusted based upon assumptions described in Appendix C hereto,
as those assumptions are adjusted from time to time in accordance with such
Appendix C. No delay in the MTC-Tax True-Up will influence or affect the TBC
True-Up.

The Company also requests that the Board grant the Company authority to make
"non-routine" adjustments to the TBC and the MTC-Tax. Such filings for
non-routine adjustments would be made to accommodate material changes to the
methodology described in Appendix C hereto. Any such filing must be made at
least 90 days prior to the proposed effective date, and will be subject to Board
approval before implementation.

h.   Remittance of TBC Collections

The Company states that the Servicer will make monthly remittances (or daily
remittances if required to do so under the rating agencies' criteria) of
estimated payments arising from the TBC to the Transition Bond Trustee, on
behalf of the SPE, based on the Company's collection history (as may be updated
from time to time).

The Company states that payments from its customers will be applied first to
sales taxes (which the Company will collect as trustee for the State and not for
its own account or that of the SPE, and which are not "charges" for purposes of
the following allocations) until all of such amounts are paid, then to charges
in arrears, if any, and then to current charges. With respect to each billing
period, partial payments of charges and taxes other than sales taxes will be
allocated pro rata (i) to the TBC; (ii) to the MTC-Tax; and (iii) to the
Company's other charges, based on the proportions that the TBC, the MTC-Tax and
the Company's other charges bear to the total charges billed. If following the
issuance of the Transition Bonds, one or more additional series of transition
bonds are issued, partial payments of the TBC will be allocated to each
respective series so issued, pro rata, based on the estimated revenue
requirement of each series of transition bonds for the period in which the
allocation is made. Each such period is to begin on a date on which a TBC
True-Up goes into effect and end on the day immediately prior to the effective
date of the next TBC True-Up.

The Company states that in the near future it will file a base rate case and
include in that filing data showing the impact of the timing of customer
payments of TBCs to the Company versus

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payments by the Company, as Servicer, to the Bond Trustee. This data will
include a calculation of customer daily remittances, timing of remittances to
the Bond Trustee and the short-term interest rate then applicable to determine
the amount of "float" income earned by the Company in its capacity as Servicer.
If the Board determines in its review of this filing that the Company retained
interest income over and above its Servicing Fee, it may calculate such retained
income, and impute interest thereon, in determining fair and reasonable rates
going forward from the date of its review. In determining its cash working
capital requirements in a base rate proceeding, the Company will exclude from
its cash balances any TBCs collected, but not yet remitted to the Trustee.

The Company states that the amounts remitted by the Servicer to the Transition
Bond Trustee (the "Deemed TBC Collections") will be retained by the Transition
Bond Trustee until it pays to the appropriate parties all periodically required
Ongoing Transition Bond Costs, including scheduled principal and interest
payments, Servicing Fees, other fees and expenses, any unpaid amounts from prior
payment dates related to the aforementioned and any required additions to or
replenishments of the Collection Account. The Company expects that monthly
disbursements, in amounts to be specified in the Indenture and Series
Supplement, will be made to the Transition Bond Trustee, to the independent
managers of the SPE, in respect of the Servicing Fee, to the administrator of
the SPE and in respect of operating expenses. In addition, payments of principal
and interest on the Transition Bonds (as well as payments of the aforementioned
amounts) will be made on a quarterly or semi-annual basis. The Transition Bond
Trustee will hold all Deemed TBC Collections received from the Servicer from the
remittance date to the dates on which such payments are made in the General
Subaccount of the Collection Account. The Transition Bond Trustee will invest
the funds in the Collection Account in securities that mature on or before the
next scheduled distribution date, in accordance with rating agency criteria for
investment of such funds.

The Company states that investment earnings on funds in the Collection Account
held by the Transition Bond Trustee may be used to satisfy currently scheduled
interest and principal payments on the Transition Bonds and other Ongoing
Transition Bond Costs. Additionally, investment earnings on such funds may be
used to restore Capital Subaccount amounts previously withdrawn therefrom to
meet periodically required Ongoing Transition Bond Costs and may be applied to
meet the Required Overcollateralization Schedule. Investment earnings on funds
in the Collection account in excess of the amount applied as described above
will be held in the Reserve Subaccount, except for such investment earnings in
the Capital Subaccount, which will be distributed to the SPE as provided in the
Indenture and Series Supplement.

Upon retirement of all outstanding Transition Bonds, including payment of all
interest thereon, and the payment of all Ongoing Transition Bond Costs, all
other Bondable Stranded Costs, and any bondable stranded costs relating to the
Company and the SPE that may be approved in favor of the Company under the Act
pursuant to any subsequent financing orders, the Company states that any
remaining amounts held by the Transition Bond Trustee will be released to the
SPE and ultimately returned to the Company as an equity distribution or, if
required under the series indenture supplement for a subsequently issued series
of transition bonds, if any, of the SPE, be reallocated to the subaccounts of
such series; provided, however, that upon retirement of all outstanding
transition bonds of the SPE, including payment of all interest thereon, and the
payment of all related bondable stranded costs, any remaining amounts held by
the Transition Bond Trustee will be released to the SPE and ultimately returned
to the Company as an equity distribution. The Company will credit, against the
distribution charges it bills to its customers, any amounts so received from the
SPE that exceed the sum of (i) the initial amount of the equity

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contribution to the SPE and (ii) the investment earnings on funds in the Capital
Subaccount, less the amount of any unpaid MTC-Tax charges and any amount that
was withdrawn and not replenished to the SPE's equity.

i.   Credit Enhancement

The Transition Bond documents will provide for the TBC True-Up as is authorized
by Section 15(b) of the Act as described above and for overcollateralization
amounts as described below or other means of credit enhancement as required by
the rating agencies.

The Company explains that a portion of the TBC will be applied to an
"overcollateralization amount" which will be deposited into the
Overcollateralization Subaccount to meet the Required Overcollateralization
Schedule. The Company states that the collection of the overcollateralization
amount will be in addition to the collection of the principal (which will be
collected in accordance with the Expected Amortization Schedule) and interest
payable on the Transition Bonds, and the collection of the other Ongoing
Transition Bond Costs, all of which will be recovered through the TBC. The total
overcollateralization requirement will be determined prior to the pricing of the
Transition Bonds but will in no event be less than 0.5% of the initial
Transition Bond principal amount. The total overcollateralization amount will be
determined by the Company based on criteria from the rating agencies, and will
be reflected in the Issuance Advice Letter and will be subject to the approval
of the Designee. It is possible that the rating agencies may require additional
credit enhancement, the terms of which will be set forth in the Pricing Advice
Certificate and subject to the Designee Guidelines.

All collection shortfall amounts relating to the TBC and amounts expected to
become due and payable during the next succeeding period for which the TBC is in
effect, including overcollateralization amounts, and any shortfall amounts
arising from defaults relating to a third party electric power supplier (an
"EPS") will be incorporated into each TBC True-Up to the extent necessary.

The Company states that it will reduce the distribution charges payable by its
customers by an amount equal to the amount remaining in the Collection Account
(including amounts in the Overcollateralization Subaccount), except for amounts
in the Capital Subaccount including any investment earnings on funds in such
subaccount, after payment in full of all Ongoing Transition Bond Costs, all
other Bondable Stranded Costs, and any bondable stranded costs relating to the
Company and the SPE that may be approved in favor of the Company under the Act
pursuant to any subsequent financing orders, less the amount of any unpaid
MTC-Tax charges.

j.   Formation of SPE

The SPE, a Delaware limited liability company, is a direct, wholly-owned,
nonutility subsidiary of the Company, which will be managed pursuant to the
administration agreement substantially as described in the SEC Filing.

k.   Bondable Transition Property

Under Section 3 of the Act, the Bondable Transition Property includes (a) the
irrevocable right to charge, collect and receive, and be paid from collections
of, the TBC, in the amount necessary to provide for the full recovery of Ongoing
Transition Bond Costs and all other bondable stranded costs whose recovery is
authorized in this Financing Order, (b) all rights of the Company under this
Financing Order, including, without limitation, all rights to obtain periodic

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adjustments of the TBC pursuant to Section 15(b) of the Act and (c) all
revenues, collections, payments, money and proceeds arising under, or with
respect to, all of the foregoing.

Pursuant to Sections 16 and 22 of the Act, when the Company has transferred, and
received consideration for, the Bondable Transition Property from the SPE, the
Bondable Transition Property will constitute a vested, presently existing
property right and will continuously exist as property for all purposes as
provided in the Act and the Financing Order, whether or not the revenues and
proceeds arising with respect thereto have accrued and notwithstanding the fact
that the value of the property right may depend upon consumers using electricity
or the Servicer performing services; and the validity of any sale, assignment or
other transfer of the Bondable Transition Property will not be defeated or
adversely affected by the commingling by the Company of revenues recovered or
payments arising from amounts billed, collected and received on account of the
Bondable Transition Property with other funds of the Company.

l.   Sale of Bondable Transition Property to SPE

The Company requests the Board to approve the transfer by the Company of the
Bondable Transition Property to the SPE in one or more transactions which, in
accordance with Section 23 of the Act, will be treated as a true sale and
absolute transfer to the SPE, even though such transactions may be treated as a
financing, and not a sale, for federal and state tax purposes, for financial
accounting purposes or for other purposes and even though the Company is the
collector or servicer of the TBC. The Company explains that the SPE will have
all of the statutory rights inherent in the Bondable Transition Property,
including, without limitation, the right to exercise, through the Company or any
Successor Utility, any and all rights and remedies to collect any amounts
payable by any customer of the Company in respect of the Bondable Transition
Property, which includes the right to direct the Company or any Successor
Utility to discontinue electric power supply to a particular customer to the
extent permitted in accordance with law and any applicable regulations. The SPE
and other third parties, however, will not have any right to exercise any direct
control over the distribution and transmission system of the Company. Any
direction to the Company or any Successor Utility to shut off the electric power
supply to a customer would be subject to Board policies and procedures and any
applicable laws then in effect.

The Company notes that the agreements which will govern transfer of the Bondable
Transition Property to the SPE may include representations and warranties with
respect to, among other things, the validity of this Financing Order, the
Bondable Transition Property and the title thereto, and may provide specific
covenants, indemnities and/or repurchase obligations in connection with such
transfer for the benefit of the holders of Transition Bonds.

m.   Issuance of Transition Bonds

The Company requests that the Board approve the issuance of Transition Bonds by
the SPE. The Company states that the Transition Bonds will, by their terms,
permit the holders to have recourse only to the SPE's credit and assets, and
will be secured by a pledge to the Transition Bond Trustee of all of the right,
title and interest of the SPE in the Bondable Transition Property and Other SPE
Collateral.

n.   Nonbypassable TBC and MTC-Tax

Under Section 18 of the Act, the TBC and the MTC-Tax are nonbypassable and will
be assessed against and collected from all customers of the Company or any
Successor Utility until

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all Ongoing Transition Bond Costs and other bondable stranded costs determined
to be recoverable in this Financing Order are paid in full, even past legal
maturity, subject to Section 28 of the Act. The TBC will apply equally to each
customer, regardless of class, based on the amount of electricity delivered to
the customer through the transmission and distribution system of the Company or
any Successor Utility. With respect to on-site generation, Section 28(b) of the
Act provides that the TBC will not be imposed on the electricity sold solely to
the on-site customer of an on-site generator. Section 28(c), however, provides
that the TBC shall be imposed on the generation from on-site generation
facilities to the extent that on-site generation has displaced customer
purchases from an electric public utility by an amount such that the kilowatt
hours distributed by the electric public utility have been reduced to an amount
equal to 92.5 percent of the 1999 kilowatt hours distributed by the electric
public utility.

o.   Electric Power Suppliers

The Transition Bond Transaction currently contemplates that the Company, in its
capacity as Servicer, will have sole responsibility for the billing, collection
and remittance of the TBC and the MTC-Tax. The Company states that there is the
possibility, however, that an EPS may seek to assume such role. Permitting an
EPS to bill, collect and remit the TBC and the MTC-Tax in place of the Company
may increase the risk of shortfalls in TBC collections or MTC-Tax collections by
exposing the cash flow to potential interruption due to the default, bankruptcy
or insolvency of the EPS. This potential interruption will increase risks to
investors, and may result in an increase to the required credit enhancement for,
and/or a reduction of the credit rating of, and/or an increase in the interest
rate on, the Transition Bonds. Additionally, such EPS billing may necessitate an
increase to the TBC or to the MTC-Tax if EPS billing causes interruption or
delay in payment to the Servicer.

In order to mitigate these risks, satisfy rating agency requirements and reduce
the cost to customers, the Company requests that any EPS the Board authorizes to
bill, collect and remit the TBC be required to comply with the billing,
collection and remittance procedures and information access requirements set
forth below. These procedures and requirements are comparable to those in effect
in this and other states in which utilities have securitized their stranded
costs. These requirements are largely derived from rating agencies' criteria.

The Company requests that the Board authorize an EPS to bill and collect the TBC
and associated MTC-Tax with respect to power sold by it, for remittance to the
Servicer, only if (i) such EPS agrees to remit the full amount of all charges it
bills to customers for services provided by the Company, together with amounts
related to the TBC and the MTC-Tax, regardless of whether payments are received
from such customers, within 15 days of the Company's (or any successor
Servicer's) bill for such charges; (ii) such EPS agrees to provide the Servicer
(or any successor Servicer) with total monthly kWh usage information for each
customer in a timely manner to enable the Servicer (or such successor) to
fulfill its obligations, because such information is the basis for assessing the
required level of such remittances; and (iii) the Servicer (or any successor
Servicer) is entitled, seven days after a default by the EPS in remitting any
charges payable to it, including amounts related to the TBC and the MTC-Tax, to
assume responsibility for billing all charges for services provided by it,
including the TBC and the MTC-Tax, or to transfer such billing responsibility to
a qualifying third party. In addition, if and so long as the billing EPS does
not maintain at least a "Baa2" and "BBB" (or the equivalent) long-term unsecured
credit rating from Moody's Investors Service and Standard & Poor's,
respectively, such EPS would be required to maintain with the Servicer (or any
successor Servicer) a cash deposit or comparable security equal to two months'
maximum estimated collections of all charges payable to the Servicer (or such
successor), including amounts related

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to the TBC and the MTC-Tax, as must be agreed upon by the Servicer (or such
successor) and the EPS. In the event of a default in the remittance of any such
amounts by an EPS, any shortfall in TBC Collections or MTC-Tax collections by an
EPS not recovered from a withdrawal from such cash deposit or security would be
included in the TBC True-Up and the MTC-Tax True-Up as described in Appendix C
hereto.

p.   Servicing

The Company states that it will enter into the Servicing Agreement with the SPE
pursuant to which it will perform servicing functions on behalf of the SPE with
respect to the Bondable Transition Property. Details regarding the Servicing
Agreement, including servicing compensation, will be substantially as described
in the SEC Filing. The Company states that under the Servicing Agreement, the
Servicer is to receive an annual servicing fee equal to 0.10% of the aggregate
initial principal amount of the Transition Bonds (the "Servicing Fee"). The
Company also requests that the Board approve a higher annual Servicing Fee of
any successor Servicer of up to 1.25% of the initial principal balance of all
transition bonds that the SPE has issued, including the Transition Bonds.

q.   Tax Recoveries - Accounting and Related Issues

Pursuant to the Restructuring Order, the Company has been directed to recover
the federal income taxes and state corporation business taxes associated with
the collection of the TBC and the MTC-Tax through the ongoing collection of the
MTC-Tax, until the SPE has received full payment of principal of and interest on
the Transition Bonds. The Restructuring Order authorizes the MTC-Tax to be
collected over essentially the same period as the TBC. The Restructuring Order
also directs that the MTC-Tax be subject to mandatory periodic adjustment (at
the same time and in the same manner as the TBC) to reconcile the MTC-Tax
collections with the income tax required to be assessed on the taxable revenue
from the TBC and the MTC-Tax. The Company will maintain separate accounting for
the MTC-Tax collections and the Bondable Transition Property. As provided in
Section 23(a)(4) of the Act, the Company's retention of the MTC-Tax until
remittance to the appropriate taxing authority will in no way affect or impair
treatment of the transfer of the Bondable Transition Property to the SPE as a
true sale and absolute transfer for bankruptcy purposes, or otherwise affect the
legal rights and attributes of the Bondable Transition Property under the Act.

3.   CUSTOMER BENEFITS

The Restructuring Order required that rate reductions pursuant to the Act were
not to be contingent upon the Company securitizing its stranded costs.
Therefore, the rate reductions mandated in the Restructuring Order already
anticipate and incorporate net present value savings and rate reductions
resulting from the anticipated issuance of the Transition Bonds. The Company
represents that, as proposed, the Transition Bond Transaction will result in net
present value savings over the term of the Transition Bonds (currently estimated
to be $114 million based on projected interest rates at the time of the public
hearing and illustrated on Exhibit A hereto), and lower rates than would have
been achieved were the recoverable stranded costs to be recovered without
issuance of the Transition Bonds. The Company states that the actual net present
value savings resulting from the Transition Bond Transaction will depend upon
the actual amount of Transition Bonds issued, market conditions at the time of
the pricing of the Transition Bonds (and any hedging arrangement) and the actual
amount of bondable stranded costs whose recovery is authorized in this Financing
Order. The structure, pricing, terms and conditions of the Transition Bonds (and
any hedging arrangement) will be

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subject to approval by the Designee pursuant to the delegation of authority in
this Financing Order. In its Issuance Advice Letter to be filed with the Board
not later than five business days after the issuance and sale of the Transition
Bonds, the Company will present a calculation of the expected net present value
savings resulting from the actual terms of the Transition Bonds, using the
methodology described in Appendix C hereto and based upon the findings in the
Restructuring Order and the rate reductions prescribed in the Act.

4.   USE OF PROCEEDS

The Company states that the SPE will remit the proceeds from the sale of the
Transition Bonds, net of underwriting discount, to the Company in consideration
of the Company's transfer of its Bondable Transition Property to the SPE. In
accordance with Section 14 of the Act, the Company will use such proceeds to
reduce its otherwise recovery-eligible bondable stranded costs through the
retirement of its debt or equity, or both (including transactions completed
prior to the issuance of the Transition Bonds), and to buy out, buy down or
otherwise restructure its existing NUG Contracts (or to repay interim financing
in respect of same).

5.   FINDINGS WITH RESPECT TO PETITION

Based on the record of proceedings in this matter and those related to the
Restructuring Order, the Petition and the provisions of the Act and the
Restructuring Order, the Board HEREBY FINDS:

     Recovery of Costs

     (1)  Consistent with the Board's decision in BPU Docket Nos. EO97070455,
          EO97070456 and EO97070457 (which approval constitutes the
          "Restructuring Order"), EM99119870 (the Nuclear Asset Sale),
          EE99090685 (the Pedricktown Buyout), and EM00060388 (the Ref-Fuel
          Buydown), the Company is authorized to recover, through
          securitization, its bondable stranded costs as described in paragraph
          2 below.

     (2)  The Company's stranded costs to be securitized in connection with the
          Nuclear Asset Sale, the Pedricktown Buyout, and the Ref-Fuel Buydown,
          are approximately $420.833 million plus an additional amount of up to
          $19.167 million for transaction and capital reduction costs and are
          recoverable through the TBC. In addition, the Restructuring Order
          permits the recovery of the federal income and state corporation
          business taxes related to securitization through an MTC-Tax Component
          with a term identical to the term of the Transition Bonds.

     (3)  The Company's Bondable Stranded Costs include: (1) the Capital
          Reduction Costs, (2) the Upfront Transaction Costs and (3) the Ongoing
          Transition Bond Costs.

     Mitigation

     (4)  In accordance with Section 14(b)(1) of the Act and the Restructuring
          Order, that the Company has taken reasonable measures to date, and has
          the appropriate incentives or plans in place to take reasonable
          measures, to mitigate the total amount of its stranded costs. As
          required by the Act, the Company shall continue to pursue all
          reasonable

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          mitigation opportunities to mitigate the total amount of its stranded
          and deferred costs.

     Necessity of Securitization

     (5)  In accordance with Section 14(b)(2) of the Act and the Restructuring
          Order, that the Company would not have been able to achieve the level
          of rate reduction deemed by the Board to be necessary and appropriate
          pursuant to the provisions of Sections 4 and 13 of the Act absent the
          issuance of the Transition Bonds.

     Tangible Benefits

     (6)  In accordance with Section 14(b)(3) and (b)(4) of the Act, based on
          current estimates of interest rates, the issuance of such Transition
          Bonds will provide tangible and quantifiable benefits to customers,
          including lower rates than would have been achieved absent the
          issuance of Transition Bonds, and net present value savings over the
          term of the Transition Bonds (currently estimated at $114 million),
          even after truing up the MTC, MTC-Tax and TBC to reflect the terms of
          the actual Transition Bond Transaction. The Company has advised the
          BPU Staff that it will exercise its best effort to achieve the lowest
          TBC consistent with market conditions, the terms of this Order and the
          Designee Guidelines.

     (7)  The methodology used to calculate expected net present value savings,
          as described in Appendix C and applied in Exhibit A hereto, is
          reasonable.

     (8)  Exhibit B hereto contains forecasted principal and interest payments
          each year in the Transition Bond Transaction based upon the forecasted
          level of the Transition Bonds to be issued. The ultimate Expected
          Amortization Schedule may be altered as a result of market conditions
          or rating agency requirements, subject to the approval of the
          Designee. The methodology used to calculate the initial TBC, the TBC
          True-Up, the MTC-Tax and the MTC-Tax True-Up as described in Exhibit C
          of the Petition are reasonable and adherence thereto will provide
          assurance that customers will pay the lowest TBC consistent with
          market conditions and the terms of this Financing Order, in compliance
          with Section 14(b)(4) of the Act. The standard for the Board to use in
          making TBC True-Ups final is the absence of a manifest error (i.e., an
          arithmetic error evident on the face of the filing) in the application
          of the TBC True-Up methodology, which standard the Board finds
          consistent with Section 15(b) of the Act and the achievement of the
          lowest TBC consistent with market conditions at the time of pricing
          and the terms of this Financing Order. The estimate of the initial
          TBC, determined in accordance with Appendix C attached hereto, is
          reasonable. The request of the Company that it be authorized to make
          non-routine adjustments to the TBC and the MTC-Tax as described in
          Section 2(g) hereof is reasonable.

     Structuring and Pricing; Hedging Arrangements

     (9)  The procedures established in this Financing Order relating to the
          final approval of the structuring and pricing of the Transition Bonds
          (including any hedging arrangements priced at the time of the pricing
          of the

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<PAGE>

          Transition Bonds) assure that, in accordance with Section 14(b)(4) of
          the Act, the Company's customers pay the lowest TBC consistent with
          market conditions and the terms of this Financing Order. As authorized
          herein by the Board and in full satisfaction of the requirements of
          Sections 14(b)(4) and 15(a)(3) of the Act, the structuring and pricing
          of the Transition Bonds (including any such hedging arrangement) will
          be conclusively deemed to satisfy the requirements of Section
          14(b)(4), and the terms and conditions of the Transition Bond
          Transaction shall be conclusively approved, if so certified by the
          Designee upon the pricing of the Transition Bonds and any such hedging
          arrangement.

     (10) The methodology for the determination of the TBC proposed by the
          Company in Appendix C hereto is reasonable. The assumptions the
          Company made in such Appendix C are reasonable. The Company's proposed
          methodologies for the mathematical calculation of the TBC are
          reasonable.

     (11) The formation of the SPE by the Company, the capitalization of the SPE
          by the Company, the transfer by the Company to the SPE of its Bondable
          Transition Property, the providing of overcollateralization as
          described herein and as approved in the Designee Certification, the
          hedging arrangements and the entering into of a servicing agreement,
          an administration agreement, a sale agreement and other agreements and
          transactions by the Company and the SPE, all substantially as
          described in the Petition and the SEC Filing and the hedging
          arrangements as described herein and in Appendix F hereto, are
          reasonable and necessary.

     (12) The lien of the Transition Bond Trustee on the Bondable Transition
          Property shall: (A) attach automatically to such Bondable Transition
          Property from the time of the issuance of the Transition Bonds; (B) be
          continuously perfected through a filing made pursuant to the Uniform
          Commercial Code with the New Jersey Secretary of State; (C) be
          enforceable against the Company and the SPE and all third parties,
          including judicial lien creditors; (D) from and after the filing
          described in clause (B) above, constitute a continuously perfected
          security interest in, and lien on, all then existing or subsequent
          revenues and proceeds arising with respect to the associated Bondable
          Transition Property, whether or not the electric power and energy
          included in the calculation of such revenues and proceeds have been
          provided; and (E) rank prior to any other lien, including any judicial
          lien, which subsequently attaches to the Bondable Transition Property
          or any other rights created by this Financing Order or any revenues or
          proceeds of the foregoing.

     (13) The methodology for the remittance of payments arising from the TBC as
          described in the Petition will satisfy the requirements of Section 14
          of the Act and is a reasonable means of undertaking the remittance of
          these amounts.

     (14) The Servicing Fee to be paid to the Company in its role as Servicer as
          described herein is reasonable. The Board finds the higher annual
          servicing fee of any successor Servicer of up to 1.25% of the initial
          principal balance of all transition bonds that the SPE has issued,
          including

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          the Transition Bonds, is reasonable. The conditions to the resignation
          or replacement of the Company as Servicer as described in the SEC
          Filing are reasonable; however, no third party servicer shall be
          approved or required to replace the Company in any of its servicing
          functions in whole or in part if such approval or requirement will
          cause the then current rating of the Transition Bonds to be withdrawn
          or downgraded.

     (15) The TBC and MTC-Tax billing, collection and remittance procedures
          imposed upon any EPS as set forth in this Financing Order and the
          Petition are reasonable.

     (16) Capital Reduction Costs, which do not include interest or preferred
          dividends accrued prior to the date of the issuance of the Transition
          Bonds, and the Upfront Transaction Costs, not to exceed $19.167
          million in the aggregate, are reasonable.

     (17) The recovery of Ongoing Transition Bond Costs, as previously described
          herein, is reasonable and consistent with the Act.

     (18) The (a) scheduled amortization upon issuance for the Transition Bonds
          (1) not exceeding 15 years from the date of issuance in the case of
          Transition Bonds the proceeds of which will be used to reduce stranded
          costs related to utility-owned generation and (2) not exceeding the
          remaining term of a long-term power purchase agreement with a
          nonutility generator in the case of Transition Bonds the proceeds of
          which will be used to buy down or buy out such power purchase
          agreement and (b) the stated maturity of the Transition Bonds being up
          to two additional years (or, in the case of the Transition Bonds
          referred to in clause (a)(2) above, three years) following the
          scheduled amortization are reasonable and permitted under the Act, and
          the collection of the TBC (and the remittance thereof to the SPE)
          until payment in full of the Transition Bonds is reasonable and
          permitted under the Act.

     (19) The issuance of series and classes of Transition Bonds by the SPE in
          an aggregate principal amount not to exceed $440 million is reasonable
          and consistent with the Act and prior Board Orders. The Financial
          Advisor has advised the Board that in this case, in its opinion, the
          negotiated sale of the Transition Bonds should be expected to provide
          a lower cost of funds than a competitive sale. Therefore, the
          negotiation of the sale of the Transition Bonds is reasonable and
          serves the public interest.

     (20) The TBC True-Up to obtain adjustments to the TBC and the MTC-Tax
          True-Up to obtain adjustments to the MTC-Tax described hereinabove and
          set forth in Appendix C hereof are reasonable.

     Use of Proceeds

     (21) The Company's proposed application of the proceeds of the Transition
          Bonds as described herein and in the Petition is reasonable and
          consistent with the Act.

     Regulatory Compliance

     (22) In light of the specific provisions of the Act governing the
          Transition Bond Transaction, the Company's Petition is found to comply
          with N.J.A.C. 14:1-5.6 and -5.9, to the extent either might be deemed
          applicable.

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     Periodic Adjustment of the MTC-Tax

     (23) The MTC-Tax should be subject to mandatory periodic adjustment at the
          same time and in substantially the same manner as adjustments to the
          TBC; provided, however, the Company makes reasonable efforts to
          utilize any and all deductions to taxable income for which it may be
          eligible with respect to the securitization transaction, now or in the
          future, whether or not such deductions are contained in the
          methodology presented by the Company in its Petition, so that the
          MTC-Tax Component does not result in the over-recovery or
          under-recovery of taxes to the Company.

6.   ORDERS

Based on the foregoing, the record of proceedings on the Petition and the
provisions of the Act, the Restructuring Order, and other related Orders the
Board HEREBY ORDERS:

     (1)  The Petition for this Financing Order pursuant to Section 14 of the
          Act is approved subject to the terms and conditions stated herein.

     (2)  The Board hereby authorizes recovery of the following bondable
          stranded costs of the Company consisting of: (1) the Capital Reduction
          Costs, the Upfront Transaction Costs and the Bondable Stranded Costs
          specified in Appendix I and (2) the Ongoing Transition Bond Costs. The
          Board hereby also approves the methodology for the calculation and
          adjustment of the TBC and the MTC-Tax in accordance with the Board's
          Findings herein.

     Bondable Transition Property and TBC

     (3)  The issuance of Transition Bonds by the SPE up to a maximum of $440
          million, and the transfer by the Company to the SPE of the bondable
          transition property created by the Act and this Financing Order are
          authorized.

     (4)  The TBC will be assessed against all existing and future customers of
          the Company or any Successor Utility, subject to Section 28 of the
          Act, and will apply equally to each such customer of the Company,
          regardless of class, based on the amount of electricity delivered to
          the customer (whether purchased from the Company or an EPS) through
          the transmission and distribution system of the Company or any
          Successor Utility. Pursuant to Section 28 of the Act, the TBC shall be
          imposed on the power produced by on-site generators under the
          circumstances specified in Section 28 of the Act.

     (5)  The TBC will be set at a level sufficient to recover the Ongoing
          Transition Bond Costs. The TBC and the MTC-Tax will remain in effect
          until the SPE, as owner of the Bondable Transition Property, has
          received TBC collections sufficient to recover the Ongoing Transition
          Bond Costs.

     (6)  Pursuant to the Act, upon transfer by the Company of its interest in
          Bondable Transition Property, receipt of consideration therefor by the
          Company and acquisition of such Bondable Transition Property by an
          assignee, there will be created and established for the benefit of the
          assignee in accordance herewith Bondable Transition Property
          consisting

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          of: (i) the irrevocable right to charge, collect and receive, and be
          paid from collections of, the TBC in the amount necessary to recover
          the Ongoing Transition Bond Costs, (ii) all rights of the Company
          under this Financing Order with respect to the TBC including without
          limitation all rights to obtain TBC True-Ups pursuant to Section 15(b)
          of the Act, and (iii) all revenues, collections, payments, money and
          proceeds arising under, or with respect to, all of the foregoing.

     (7)  Pursuant to Section 16 of the Act, neither the Board nor any other
          governmental entity will have the authority, directly or indirectly,
          legally or equitably, to rescind, alter, repeal, modify or amend this
          Financing Order, to revalue, re-evaluate or revise the amount of
          Bondable Stranded Costs, to determine that the TBC or the MTC-Tax or
          the revenues required to recover Bondable Stranded Costs are unjust or
          unreasonable, or in any way to reduce or impair the value of the
          Bondable Transition Property, nor shall the amount of revenues arising
          with respect thereto be subject to reduction, impairment, postponement
          or termination, directly or indirectly, provided, however, that
          nothing in this Financing Order will preclude the TBC True-Up or the
          MTC-Tax True-Up in accordance with the provisions hereof and of
          Section 15(b) of the Act.

     (8)  Pursuant to Section 16 of the Act, and notwithstanding any other
          provision of law, this Financing Order and the TBC authorized herein
          will become irrevocable upon the issuance of this Financing Order and
          its becoming effective pursuant to Section 19 of the Act. Pursuant to
          Section 16 of the Act, this Financing Order, the TBC and the Bondable
          Transition Property will constitute vested, presently existing
          property rights upon the transfer of the Company's interest in the
          Bondable Transition Property by the Company to an assignee and receipt
          by the Company of consideration for such interest in the Bondable
          Transition Property, and following such transfer and receipt of
          consideration, such property right in the Bondable Transition Property
          shall be vested ab initio in such assignee.

     (9)  Pursuant to Section 15(c) of the Act, until the Ongoing Transition
          Bond Costs have been fully recovered, this Financing Order and the
          authority to meter, charge, collect and receive the TBC and the
          MTC-Tax will remain in effect and the Company shall be obligated to
          provide electricity to its customers and will have the right to meter,
          charge, collect and receive the TBC and the MTC-Tax, which rights and
          obligations may be assignable solely within the discretion of the
          Company.

     Sale, Pledge and Assignment Of Transition Property

     (10) In accordance with the Act and as described in the Petition, the
          Company is authorized to sell, pledge or assign any or all of its
          interest in the Bondable Transition Property to the SPE. The SPE is
          authorized to acquire the Bondable Transition Property and is approved
          and designated as a "financing entity" (as defined in Section 3 of the
          Act) for such purpose, and for the purpose of issuing Transition Bonds
          and pledging the Bondable Transition Property to the payment of the
          Transition Bonds. The transfer by the Company of the Bondable
          Transition Property to the SPE will be treated as a true sale and
          absolute transfer to the SPE, even

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          though such transaction may be treated as a financing, and not a sale,
          for federal and state tax purposes, for financial accounting purposes
          or for other purposes. Neither this Financing Order nor the transfer
          of the Bondable Transition Property nor the interest of the SPE in the
          Bondable Transition Property shall be defeated or otherwise affected
          by the commingling of TBC collections with other funds of the Company,
          and the portion of such commingled funds allocable to TBC collections
          may be determined by such methods of estimation as are set forth in
          the Servicing Agreement.

     (11) The SPE will pay the purchase price of the Bondable Transition
          Property equal to the net proceeds from the issuance of the Transition
          Bonds to the Company, to be applied substantially as described in the
          Petition and as set forth in ordering paragraph 36 of this Financing
          Order.

     (12) When the Company transfers its interest in the Bondable Transition
          Property to the SPE as described in this Financing Order, the Bondable
          Transition Property will arise and constitute a valid, presently
          existing property right, and will be vested in the SPE as an original
          property right and not by assignment from any other entity. The SPE
          will have all of the statutory rights inherent in the Bondable
          Transition Property, including, without limitation, the right to
          exercise, through the Company or any Successor Utility, any and all
          rights and remedies, including the right to direct the Company or any
          Successor Utility to shut-off electric power to a particular customer
          to the extent permitted by Board policies and procedures and any
          applicable laws then in effect, and to assess and collect any amounts
          payable by any customer in respect of such Bondable Transition
          Property, notwithstanding any objection or direction to the contrary
          by the Servicer.

     (13) When the Company transfers its interest in the Bondable Transition
          Property to the SPE, neither the Company nor any successor Servicer
          will be entitled to recover the TBC other than for the benefit of the
          holders of Transition Bonds in accordance with the Company's duties as
          Servicer of such Bondable Transition Property as authorized in this
          Financing Order.

     Transition Bonds

     (14) The scheduled amortization upon issuance of the Transition Bonds will
          be (1) up to 15 years in the case of Transition Bonds the proceeds of
          which will be used to reduce stranded costs related to utility-owned
          generation and (2) up to the remaining term of a long-term power
          purchase agreement with a nonutility generator in the case of
          Transition Bonds the proceeds of which will be used to buy down or buy
          out such power purchase agreement, and the stated maturity will be up
          to two additional years (or, in the case of the Transition Bonds
          referred to in clause (2) above, three additional years). The
          Transition Bonds may be issued in series and classes with different
          terms. Exhibit B hereto contains forecasted principal and interest
          payments each year in the Transition Bond Transaction based upon the
          forecasted level of the Transition Bonds to be issued. The ultimate
          Expected Amortization Schedule may be altered as a result of market
          conditions or rating agency requirements, subject to Designee
          approval. The associated MTC-Tax collections may

ACE Bondable Stranded Costs Rate Order       25        BPU Docket No. EF01060394

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          be adjusted from time to time to reflect the changing principal and
          interest components of the Transition Bond debt service. One or more
          classes of Transition Bonds may be issued as variable rate
          instruments, the interest on which will be fixed or hedged in
          accordance with the terms of a hedging arrangement consistent with
          this Financing Order.

     (15) The amount of Transition Bonds to be issued (not to exceed $440
          million) is approved as described herein and as detailed in Appendix
          I. The Company should be afforded substantial flexibility in
          establishing the provisions of the Transition Bonds, and the final
          structure, pricing, terms and conditions of the Transition Bonds
          (including any hedging arrangement described in Section 2(e) hereof)
          will, to the extent consistent with the provisions of this Financing
          Order, be determined by the Company and approved by the Board or its
          Designee pursuant to his delegation of authority from the Board,
          pursuant to Sections 14(b)(4) and 15(a)(3) of the Act, at the time
          Transition Bonds are priced. The Designee may rely conclusively on the
          finding of the tangible and quantifiable benefits of securitization in
          paragraph 6 of Section 5 hereof, as required by Section 14(b)(3) of
          the Act, upon the advice of the Financial Advisor provided in the form
          of Appendix H hereto and upon information provided to the Designee by
          the Company to support any Designee Certification. Any Designee
          Certification shall be substantially in the form of Appendix A hereto,
          shall constitute a part of this Financing Order, shall constitute a
          full and complete record of the determinations and approvals made
          therein and full satisfaction of the requirements of Sections 14(b)(4)
          and 15(a)(3) of the Act, and shall be final and uncontestable as of
          its date.

     (16) The issuance and sale of the Transition Bonds through negotiation with
          underwriters is approved.

     Recovery of Bondable Stranded Costs

     (17) In accordance with Section 20 of the Act, Transition Bonds will be
          recourse only to the credit and assets of the SPE. Investment income
          earned on the trust accounts held by the Transition Bond Trustee may
          be used to satisfy current scheduled interest and principal payments
          on the Transition Bonds and related expenses and to replenish the
          SPE's equity and the Required Overcollateralization Schedule.
          Investment income in the Capital Subaccount not used currently for
          this purpose will be released to the SPE. Any earnings in excess of
          amounts required to be held in such trust accounts (other than the
          Capital Subaccount) will reduce the TBC through the TBC True-Up.

     (18) The Capital Reduction Costs and Upfront Transaction Costs up to
          $19.167 million in the aggregate are authorized to be recovered
          through the issuance of Transition Bonds.

     (19) The Ongoing Transition Bond Costs as described herein are authorized
          to be recovered through the TBC.

     Reports

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     (20) The Designee will make his/her determinations and approvals of the
          pricing of the Transition Bonds upon receipt from the Company of the
          Pricing Advice Certificate(s) substantially in the form of Appendix D
          hereto. Within two business days after the pricing of the Transition
          Bonds, the Designee shall file with the Secretary of the Board a
          Designee Certification substantially in the form of Appendix A hereto.
          As provided in ordering paragraph 15 of this Financing Order, any
          Designee Certification will be final and uncontestable as of its date
          and will represent final approval, pursuant to Sections 14(b)(4) and
          15(a)(3) of the Act, of the structure, pricing, terms and conditions
          of the Transition Bonds. No delay or error in such filing will affect
          the validity of this Financing Order, the Bondable Transition Property
          or the Transition Bonds.

     (21) Pursuant to Section 15(a)(3) of the Act, not later than five business
          days after the issuance and sale of the Transition Bonds, the Company
          will notify the Secretary of the Board, in an Issuance Advice Letter
          substantially in the form of Appendix B hereto, of the initial TBC and
          MTC-Tax (which are hereby approved), the Expected Amortization
          Schedule approved in the Designee Certification and related matters.
          The Issuance Advice Letter will be automatically effective upon filing
          with the Secretary of the Board. No delay or error in such filing will
          affect the validity of this Financing Order, the Bondable Transition
          Property or the Transition Bonds.

     Servicing of Transition Bonds

     (22) The Company, as Servicer, is authorized to enter into a servicing
          agreement, substantially as described in the SEC Filing, with the SPE
          pursuant to which the Company agrees to continue to operate its
          distribution system to provide service to its customers, to impose,
          charge, collect and receive the TBC with respect to Bondable
          Transition Property for the benefit and account of such SPE or its
          assigns, and to account for and remit these amounts to or for the
          account of such SPE or its assigns in the manner described in the
          Petition.

     (23) Each customer's monthly bill will note that a portion of the charges
          on such bill represents amounts being collected on behalf of the SPE
          as owner of the Bondable Transition Property.

     (24) Payments from customers will be applied first to sales taxes (which
          the Company will collect as trustee for the State and not for its own
          account or that of the SPE, and which are not "charges" for purposes
          of the following allocations), then to charges in arrears, if any, and
          then to current charges. With respect to each billing period, partial
          payments of charges will be allocated pro rata: (i) to the TBC, (ii)
          to the MTC-Tax and (iii) to the Company's other charges based on the
          proportions that the TBC, the MTC-Tax and the Company's other charges
          bear to the total charges billed. If the Transition Bonds are issued
          in more than one series, partial payments of the TBC will be allocated
          to each respective series so issued, pro rata, based on the respective
          amounts owed under each series.

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     (25) Pursuant to Section 22 of the Act, in the event of a default by a
          Servicer under any servicing agreement with respect to the Transition
          Bonds, upon application of the SPE or the Transition Bond Trustee, the
          Board will designate a successor Servicer for the Bondable Transition
          Property, who will promptly assume billing and collection
          responsibilities for the TBC and the MTC-Tax. The Board will act on an
          expedited basis to designate within 30 days such successor Servicer.
          Such successor Servicer will assume all rights and obligations of the
          initial Servicer.

     (26) The Board will permit a successor Servicer to replace the Company as
          Servicer in any of its servicing functions with respect to the TBC and
          the Bondable Transition Property authorized by this Financing Order
          only upon determining that approving or requiring such successor
          Servicer will not cause then current credit ratings on Transition
          Bonds to be withdrawn or downgraded.

     (27) Any EPS that proposes to collect and remit the TBC and associated
          MTC-Tax must (i) meet the creditworthiness criteria to be established
          by the Board, and at a minimum, the criteria set forth and approved
          below in this Financing Order; and (ii) comply with the billing,
          collection and remittance procedures and information access
          requirements set forth below.

     (28) The Board will authorize a EPS to bill and collect the TBC and
          associated MTC-Tax, for remittance to the Servicer, only with respect
          to power sold by it and only if: (i) such EPS agrees to remit the full
          amount of all charges it bills to customers for services provided by
          the Company or any Successor Utility, together with amounts related to
          the TBC and the MTC-Tax, regardless of whether payments are received
          from such customers, within 15 days of the Company's (or any successor
          Servicer's) bill for such charges; (ii) such EPS agrees to provide the
          Servicer with total monthly kWh usage information for each customer in
          a timely manner to enable the Servicer to fulfill its obligations,
          because such information is the basis for assessing the required level
          of such remittances; and (iii) the Servicer is entitled, seven days
          after a default by the EPS in remitting any charges payable to the
          Company, including amounts related to the TBC and the MTC-Tax, to
          assume responsibility for billing and collecting all charges for
          services provided by the Company or any Servicer, including the TBC
          and the MTC-Tax, or to transfer responsibility to a qualifying third
          party. In addition, if and so long as such EPS does not maintain at
          least a "Baa2" and "BBB" (or the equivalent) long-term unsecured
          credit rating from Moody's Investors Service and Standard & Poor's
          Rating Services, respectively, such EPS will maintain, with the
          Servicer or as directed by the Servicer, a cash deposit or comparable
          security equal to two months' maximum estimated collections of all
          charges payable to the Company, including the amounts related to the
          TBC and the MTC-Tax, as must be agreed upon by the Company (or any
          Successor Servicer) and the EPS. In the event of a default in the
          remittance of any such amounts by an EPS, any shortfall in TBC
          collections or MTC-Tax collections by an EPS not recovered from such
          cash deposits or comparable security will be included in the TBC
          True-Up and the MTC-Tax True-Up as described in Appendix C hereto.

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     (29) Customers will continue to be responsible for payment to the Servicer
          of the TBC and the MTC-Tax billed by an EPS, to the extent such
          customer has not paid the TBC or MTC-Tax billed to it. In the event of
          a failure of any customer to pay the TBC or MTC-Tax, the Company is
          authorized to shut-off power, or a successor Servicer is authorized to
          direct the Successor Utility to shut-off power, to such customer in
          accordance with Board policies and procedures and any applicable laws
          then in effect.

     (30) The Servicer will be entitled to an annual servicing fee equal to
          0.10% of the aggregate initial principal amount of the Transition
          Bonds (the "Servicing Fee"). The Board approves the Servicing Fee as
          described herein. The Board also approves a higher annual Servicing
          Fee of any successor Servicer of up to 1.25% of the initial principal
          balance of all transition bonds that the SPE has issued, including the
          Transition Bonds.

     The TBC: Establishment and Adjustment

     (31) The methodology used to calculate the TBC, the TBC True-Up and the
          MTC-Tax True-Up, as described in Appendix C hereof, is approved.

     (32) Pursuant to Section 15(a)(3) of the Act, the initial TBC and MTC-Tax
          will be filed with the Secretary of the Board in the Issuance Advice
          Letter and will be effective upon such filing, to be adjusted up or
          down, as necessary, by the TBC True-Up and MTC-Tax True-Up.

     (33) In accordance with Section 15(b) of the Act, the Servicer, on behalf
          of the Company and the pledgees or transferees of the Bondable
          Transition Property, is authorized to file with the Secretary of the
          Board periodic TBC True-Ups, at least annually but not more frequently
          than quarterly (or monthly in the last two years before the scheduled
          maturity of the Transition Bonds and continuing until all Ongoing
          Transition Bond Costs and other bondable stranded costs determined to
          be recoverable in this Financing Order are paid in full, even past
          legal maturity), to the extent necessary to ensure the timely receipt
          of revenues equal in amount to required payments of Ongoing Transition
          Bonds Costs. Each such adjustment shall be formula-based, shall be in
          the amount required to ensure the timely receipt of revenues
          sufficient to provide for the full and timely recovery of Bondable
          Stranded Costs, including, without limitation, the timely payment of
          principal of, and interest and acquisition or redemption premium on,
          the Transition Bonds issued to finance such Bondable Stranded Costs.
          The periodic adjustments will be filed in substantially the form
          attached to this Financing Order as Appendix E.

     (34) The Company will propose each TBC True-Up in a filing with the
          Secretary of the Board at least 30 days in advance of the date upon
          which it is requested to be effective. The proposed adjustment will
          become effective on an interim basis on the date on which it is
          requested to be effective and, in the absence of a Board Order to the
          contrary finding manifest error (i.e., an arithmetic error evident on
          the face of the filing), will become final and nonappealable 60 days
          after the filing.

     (35) If necessary to ensure the timely recovery of the Ongoing Transition
          Bond Costs and the MTC-Tax, the Board will approve adjustments to the

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          methodology as proposed by the Company in "non-routine" adjustments to
          the TBC and the MTC-Tax.

     Use Of Transition Bond Proceeds

     (36) The Company will use the proceeds of the Transition Bonds, net of
          transaction costs and any costs of credit enhancement for the
          Transition Bonds paid from the proceeds, to reduce its otherwise
          recovery-eligible Bondable Stranded Costs through the retirement of
          the Company's debt or equity, or both (including transactions
          completed prior to the date of this Financing Order), or to buy out or
          buy down or otherwise restructure power purchase agreements (or to
          repay interim financing in respect of same). The Company is authorized
          to apply the proceeds to retire debt, equity or both, and to buyout,
          buydown or restructure power purchase agreements, substantially as set
          forth in the Petition, and to pay any accrued interest and accrued
          preferred dividends from the date of issuance of the Transition Bonds
          to the date of retirement, and to pay any premium, unamortized
          discounts and other fees, costs and charges associated with such
          retirement. No failure to apply the proceeds in accordance with the
          Restructuring Order or this Financing Order shall affect the sale of
          the Bondable Transition Property or the right to collect the TBC.

     Approval of Servicing Agreement, Administration Agreement, Sale Agreement,
     Hedging Arrangement, if any, and Other Agreements or Transactions

     (37) The Company's entering into a servicing agreement, an administration
          agreement, a sale agreement, any hedging arrangement as described in
          Section 2(e) and any other Transition Bond Transaction documents with
          the SPE or any other party consistent with the terms of this Financing
          Order and/or substantially as described in the SEC Filing and such
          other related transaction documents and other dealings between the
          Company and the SPE or any other party as contemplated therein and
          herein are authorized.

     Accounting for Certain Benefits

     (38) Pursuant to Section 15(d) of the Act, any amount of the TBC
          collections held by the Transition Bond Trustee in excess of those
          amounts necessary to fully recover the Ongoing Transition Bond Costs
          will be applied as a credit to reduce charges to customers of the
          Company, as described in the Petition, except that if more than one
          series of Transition Bonds is sold, all such requirements with respect
          to such Transition Bonds will be aggregated for purposes of
          determining whether or not the total TBC collected exceeds the total
          of such requirements for all such Transition Bonds.

     (39) Upon retirement of all outstanding Transition Bonds and payment of any
          related Ongoing Transition Bond Costs and other Bondable Stranded
          Costs, any remaining amounts held by the Transition Bond Trustee will
          be released to the SPE. The Company's equity in the SPE may be
          distributed to the Company. The Company will credit an amount equal to
          any remaining TBC (but not investment earnings on funds in the Capital

ACE Bondable Stranded Costs Rate Order       30        BPU Docket No. EF01060394

<PAGE>

          Subaccount), less any amount of any unpaid MTC-Tax charges and any
          amount that was withdrawn and not replenished to the SPE's equity, to
          its electric customers against its distribution charges. Any
          overcollected MTC-Tax charges shall also be credited to the Company's
          electric customers against the Company's distribution charges.

     Records

     (40) Pursuant to Section 21 of the Act, the Company or another Servicer on
          its behalf will maintain or cause to be maintained records of TBC and
          associated MTC-Tax collections which have been assessed and collected
          by the Company, as Servicer, under this Financing Order and the
          Restructuring Order, respectively. Such records, and any records of a
          financing entity, will be made available by the Company for inspection
          and examination within a reasonable time upon demand therefor by the
          Board or the related financing entity.

     MTC-Tax Establishment and Adjustment

     (41) Pursuant to the Restructuring Order and this Financing Order, the
          Company is authorized to file with the Board proposals for mandatory
          periodic MTC-Tax True-Ups authorized by the Board in the Restructuring
          Order. The methodology used to calculate the MTC-Tax and the MTC-Tax
          True-Up, as described in Appendix C hereto, is approved. Pursuant to
          Section 15 of the Act, the initial MTC-Tax will be filed with the
          Secretary of the Board in the Issuance Advice Letter and will be
          effective upon such filing, to be adjusted up or down, as necessary,
          by the MTC-Tax True-Up. The MTC-Tax True-Up shall be made
          substantially in the same manner and at the same time as the TBC
          True-Up for the TBC in order to insure receipt of revenues sufficient
          to recover the MTC-Tax Component. Unless the Company or the Board
          proposes an adjustment to the methodology used to calculate the
          MTC-Tax, any MTC-Tax True-Up will become effective 30 days after
          filing absent manifest error and, in the absence of a Board Order to
          the contrary, will become final and nonappealable 60 days after
          filing. The periodic adjustments will be filed in substantially the
          form attached to this Financing Order as Appendix E hereto.

     (42) It is the express intention of the Board that the Company shall not
          overrecover or underrecover the MTC-Tax Component. Accordingly, the
          Company shall adjust the methodology used to calculate the MTC-Tax to
          reflect changes in federal income tax or state corporate business tax
          rates and any other changes to the application or interpretation of
          such laws, provided such changes are either "generic" (affect all
          taxpayers such as a prospective change in the tax rate) or are
          securitization-related.

          Any proposed adjustment to the MTC-Tax methodology by the Company
          shall be submitted to the Secretary of the Board no less than 60 days
          prior to its proposed effective date and shall become effective on the
          proposed effective date absent a Board Order to the contrary;
          provided, however, that the existing methodology shall remain
          effective in the interim.

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     (43) As provided in Section 23(a)(4) of the Act, the Company's right to
          recover the MTC-Tax Component will in no way affect or impair the
          legal true sale and absolute transfer of the Bondable Transition
          Property to the SPE, or otherwise affect the legal rights and
          attributes of the Bondable Transition Property under the Act or under
          this Financing Order.

     Miscellaneous

     (44) Pursuant to Section 19 of the Act, this Financing Order will be
          effective only in accordance with the terms hereof and upon the
          written consent of the Company to all such terms.

     (45) Pursuant to Section 25 of the Act, the consideration or approval by
          the Board of a petition by the Company under the Act, including this
          Financing Order and the periodic adjustment provided in Section 15 of
          the Act, will be wholly separate from, and will not be utilized in the
          Board's consideration of, any other ratemaking or other proceeding
          involving the Company, except as otherwise provided in Sections 39 and
          40 hereof and in the Act.

     (46) Any holder of a Transition Bond and the Transition Bond Trustee, for
          the benefit of such holders, are entitled to the benefit of the
          pledges and agreements of the State of New Jersey set forth in the Act
          and each of the Company, the SPE and the Transition Bond Trustee is
          authorized to include such pledges and agreements in any contract with
          the holders of the Transition Bonds, the Transition Bond Trustee or
          with any assignees.

     (47) The Board is aware of, and hereby expressly modifies, its prior Orders
          in Docket Nos. E097070455, E097070456 and E097070457 (Electric
          Restructuring) and EM99110870 (Nuclear Asset Sale) to permit the
          Company to securitize at this time those bondable stranded costs
          associated with the Company's nuclear generation assets as set forth
          hereinabove. The Board takes this step in reliance upon the
          certification of the Company regarding the fossil divestiture filed on
          September 10, 2002, and in order to permit customers to benefit from
          the current low interest rate environment. The Board reserves the
          right to address, and to adjust if necessary, any net positive
          benefits which might result from the fossil divestiture in a future
          divestiture, ratemaking or other proceeding. The Board finds, however,
          that the Bondable Transition Property described herein will not be
          altered by such future review.

This Financing Order is issued subject to the following provisions, failure of
compliance with which shall not affect the rights of the holders of the
Transition Bonds:

     (1)  The Company will furnish the Secretary of the Board with copies of all
          documents as executed and filed with other regulatory agencies
          relating to the Transition Bonds.

     (2)  The Company will quarterly file with this Board, until all proceeds
          are disbursed, a statement setting forth details with respect to the
          disbursement of net proceeds of the Transition Bonds and their use in
          retiring debt or equity or both and in buying out, buying down or to
          otherwise restructuring existing Board-approved power purchase

ACE Bondable Stranded Costs Rate Order       32        BPU Docket No. EF01060394

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          agreements. Interest on any undisbursed proceeds will be credited to
          the Deferred Balance (as that term is defined in the Board's Final
          Order, dated March 30, 2001) in the monthly reconciliation process.

     (3)  This Financing Order will not be construed as a certification that the
          Transition Bonds will be secured by tangible or intangible assets of
          commensurate value or investment costs.

     (4)  The Company is directed to file, as part of its next base rate filing,
          data showing the impact of the timing of customer payments of TBCs to
          the Company versus payments by the Company, as Servicer, to the Bond
          Trustee. This data will include a calculation of customer daily
          remittances, timing of remittances to the Bond Trustee and the
          short-term interest rate then applicable to determine the amount of
          "float" income earned by the Company in its capacity as Servicer. If
          the Board determines in its review of this filing that the Company
          retained interest income over and above its Servicing Fee, it may
          calculate such retained income, and impute interest thereon, in
          determining fair and reasonable rates going forward from the date of
          its review. Furthermore, in determining its cash working capital
          requirements in a base rate proceeding, the Company will exclude from
          its cash balances any TBCs collected, but not yet remitted to the
          Trustee.

     (5)  Not more than nine months following issuance of the Transition Bonds,
          the Company will file with the Board a reconciliation statement for
          Upfront Transaction Costs and Capital Reduction Costs. If the sum of
          Upfront Transaction Costs and Capital Reduction Costs exceeds $19.167
          million, or if the sum of Upfront Transaction Costs and Capital
          Reduction Costs is less than $19.167 million, any difference will be
          accounted for by an appropriate adjustment made to the Deferred
          Balance, as that term is used in the Restructuring Order. Prior to
          being expended for their intended purpose, earnings on proceeds from
          the Transition Bonds issued to pay transaction costs (Capital
          Reduction Costs and Upfront Transaction Costs) shall be credited to
          the beginning balance of deferred costs associated with the Company's
          Deferred Balance, and bear interest at the rate applicable to the
          Deferred Balance as set forth on page 83 of the Restructuring Order.
          The failure to file such statement or any delay in filing the same or
          making such credits shall not affect the validity of this Financing
          Order, the Bondable Transition Property or the Transition Bonds.

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     (6)  The Board hereby designates Commissioner Frederick F. Butler or, in
          his absence, any other Commissioner, as its Designee under this
          Financing Order. Such Designee shall act only in accordance with the
          Designee Guidelines approved herein and attached hereto as Appendix F
          hereto.

DATED:                               BOARD OF PUBLIC UTILITIES
                                     BY:

                                     /s/ Jeanne M. Fox
                                     JEANNE M. FOX
                                     PRESIDENT

                                     /s/ Frederick F. Butler
                                     FREDERICK F. BUTLER
                                     COMMISSIONER

                                     /s/ Carol J. Murphy
                                     CAROL J. MURPHY
                                     COMMISSIONER

                                     /s/ Connie O. Hughes
                                     CONNIE O. HUGHES
                                     COMMISSIONER
ATTEST:

         KRISTI IZZO
         BOARD SECRETARY

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                             CONSENT OF THE COMPANY

Pursuant to Section 19 of the Act, the Company hereby consents to all of the
terms of this Financing Order, this ____ day of September, 2002.

                                     ATLANTIC CITY ELECTRIC COMPANY
                                     BY:

                                     /s/ Joseph M. Rigby
                                     ____________________________________
                                     Joseph M. Rigby, President
                                     Atlantic City Electric Company

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                                      INDEX

1. PROCEDURAL HISTORY..........................................................3
2. TRANSITION BOND TRANSACTION.................................................5
   a. Proposed Structure.......................................................5
   b. Recovery of Upfront Transaction Costs....................................8
   c. Recovery of Capital Reduction Costs......................................9
   d. Recovery of Ongoing Transition Bond Costs................................9
   e. Approval of Final Terms and Conditions: Transition Bond Transaction......9
   f. TBC.....................................................................11
   g. Periodic Adjustments to the TBC and MTC-Tax.............................12
   h. Remittance of TBC Collections...........................................13
   i. Credit Enhancement......................................................15
   j. Formation of SPE........................................................15
   k. Bondable Transition Property............................................15
   l. Sale of Bondable Transition Property to SPE.............................16
   m. Issuance of Transition Bonds............................................16
   n. Nonbypassable TBC and MTC-Tax...........................................16
   o. Electric Power Suppliers................................................17
   p. Servicing...............................................................18
   q. Tax Recoveries - Accounting and Related Issues..........................18
3. RATEPAYER BENEFITS.........................................................18
4. USE OF PROCEEDS............................................................19
5. FINDINGS WITH RESPECT TO PETITION..........................................19
6. ORDERS.....................................................................23

                                    EXHIBITS

Exhibit A Savings Analysis (2 pages)

Exhibit B Debt Design Chart (1 page), TBC Development Chart (1 page), MTC-Tax
Charge Development & True-Up (1 page), and MTC-Tax Charge Development & True-Up
Line Item Descriptions (1 page).

                                   APPENDICES

Appendix A      Form of Designee Certification (w/ Attachment 1 Expected
                Amortization Schedule)

Appendix B      Form of Issuance Advice Letter (w/ Attachment 1 Expected
                Amortization Schedule)

Appendix C      Revised Exhibit C-3 to the Petition (methodology for setting
                and adjusting the TBC and MTC-Tax)

ACE Bondable Stranded Costs Rate Order       36        BPU Docket No. EF01060394

<PAGE>

Appendix D      Form of Pricing Advice Certificate

Appendix E      Form of True-Up Letter (w/ Table 1 Input Values)

Appendix F      Designee Guidelines

Appendix G      Form of Underwriter Certification

Appendix H      Form of Bear Stearns Letter

Appendix I      Series 2002-1 Amounts to be Securitized (1 page),
                Estimated Securitization Issuance & Capital Reduction
                Costs (1 page), Detailed Capital Reduction Costs (2 pages)

ACE Bondable Stranded Costs Rate Order       37        BPU Docket No. EF01060394

<PAGE>

                                                                      Appendix A

                                [BPU LETTERHEAD]

                             DESIGNEE CERTIFICATION

                  (to be filed with the Secretary of the Board
                         within two business days after
                      the pricing of the Transition Bonds)

BOARD OF PUBLIC UTILITIES (THE "BOARD") OF THE STATE OF NEW JERSEY

SUBJECT: Certification for Atlantic City Electric Transition Funding LLC Series
2002-1 Transition Bonds ("Transition Bonds") Pursuant to the Order of the Board
dated September 18, 2002, Docket No. EF01060394 (the "Financing Order").

     I, _____________________________ (the "Designee"), in accordance with
Sections 14(b) and 15(a)(3) of the Electric Discount and Energy Competition Act,
Chapter 23 of the Laws of 1999 ("Act"), for the purpose of (a) establishing that
the structuring and pricing of the Transition Bonds assures that the customers
of Atlantic City Electric Company (the "Company") pay the lowest Transition Bond
Charges consistent with market conditions and the terms of the Financing Order
and (b) approving at the time of pricing of the Transition Bonds, the terms and
conditions of the Transition Bonds, servicing fees, if any, with respect to the
collection of such Transition Bond Charges and the pledging, assignment and sale
of Bondable Transition Property in connection with the initial Transition Bond
Charge, HEREBY CERTIFY as follows:

     1. Any capitalized terms not defined herein shall have the meanings
ascribed thereto in the Financing Order.

     The following are the terms of the Transition Bonds:

     Name of Transition Bonds:  Series 2002-1 Transition Bonds
     SPE: Atlantic City Electric Transition Funding LLC
     Closing Date: _________
     Amount Issued:  $440,000,000
     Interest Rates and Expected Amortization Schedule: See Attachment 1
     Distributions to Investors (quarterly or semi-annually): ________
     Weighted Average Coupon Rate: ________
     Weighted Average Yield:_________
     Capitalization Amount: ________
     Overcollateralization Amount:_______
     Overcollateralization Schedule: See Attachment 1
     New Jersey Statutory Corporate Business Tax Rate: __________
     New Jersey Sales Tax Rate:____________
     Federal Statutory Corporate Income Tax Rate: __________

     2. All such items are within the parameters established in the Financing
Order and in the Designee Guidelines in Appendix F to the Financing Order.
Accordingly, (a) the structuring

                                      A-1

<PAGE>

and pricing of the Transition Bonds assures that the Company's customers will
pay the lowest Transition Bond Charges consistent with market conditions and the
terms of the Financing Order and (b) the terms and conditions of the Transition
Bonds and the schedule of payments of principal and interest on the Transition
Bonds and overcollateralization requirements are approved.

     THIS CERTIFICATION, in accordance with Sections 14(b)(4) and 15(a)(3) of
the Act and the Financing Order, is final and uncontestable as of its date,
which is the pricing date of the Transition Bonds.

DATED:

                                       -----------------------------------------
                                                       Designee

                                      A-2

<PAGE>

                                  ATTACHMENT 1
                         EXPECTED AMORTIZATION SCHEDULE
     (with coupons, prices, classes, if any, expected amortization schedule
              and stated maturities, call features, and scheduled
                       overcollateralization requirements)

General Terms

                                                                        Call
  Class   Price  Coupon  Fixed/Floating   Ave. Life   Stated Maturity  Feature
  -----   -----  ------  --------------   ---------   ---------------  -------

Scheduled Amortization Requirement

      Date      Class A-1       Class A-2       Class A-3       Class A-4
      ----      ---------       ---------       ---------       ---------

Schedule of Overcollateralization Requirement

      Date                     Required Overcollateralization Level
      ----                     ------------------------------------

                                      A-3

<PAGE>

                                                                      Appendix B

                             ISSUANCE ADVICE LETTER
                                [ACE Letterhead]

               [To be filed with the Board of Public Utilities or
                 its successor not later than five business days
              after the issuance and sale of the Transition Bonds]

                                                                       [DATE]

Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

               Re:  Docket No. EF01060394

Dear Secretary Izzo:

     Pursuant to your Honorable Board's order in the above-captioned Docket
("Financing Order"), Atlantic City Electric Company (the "Company") hereby
transmits for filing this Issuance Advice Letter. Any capitalized terms not
defined herein shall have the meanings ascribed thereto in the Financing Order.

     In the Financing Order, the Board authorized the Company to file an
Issuance Advice Letter not later than five business days after the issuance and
sale of a series of Transition Bonds. This Issuance Advice Letter filing applies
the methodology approved by the Board in the Financing Order to establish the
initial Transition Bond Charge and initial MTC-Tax. The terms of issuance are as
follows:

     1.   Transition Bond Name: Series 2002-1 Transition Bonds

     2.   SPE Name: Atlantic City Electric Transition Funding LLC

     3.   Trustee: _________

     4.   Closing Date: _________

     5.   Amount Issued: $440,000,000

     6.   Upfront Transaction Costs: _______

     7.   Interest Rates and Expected Amortization Schedule: See Attachment 1

     8.   Distributions to Investors (quarterly or semi-annually): ________

     9.   Annual Servicing Fee as a percent of the initial principal balance:
          ________

     10.  Overcollateralization amount: _______________

     11.  Overcollateralization Schedule: See Attachment 1

     12.  Capitalization Amount: ________

     13.  Brief description of any interest rate exchange agreement or other
          hedging arrangement:

                                      B-1

<PAGE>

         Table I below shows the current assumptions for each of the variables
used in the Transition Bond Charge and MTC-Tax calculation.

                                     TABLE I
           INPUT VALUES FOR INITIAL TRANSITION BOND CHARGE AND MTC-TAX

Forecasted annual kWh sales:________

Days Outstanding:_______

Percent of billed amounts expected to be charged-off:____________

Forecasted annual Ongoing Transition Bond Costs (including any hedging
costs):________

Required annual overcollateralization amount: ________

Current Transition Bond outstanding balance: ________

Scheduled Transition Bond outstanding balance as of ___/___/___:_____

New Jersey Statutory Corporate Business Tax Rate: __________

New Jersey Sales Tax Rate:____________

Federal Statutory Corporate Income Tax Rate: __________

Based on the approved formula, the initial Transition Bond Charge is
________(cent)/kWh and the initial MTC-Tax is ________(cent)/kWh

Revised Exhibit E to the Petition filed in this docket by the Company shows
expected net present value savings of $___ million for this series of Transition
Bonds.

     In accordance with the Financing Order, the Transition Bond Charge and
MTC-Tax shall be automatically effective when this Issuance Advice Letter is
filed and will continue to be effective.

                                         Respectfully submitted,

                                         [                       ]

Attachments

                                      B-2

<PAGE>

                                  ATTACHMENT 1
                         EXPECTED AMORTIZATION SCHEDULE
     (with coupons, prices, classes, if any, expected amortization schedule
              and stated maturities, call features, and scheduled
                       overcollateralization requirements)

A.  General Terms

                                                       Stated
  Class   Price  Coupon  Fixed/Floating   Ave. Life   Maturity  Call Feature
  -----   -----  ------  --------------   ---------   --------  ------------

Scheduled Amortization Requirement

      Date      Class A-1       Class A-2       Class A-3       Class A-4
      ----      ---------       ---------       ---------       ---------

Schedule of Overcollateralization Requirement

      Date                     Required Overcollateralization Level
      ----                     ------------------------------------

                                      B-3

<PAGE>

                                                                      Appendix C

                   Development of the Transition Bond Charge,
                           MTC-Tax and True-up Formula

     The Transition Bond Charge (the "TBC") is designed to insure full and
timely recovery of all Bondable Stranded Costs including financing charges and
related costs. A separate Tax Market Transition Charge (the "MTC-Tax") is
designed to recover all income taxes associated with the TBC and MTC-Tax
revenues. First, the TBC necessary to generate sufficient revenues to service
Transition Bonds and pay all related expenses is computed. Second, the MTC-Tax,
designed to recover the necessary tax gross-up is developed taking into account
projected TBC billings, projected Transition Bond interest expense accrued, the
current statutory Federal Income and New Jersey Income tax rates and projected
collections of the MTC-Tax. The detailed mechanics of this procedure are
described below:

Phase 1 - Development of the TBC
--------------------------------

     TBC development: The TBC is developed as follows: Subtract any expected
collections of TBCs billed in the prior period from the scheduled debt service
for the upcoming period (note that in developing the initial charge there are no
prior period billed charges). Debt service includes principal, interest,
administrative and servicing fees, overcollateralization and any true-up amount
computed below (note that there is no true-up adjustment used in developing the
initial charge). This results in the TBC amount required to be billed and
collected during the upcoming period. That result is then divided by projected
kilowatt hours ("kWhs") of electric distribution throughput expected to be
billed to customers and collected from customers during the next period. These
collected kWhs are computed by multiplying monthly kWhs metered and billed by
collections curves which estimate the percent of customer payments received in
each month following a billed sale. The result is a charge per kWh that will
generate the expected collections necessary to pay required debt service and
account for prior period shortfalls or excesses. The resulting TBC is multiplied
by 1 plus the New Jersey state sales tax rate to appropriately include sales tax
in the charge.

Phase 2 - Tax Gross-up Adjustment: MTC-Tax Charge Development
-------------------------------------------------------------

     Tax Gross-up on the TBC: The first step of the process is to compute the
income tax due on the next projected TBC and MTC-Tax revenue (excluding sales
tax). This computation is made as follows: Add projected TBC and MTC-Tax charges
to be billed to customers during the upcoming period to determine the combined
Total Taxable Revenue (Note this requires an iterative computation since the
MTC-Tax charges billed are an input into the equation and also a function of the
resulting MTC-Tax charge rate). From Total Taxable Revenue, subtract

                                      C-1

<PAGE>

projected accrued interest on the Transition Bonds for the period, any accruable
fees for administrative or servicing services to be provided to the Issuer, any
tax deductible amortization of Transition Bond issuance costs (limited, in
aggregate, to the amount recoverable through the TBC), any deductible
expenses/losses on the debt retired by Transition Bond proceeds (limited, in
aggregate, to the amount recoverable through the TBC), and any projected
allowable deduction for uncollectable accounts. The result is taxable income
from the net combined charges. Multiply this amount by the combined effective
tax rate for New Jersey state income/CBT tax and the statutory regular federal
income tax rate in effect for the period, (currently the combined effective tax
rate is 40.85%) and the result is the total income tax associated with net
combined charges.

MTC-Tax charges billed in the prior year but expected to be collected in the
upcoming year are subtracted from the estimated total income tax liability
associated with the net combined charges to derive the expected tax liability
required to be billed and collected during the subsequent year (note that this
step is not applicable in developing the initial charge). To that result, any
true-up adjustment computed below is added or subtracted (not applicable for
initial charge). The result is then divided by projected kWhs of electric
distribution throughput expected to be billed to customers and collected from
customers during the next period as developed in Phase 1. The result is a charge
per kWh that will generate the expected collections necessary to pay the
forecasted tax liability resulting from net combined TBC and MTC-Tax charge
revenues in the upcoming period. The resulting MTC-Tax charge is multiplied by 1
plus the New Jersey state sales tax rate to appropriately add sales tax to the
charge.

Computing True-up Adjustments
-----------------------------

     True-up adjustments are designed to adjust the charges to ensure that the
cost of Transition Bonds, related fees and taxes are fully and timely recovered
from customers and that customers pay no more than is required to satisfy these
costs. As in the case of the development of the TBC and MTC-Tax charges, the
true-up adjustments are completed in two steps - Step One for the TBC and Step
Two for the MTC-Tax charge.

Step 1: TBC True-up Adjustment
------------------------------

     The TBC is to be adjusted at least annually to ensure full and timely
recovery of all Bondable Stranded Costs, financing charges and related costs.
The adjustment is computed as follows:

1.   TBC Shortfalls: TBC collections are remitted to the Bond Trustee and used
     to service the Transition Bonds of each outstanding series and pay related
     expenses. To the extent TBC collections are insufficient to fund required
     debt service and meet other SPE expenses with respect to a series, the Bond
     Trustee will fund the shortfall first with any excess

                                      C-2

<PAGE>

     collection from prior periods in the Reserve Subaccount for such series,
     then the Overcollateralization Subaccount for such series funds held by the
     Bond Trustee, and then with equity capital of the Issuer held in the
     Capital Subaccount for such series. If these amounts are not sufficient to
     fund debt service and meet other expenses, the Bond Trustee will, after
     paying certain fees and expenses in accordance with the Indenture, pay
     interest on the Transition Bonds first and then principal to the extent of
     remaining funds. To the extent overcollateralization or equity funds are
     used to service debt and meet other SPE expenses, these amounts will be
     added as a true-up adjustment to be factored into the subsequent period TBC
     to fully replenish those accounts to their scheduled amounts within the
     next period. In addition, any principal payment shortfall (relative to the
     Expected Amortization Schedule) and the interest that accrues on this
     principal shortfall will be added to the subsequent year's TBC via the true
     up.

2.   TBC Over-collections: To the extent, TBC collections are in excess of the
     amount needed for current debt service requirements and related expenses,
     the excess is first applied to reduce any shortfalls from prior periods
     computed under 1. above. Any TBC excess is next applied to restore the
     Issuer's Capital Subaccount to its scheduled balance. Excesses are then
     applied to restore the Overcollateralization Subaccount to its scheduled
     level. Any remaining excess is retained in the Reserve Subaccount
     maintained by the Bond Trustee. These amounts are invested by the Bond
     Trustee in eligible investments and are retained until they are required to
     service debt, replenish accounts to their scheduled levels or until the
     next periodic true-up which ever comes first. Any balance in the Reserve
     Subaccount including interest on hand (with the exception of interest
     earnings on the Capital Subaccount) at the time of periodic true up is
     subtracted as a true-up adjustment in determining the subsequent period
     TBC.

3.   Investment Earnings on the accounts held by the Bond Trustee (including to
     the extent provided in the Indenture, in the Capital Subaccounts) will be
     used to service debt or fund or replenish the Capital or
     Overcollateralization Subaccounts to their scheduled levels and if not
     needed for that purpose will be retained in the Reserve Subaccount and will
     be subtracted as a true-up adjustment as of the next true-up date.

4.   Periodic True-up: On at least an annual basis, any true-up adjustment,
     computed as above will be used to develop a new TBC rate for the up-coming
     period. The true-up amount will be added or subtracted to the amount of
     required debt service and related expenses used in developing the TBC rate
     for the subsequent period described in Phase 1 above.

Step 2 - MTC-Tax True-up Adjustment
-----------------------------------

1.   Using the methodology described in Phase 2 above, compute the income tax
     associated with net combined charges for the prior period by substituting
     actual amounts for the prior period for the projected amounts.

2.   Compute Income Tax True-up amount: Subtract the tax liability computed in
     1. above from the actual MTC-Tax collections for the same period to derive
     the shortfall or over-

                                      C-3

<PAGE>

     collection with respect to Taxes. Interest will be added to any over or
     under collection to ensure that no party is economically harmed by any such
     over or under collection. The net adjustment plus accrued interest will be
     added or subtracted to the projected amount of total income tax associated
     with net combined charges used in developing the MTC-Tax charge for the
     subsequent period described in Phase 2 above.

                                      C-4

<PAGE>

                                                                      Appendix D

                           PRICING ADVICE CERTIFICATE
                                [ACE Letterhead]
     [To be filed no later than the date of pricing of the Transition Bonds]

                                                      [DATE]

[Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102]

and

[Board Designee]

               Re:  Docket No. EF01060394

Dear Secretary Izzo:

     Pursuant to your Honorable Board's order in the above-captioned Docket
("Financing Order"), Atlantic City Electric Company (the "Company") hereby
transmits for filing this Pricing Advice Certificate. Any capitalized terms not
defined herein shall have the meanings ascribed thereto in the Financing Order.

     In the Financing Order, the Board requires the Company to file a Pricing
Advice Certificate when pricing terms for a series of Transition Bonds and the
pricing of any hedging arrangement in advance of the issuance of Transition
Bonds have been approved by the Company. The proposed terms of pricing and
issuance of the [Transition Bonds] [hedging arrangement] are as follows:

     Name of Transition Bonds:  Series 2002-1 Transition Bonds
     SPE:  Atlantic City Electric Transition Funding LLC
     Closing Date: __________
     Amount Issued:  $440,000,000
     Interest Rates and Expected Amortization Schedule: See Attachment 1
     Distributions to Investors (quarterly or semi-annually): __________
     Weighted Average Coupon Rate: __________
     Weighted Average Yield: __________
     Capitalization Amount: __________
     Overcollateralization Amount: __________
     Overcollateralization Schedule: See Attachment 1

                                      D-1

<PAGE>

     [Brief description of any hedging arrangement:]

     The Company hereby certifies that: (i) all proposed terms of pricing and
issuance of the [Transition Bonds] and/or [the hedging arrangement] are within
the parameters established in the Financing Order and the Designee's Guidelines
attached as Appendix F to the Financing Order [and] (ii) the structuring and
pricing of the [Transition Bonds] and/or [the hedging arrangement] assures that
the Company's customers will pay the lowest Transition Bond Charges consistent
with market conditions and the terms of the Financing Order [or (iii) the
hedging arrangement reasonably protects ratepayers against interest rate
increases which may occur after the date hereof.]

     The Company's certification provided in clause (ii) or (iii) above is
based, in part, upon representations provided to the Company by its Lead
Underwriter for the Transition Bonds, Morgan Stanley & Co. Incorporated.

                                           Respectfully submitted,

                                           [                       ]

Attachments

                                      D-2

<PAGE>

                                                                      Appendix E

                                 TRUE-UP LETTER

                                [ACE Letterhead]

                                                                          [date]

Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

               Re:  Docket No. EF01060394

Dear Secretary Izzo:

     Pursuant to your Honorable Board's order in the above-captioned Docket
("Financing Order"), Atlantic City Electric Company ("Company") as Servicer of
the Transition Bonds or any successor Servicer and on behalf of the trustee as
assignee of the SPE shall apply at least annually for mandatory periodic
adjustment to the Transition Bond Charge and MTC-Tax charge. Any capitalized
terms not defined herein shall have the meanings ascribed thereto in the
Financing Order.

     Each such adjustment shall be proposed in a filing ("True-Up Letter") with
the Board at least 30 days in advance of the date upon which it is requested to
be effective (which effective date hereunder is _________________). The proposed
adjustment to the Transition Bond Charge will become effective on an interim
basis on the date on which it is requested to be effective and, in the absence
of a Board Order to the contrary correcting manifest error in the calculation,
will become final 60 days after the filing. The proposed adjustment to the
MTC-Tax charge, absent a proposed change in the formula, will become effective
on an interim basis on the date on which it is requested to be effective and, in
the absence of a Board order to the contrary correcting manifest error in the
calculation, will become final 60 days after the filing.

     Using the formula approved by the Board in the Financing Order (or in
effect pursuant to the True-Up Letter dated _______), this filing modifies the
variables used in the Transition Bond Charge and MTC-Tax calculation and
provides the resulting modified Transition Bond Charge and MTC-Tax charge. Table
I shows the revised assumptions for each of the variables used in calculating
the Transition Bond Charge and MTC-Tax charge. The assumptions underlying the
current Transition Bond Charge and MTC-Tax charge were filed by the Company in
an Issuance Advice/True-Up Letter dated ________________.

                                      E-1

<PAGE>

     Based on the approved formula, the proposed Transition Bond Charge is
______ (cent)/kWh and the resulting MTC-Tax is ______ (cent)/kWh.

                                        Respectfully submitted,

                                        [                       ]

Attachment

                                      E-2

<PAGE>

                                     TABLE I
          INPUT VALUES FOR ADJUSTED TRANSITION BOND CHARGE AND MTC-TAX

    Forecasted annual kWh sales:______
    Days outstanding:________
    Percent of billed amounts expected to be charged-off:_______

    1.   Under-collection of prior principal amount _______
    2.   Upcoming collection of current principal amount _______
    3.   Under-collection of prior interest amount ____
    4.   Upcoming collection of current interest amount _______
    5.   Under-collection of prior over-collateralization amount _______
    6.   Upcoming collection of current over-collateralization amount _______
    7.   Under-collection of prior tax component amount _______
    8.   Upcoming collection of current tax component amount _______
    9.   Deficiency in required capital amount _______
    10.  Amount in reserve subaccount ________
    11.  Upcoming period servicing and administration fees and expenses _______
    12.  New Jersey Statutory Corporate Business Tax Rate ___________
    13.  New Jersey Sales Tax Rate _________
    14.  Federal Statutory Corporate Income Tax Rate___________

                                      E-3

<PAGE>

                                                                      Appendix F

                               Designee Guidelines

                              Docket No. EF01060394

     The Designee is empowered to agree to the terms and conditions of the
Transition Bonds to be issued to recover a portion of the Stranded Costs of
Atlantic City Electric Company (the "Company"), and to certify that the
structuring and pricing of the Transition Bonds assure that the ratepayers will
pay the lowest Transition Bond Charges ("TBC") consistent with market conditions
and the terms of the Financing Order; provided, however, that the Designee
cannot approve the terms and conditions or deliver such certification if the
terms and conditions of the structuring and pricing of the Transition Bonds fall
outside the parameters set forth below:

     Bond Size:              Not to exceed $440,000,000

     Bond Maturity:          15 year scheduled amortization, not to exceed 17
                             year final stated maturity for Transition Bonds
                             the proceeds of which will be used to reduce
                             stranded costs related to the Company's nuclear
                             generation assets, and 20 year scheduled
                             amortization, not to exceed 23 year final stated
                             maturity for Transition Bonds the proceeds of
                             which will be used to buy out or buy down existing
                             Board-approved long-term power purchase agreements.

     Amortization:           Set to provide an approximately level TBC rate per
                             kWh.

     Payment Dates:          The first payment of principal shall occur within
                             11 months of issuance and payments of principal and
                             interest shall be no less frequent than quarterly
                             or semi-annually.

     Capital Account and     The Company shall capitalize the SPE at no less
     Over-Collateralization: than 0.50% of the initial principal amount of the
                             bonds. The Transition Bond Charge shall include
                             over-collateralization in amounts sufficient to
                             build up to at least 0.50% of the initial principal
                             amount of the Transition Bonds.

     Redemption Features:    The bonds will have a 5% "clean-up" call.

     Underwriting and        Consistent with the provisions of the Financing
     Syndication:            Order and the letter dated September 10, 2002 from
                             Morgan Stanley & Co. detailing the proposed
                             syndication plan, the Transition Bonds were
                             offered by way of a negotiated sale, and customary
                             practices were used in the syndication and
                             underwriting process for the execution of an
                             asset-backed securitization of this size and credit
                             quality.

                                      F-1

<PAGE>

     Floating Rate Bond      If the Company proposes to cause the issuer to
     Hedging Arrangement:    issue floating rate bonds which are swapped to a
                             fixed rate then any such swap shall be
                             competitively bid among no less than three (3)
                             qualified swap counterparties and the issuer shall
                             accept the lowest responsible bid taking into
                             account the trading value of the counterparties. A
                             swap counterparty shall be deemed a qualified swap
                             counterparty if the rating of the counterparty is
                             at least AA-/ Aa3.

     Hedging Arrangement:    The Designee may authorize a Hedging Arrangement if
                             (i) the Company notifies the Designee and the
                             Financial Advisor that it proposes to enter into a
                             Hedging Arrangement, (ii) the Company provides an
                             analysis to the Designee and the Financial Advisor
                             comparing the estimated present value savings using
                             the Hedging Arrangement and the estimated present
                             value savings assuming the Transition Bonds were
                             issued on the same date, (iii) the difference
                             between the estimated present value savings using
                             the Hedging Arrangement and the estimated present
                             value savings assuming the Transition Bonds were
                             issued on the same date is less than $500,000 and
                             (iv) the Financial Advisor concurs with the
                             analysis.

Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Financing Order.

The terms and conditions described therein are hereby approved with such
modifications and amendments as are acceptable to the Designee relying upon the
written advice and recommendations of the Financial Advisor (collectively, the
"Designee Guidelines").

                                      F-2

<PAGE>

                                  CONFIDENTIAL

                                                                      Appendix G

                      FORM OF MORGAN STANLEY CERTIFICATION
                           [Morgan Stanley Letterhead]
          [To be filed on the date of pricing of the Transition Bonds]

                                                [DATE]

[Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102]

           and

[Board Designee]

               Re: Bondable Stranded Costs Rate Order - Docket No. EF01060394
               (the "Financing Order").

Dear Secretary Izzo:

     We have been exclusively engaged by Atlantic City Electric Company (the
"Company") to act as lead underwriter in connection with the offering by
Atlantic City Electric Transition Funding LLC of $[ ] million in aggregate
principal amount of Transition Bonds, Series 2002-1 (the "Transition Bonds")
pursuant to the terms of an underwriting agreement dated as of [insert pricing
date] (the "Underwriting Agreement"). The Transition Bonds were priced at [ : ]
[A.M./P.M.], New York time today (the "Pricing Time"). At the Pricing Time, we
agreed to purchase the Transition Bonds from Atlantic City Electric Transition
Funding LLC, subject to certain conditions contained in the Underwriting
Agreement. Any capitalized terms not defined herein shall have the meanings
ascribed thereto in the Financing Order.

     The Company has informed us that the [State of New Jersey Board of Public
Utilities] issued the Financing Order dated September [ ], 2002 and that the
Financing Order requires the Company's lead underwriter to file a Certification
supporting the Company's Pricing Advice Certificate when [(i)] pricing terms for
a series of Transition Bonds have been approved by the Company [and (ii) when
the terms of a hedging arrangement have been approved by the Company].

     In its Pricing Advice Certificate, the Company indicated that terms of
pricing and issuance are as follows:

                                      G-1

<PAGE>

     Name of Transition Bonds:  Series 2002-1 Transition Bonds
     SPE:  Atlantic City Electric Transition Funding LLC
     Closing Date: __________
     Amount Issued: __________
     Interest Rates and Expected Amortization Schedule: See Attachment 1
     Distributions to Investors (quarterly or semi-annually): __________
     Weighted Average Coupon Rate: __________
     Weighted Average Yield: __________
     Capitalization Amount: __________
     Overcollateralization Amount: __________
     Overcollateralization Schedule: See Attachment 1

     [Brief description of any interest rate exchange agreement or other hedging
arrangement:]

     For purposes of the certification set forth herein, we have:

     (i) reviewed the structuring and pricing of the Transition Bonds as set
forth in the Company's Pricing Advice Certificate;

     (ii) reviewed the reported prices and trading activity for other publicly
traded "stranded costs" bonds that are comparable to the Transition Bonds;

     (iii) reviewed the Financing Order, including the Company's methodology and
assumptions set forth therein for calculating the transition bond charge;

     (iv) discussed with senior executives of the Company the Company's
methodology and assumptions for calculating the transition bond charge;

     [(v) reviewed the structuring and pricing of the hedging arrangement and
the proposed structuring and pricing of the Transition Bonds as set forth in the
Company's Pricing Advice Certificate;

     (vi) reviewed the pricing of certain comparable hedging arrangements that
are known to us;] and

     (vii) performed such other analyses and considered such other factors as we
have deemed appropriate.

     We have assumed and relied upon without independent verification the
accuracy and completeness of the information provided to us by management of the
Company and reviewed by us for the purposes of this certification. We have also
assumed that the Company implements the transactions contemplated hereby in
accordance with the terms of the Financing Order, including that any hedge
payment benefits ratepayers. Our certification is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made

                                      G-2

<PAGE>

available to us as of, the date hereof. We have not made any independent
valuation or appraisal of the assets or liabilities of the Issuer, nor have we
been furnished with any such appraisals. This certification does not constitute
a bid for any of the Transition Bonds. Rather it is a statement of our view of
the reasonableness of the structuring and pricing of the Transition Bonds, as
proposed, at a particular point in time relative to current market conditions.
The structuring and pricing of the Transition Bonds does not reflect a level at
which actual other transactions have occurred or may occur. Our views set forth
in this certification may vary significantly from the views expressed in
certifications from other sources.

     It is understood that this certification is solely for the information of
the Board and the Board Designee and is not on behalf of, and is not intended to
confer any rights upon, any other person, and this certification is not to be
relied upon by any other person for any purpose. This certification is being
delivered to the Board and the Board Designee pursuant to the Financing Order
for the sole purpose of supporting the Company's Pricing Advice Certificate. It
is understood that the delivery of this certification by us to the Board and the
Board Designee does not establish a fiduciary relationship between us and the
Board or the Board Designee. This certification does not address nor should it
be construed to address the relative merits of alternative business strategies
that may be available to the Company.

     We have acted as lead underwriter for the Company in connection with the
proposed offering of Transition Bonds and will receive underwriting compensation
for our services. We will not receive a separate fee for providing this
certification. In the past, we have provided [financial advisory and] financing
services for the Company and have received fees for the rendering of these
services.

     Based on the foregoing it is the view of Morgan Stanley, as lead
underwriter, that:

(1) The structuring and pricing of the Transition Bonds, as proposed, is
reasonable in the light of current market conditions.

(2) Assuming the accuracy of the assumptions of the Company contained in the
Financing Order and the formulae contained therein, and of the consistency of
mathematical calculations made by the Company with those formulae contained in
the Financing Order, the customers of the Company will pay the lowest
transition bond charges consistent with current market conditions and the terms
of the Financing Order.

[or, if the certification is given in connection with the execution of a hedging
arrangement in advance of the pricing of the Transition Bonds

(1)  The structuring and pricing of the hedging arrangement is reasonable in
     light of current market conditions.

(2)  The hedging arrangement reasonably protects ratepayers against interest
     rate increases above the locked-in rate which may occur after the date of
     its execution.

                                      G-3

<PAGE>

[or if the certification is given in connection with the termination of a
hedging arrangement, the pricing of the termination payment is reasonable in
light of current market conditions.]

                                            Respectfully submitted,

                                            Morgan Stanley

Attachments

                                      G-4

<PAGE>

                                                                      Appendix H

              Form of Advisory Letter from Bear Stearns & Co. Inc.
                              As Financial Advisor

Bear Stearns & Co. Inc. ("Bear Stearns") has acted as the financial advisor to
the New Jersey Board of Public Utilities ("BPU") with respect to the offering
and issuance of $440,000,000 of Series 2002-1 Transition Bonds (the "Transition
Bonds") and/or the execution of a hedging arrangement by [Issuer Designation]
(the "Issuer").

Bear Stearns has examined (i) the Final Decision and Order (the "Restructuring
Order") of the BPU signed on March 30, 2001 (the "Order Date"); (ii) the
Petition of Atlantic City Electric Company ("ACE") for a Financing Order, dated
June 25, 2001 (the "Petition"); (iii) the Financing Order of the BPU dated
September 18, 2002 (the "Financing Order") (iv) the form of Prospectus and
Prospectus Supplement of the Issuer as filed with the SEC on [date of final
draft reviewed] concerning the Transition Bonds (collectively the "SEC Filing");
(v) the final pricing terms (the "Final Terms") for the Transition Bonds
provided by Morgan Stanley & Co. Incorporated (the "Lead Underwriter") which
final pricing terms were agreed upon between the Issuer, ACE and the Lead
Underwriter; (vi) the Underwriting Agreement for the Transition Bonds (the
"Underwriting Agreement"), proposed for execution on the date hereof among ACE,
the Issuer and the Lead Underwriter; (vii) the form of Designee Certification
proposed to be delivered to the BPU within two business days after the final
pricing terms are determined pursuant to the Financing Order; (viii) the Pricing
Advice Certificate delivered by ACE on the date hereof; and (ix) such other
documents, representations and other forms of information as we have deemed
necessary and appropriate in order for us to deliver this Advisory Letter. We
have found the following:

1.   The structuring and pricing of the Transition Bonds (and any hedging
     arrangement), as evidenced, inter alia, by the terms thereof contained in
     the SEC Filing and the Final Terms provided to us by the Lead Underwriter
     are reasonable in light of current market conditions and are consistent
     with the terms of the Financing Order.

2.   The Final Terms of the Transition Bonds including the syndicate rules, the
     estimated costs of issuance, the overcollateralization levels and the
     servicing fees, appear reasonable and consistent with current market
     conditions.

3.   The initial Transition Bond Charge proposed by ACE in accordance with the
     Financing Order should be [adjusted up or down] [left unchanged] in order
     to provide the Issuer with amounts not less than those necessary to fully
     recover the bondable stranded costs of ACE, in light of the actual interest
     rates achieved in the marketing and sale of the Securities and the costs,
     including overcollateralization of __%, associated with the issuance of the
     Transition Bonds.

4.   Assuming the accuracy of the assumptions of ACE contained in the Financing
     Order and the formulae contained therein, and of the mathematical
     calculations made by ACE

                                      H-1

<PAGE>

     thereunder, the structuring and pricing of the Transition Bonds assure that
     the customers of ACE will pay the lowest Transition Bond Charges consistent
     with current market conditions and the terms of the Financing Order.

5.   ACE has delivered its Pricing Advice Certificate, which conforms to the
     Final Terms.

                                      H-2

<PAGE>

                                                                      Appendix I

                         Atlantic City Electric Company
                              Stranded Costs to be
                          Securitized in Series 2002-1
                                      $000

                                Pre-Tax                    After-Tax
                                Stranded                   Stranded
                                 Costs                       Costs
                           -------------------       ----------------------

Nuclear                              $372,839                   $277,946 /1

PCLP:
   Buyout Payment                    $228,500                   $135,158 /2
   Transaction Costs                   $1,884                     $1,114 /3
   Tax Payment on CIAC                 $2,755                     $2,755 /4
                           -------------------       ----------------------
        Total                        $233,139                   $139,027

Ref-Fuel:
   Buydown Payment                     $3,450                     $3,450 /5
   Transaction Costs                     $693                       $410 /6
                           -------------------       ----------------------
       Total                           $4,143                     $3,860

Stranded Cost Total                  $610,121                   $420,833
                           ===================       ======================

   Securitization
Issuance & Capital

Reduction Costs
        Total                                                    $19,167 /7
                                                     ----------------------

   Securitization

   Grand Total                                                  $440,000
                                                     ----------------------

--------
1 The Board approved the sale of the nuclear assets in I/M/O the Petition of
Atlantic City Electric Company for Approval of the Sale of its Nuclear
Generating Units, BPU Docket No. EM99110870, Decision and Orders dated July 21,
2000 and September 17, 2001. Final post-closing stranded costs were filed with
the Board pursuant to those Orders on June 24, 2002.

2 The Board approved the buyout payment in I/M/O the Petition of Atlantic City
Electric Company for Approval of an Agreement to Terminate its Power Purchase
Agreement with Pedricktown Cogeneration Limited Partnership, BPU Docket No.
EE99090685, Decision and Order, dated November 10, 1999.

3 Atlantic made compliance filings quantifying transaction costs related to the
PCLP buyout on February 22, 2001, (estimated costs) and April 4, 2001 (final
costs).

4 Atlantic's April 4, 2001 compliance filing identified and quantified the PCLP
tax payment on CIAC.

5 The Board approved the Ref-Fuel buydown payment in I/M/O the Petition of
Atlantic City Electric Company for Approval of an Amendment to the Agreement for
Purchase of Electric Power with American Ref-Fuel Company of Delaware Valley,
L.P., BPU Docket No. EM00060388, Order of Approval, dated December 6, 2000.

6 Atlantic made a compliance filing quantifying transaction costs related to the
Ref-Fuel buydown on April 4, 2001.

7 A detailed breakdown of estimated securitization issuance and transaction
costs is included in Exhibit B to this statement.

                                      I-1

<PAGE>

Atlantic City Electric                                                Appendix I
Docket Number EF 01060394

Estimated Securitization Issuance & Capital Reduction Costs

Description                                       Amount
---------------------------------------------------------
Underwriting Discount and Fees                $3,023,000
Structuring Fee                                 $336,000
Underwriters' Reimbursable Expenses             $100,000
Road Show (Bloomberg)                             $8,000
Road Show                                        $50,000
SEC Registration Fee                            $117,000
Issuer's and Underwriter's Legal Fees         $4,000,000
Rating Agency Fees                              $417,000
Auditor's Fees                                  $130,000
Printing Fees                                   $120,000
Trustee Fees                                     $36,000
Blue Sky Fees                                     $3,000
IRS Private Letter Ruling Request User Fee        $5,000
SPE Organizational Costs                        $100,000
BPU Financial Advisor Fee *                     $150,000
Internal Labor                                  $350,000
Miscellaneous & Contingency                     $488,000
Capital Reduction Costs                       $9,734,000

---------------------------------------------------------
Total                                        $19,167,000
=========================================================

Footnote
* - could increase to $300,000 if a hedging arrangement is made

<PAGE>

                                   APPENDIX I

<TABLE>
Atlantic City Electric                                                                               CAPITAL REDUCTION COSTS
NPV-Based Priority List for Outstanding Long-Term Debt and Preferred Stock                           ASSUMING CURRENT CAPITALIZATION
(Highlighted Securities Included on RAR-12 - Use of Securitization Proceeds)                         RATIOS ARE MAINTAINED
As of August 22, 2002

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Sorted By NPV (%)                              Repurchase Pricing                                       Capital Reduction Costs
                                              --------------------------------------------------------------------------------------
Security Description            Type    Type   UST  Spread  Yield  Price    Cash  Capital    Planned    Tender  Unamortized  Accrued
                                               (%)   (bp)    (%)    (%)     Cost  Reduction  Cap Reduct  $mm     Issuance     Int
                                                                            $mm   Cost $mm   Cost $mm              $mm        $mm
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>     <C>    <C>   <C>    <C>    <C>     <C>    <C>        <C>        <C>       <C>       <C>
$70.00 mm 8.250% QUIPS           Pfd     Pfd     NA    NA      NA   100.0   70.0     -
---------------------------------------------------------------------------------
$0.41 mm 5.000% undated          Pfd     Pfd   5.08   -50    4.58   109.1    0.4   0.0
---------------------------------------------------------------------------------
$2.43 mm 4.000% undated          Pfd     Pfd   5.08   -50    4.58    87.3    2.1  (0.3)
---------------------------------------------------------------------------------
$0.86 mm 4.750% undated          Pfd     Pfd   5.08   -50    4.58   103.6    0.9   0.0
---------------------------------------------------------------------------------
$0.17 mm 4.350% undated          Pfd     Pfd   5.08   -50    4.58    94.9    0.2  (0.0)
---------------------------------------------------------------------------------
$0.31 mm 4.350% undated          Pfd     Pfd   5.08   -50    4.58    94.9    0.3  (0.0)
---------------------------------------------------------------------------------
$2.05 mm 4.100% undated          Pfd     Pfd   5.08   -50    4.58    89.4    1.8  (0.2)
---------------------------------------------------------------------------------
$25.00 mm 7.375% QUIPS           Pfd     Pfd   1.78    50    2.28   105.9   26.5   1.5
---------------------------------------------------------------------------------
$19.5mm 7.980% due May 2004- 02  Call    ss      NA    NA      NA   100.0   19.5     -         0.6            -       0.0       0.5
---------------------------------------------------------------------------------
$10.5mm 7.970% due May 2004- 02  Call    ss      NA    NA      NA   100.0   10.5     -         0.3            -       0.0       0.3
---------------------------------------------------------------------------------
$28.0mm 7.125% due Feb 2004- 03  Call    ss    1.63    28    1.91   102.2   28.6   0.6         0.9          0.6       0.0       0.3
---------------------------------------------------------------------------------
$62.5mm 7.000% due Sep 2023- 03  Call    ss    1.70    29    1.99   107.8   67.3   4.8
---------------------------------------------------------------------------------
$7.0mm 7.630% due Aug 2014       Bullet  ss    4.30   128    5.58   117.8    8.2   1.2         1.4          1.2       0.0       0.1
---------------------------------------------------------------------------------
$68.6mm 6.625% due Aug 2013      Bullet  ss    4.30   125    5.55   108.7   74.6   6.0
---------------------------------------------------------------------------------
$1.0mm 7.250% due Aug 2010       Bullet  ss    4.05   119    5.24   113.0    1.1   0.1         0.2          0.1       0.0       0.0
---------------------------------------------------------------------------------
$15.0mm 7.680% due Aug 2015      Bullet  ss    4.30   131    5.61   118.9   17.8   2.8         3.2          2.8       0.1       0.3
---------------------------------------------------------------------------------
$75.0mm 7.000% due Aug 2028- 03  Call    ss    1.67    29    1.96   107.4   80.6   5.6
---------------------------------------------------------------------------------
5.0mm 6.710% due Jun 2008        Bullet  ss    3.61   116    4.77   109.8    5.5   0.5         0.6          0.5       0.0       0.1
---------------------------------------------------------------------------------
$4.0mm 6.730% due Jun 2008       Bullet  ss    3.61   116    4.77   109.9    4.4   0.4
---------------------------------------------------------------------------------
$11.0mm 6.750% due May 2008      Bullet  ss    3.53   116    4.69   110.2   12.1   1.1
---------------------------------------------------------------------------------
$10.0mm 6.750% due May 2008      Bullet  ss    3.53   116    4.69   110.2   11.0   1.0
---------------------------------------------------------------------------------
$1.0mm 6.770% due Apr 2008       Bullet  ss    3.53   116    4.69   110.1    1.1   0.1
---------------------------------------------------------------------------------
$5.0mm 6.810% due Mar 2008       Bullet  ss    3.53   116    4.69   110.3    5.5   0.5
---------------------------------------------------------------------------------
$10.0mm 6.780% due Mar 2008      Bullet  ss    3.53   116    4.69   110.1   11.0   1.0
---------------------------------------------------------------------------------
$4.0mm 6.730% due May 2008       Bullet  ss    3.53   116    4.69   110.1    4.4   0.4
---------------------------------------------------------------------------------
$2.0mm 7.680% due Aug 2016       Bullet  ss    4.30   134    5.64   119.6    2.4   0.4
---------------------------------------------------------------------------------
$50.0mm 6.190% due Jan 2006      Bullet  ss    2.79    98    3.77   107.6   53.8   3.8
---------------------------------------------------------------------------------
$15.0mm 6.180% due Jan 2006      Bullet  ss    2.79    98    3.77   107.5   16.1   1.1
---------------------------------------------------------------------------------
$1.0mm 7.150% due May 2007       Bullet  ss    3.22   102    4.24   112.4    1.1   0.1
---------------------------------------------------------------------------------
$20.0mm 6.000% due Jan 2003      Bullet  ss    1.63    28    1.91   101.5   20.3   0.3         0.3          0.3       0.0         -
---------------------------------------------------------------------------------
$30.0mm 6.630% due Jun 2003      Bullet  su    1.67    20    1.87   103.5   31.1   1.1
---------------------------------------------------------------------------------
$3.3mm 6.300% due Aug 2005       Bullet  ss    2.58    65    3.23   108.6    3.5   0.3
---------------------------------------------------------------------------------
$2.0mm 6.290% due Jul 2005       Bullet  ss    2.58    65    3.23   108.4    2.2   0.2
---------------------------------------------------------------------------------
$1.5mm 6.350% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    1.6   0.1
---------------------------------------------------------------------------------
$1.0mm 6.350% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    1.1   0.1
---------------------------------------------------------------------------------
$1.5mm 6.300% due Jul 2005       Bullet  ss    2.58    65    3.23   108.4    1.6   0.1
---------------------------------------------------------------------------------
$1.1mm 6.330% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    1.2   0.1
---------------------------------------------------------------------------------
$2.5mm 6.340% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    2.7   0.2
---------------------------------------------------------------------------------
$2.2mm 6.350% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    2.3   0.2
---------------------------------------------------------------------------------
$2.0mm 6.380% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    2.2   0.2
---------------------------------------------------------------------------------
$11.0mm 6.400% due Jul 2005      Bullet  ss    2.58    65    3.23   108.6   11.9   0.9
---------------------------------------------------------------------------------
$10.0mm 7.160% due Jan 2003      Bullet  ss    1.63    28    1.91   102.1   10.2   0.2         0.2          0.2       0.0         -
---------------------------------------------------------------------------------
$8.0mm 7.190% due Jan 2003       Bullet  ss    1.63    28    1.91   102.1    8.2   0.2         0.2          0.2       0.0         -
---------------------------------------------------------------------------------
$2.0mm 7.200% due Jan 2003       Bullet  ss    1.63    28    1.91   102.1    2.0   0.0         0.0          0.0       0.0         -
---------------------------------------------------------------------------------
$2.0mm 6.650% due Mar 2005       Bullet  ss    2.46    43    2.89   109.2    2.2   0.2
---------------------------------------------------------------------------------
$10.0mm 6.670% due Mar 2005      Bullet  ss    2.46    43    2.89   109.3   10.9   0.9
---------------------------------------------------------------------------------
$9.0mm 7.150% due May 2004       Bullet  ss    1.96    31    2.27   108.3    9.7   0.7
---------------------------------------------------------------------------------
$5.0mm 7.520% due Apr 2007       Bullet  su    3.22    24    3.46   117.1    5.9   0.9
---------------------------------------------------------------------------------
$10.0mm 7.500% due Apr 2007      Bullet  su    3.22    24    3.46   117.0   11.7   1.7
---------------------------------------------------------------------------------
                                                                    106.5  681.6  41.3         8.0          6.0       0.2       1.7
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               1.7 Miscellaneous & Contingency
---------------------------------------------------------------------------------
                                                                                               9.7
------------------------------------------------------------------------------------------------------------------------------------
2002 Retirements
----------------------------------------------------      --------        -------
$20.0mm 6.460%                   Bullet  su                                 20.0
----------------------------------------------------      --------        -------
$5.0mm 7.040%                    Bullet  ss                                  5.0
----------------------------------------------------      --------        -------
$12.45 mm 7.800%                 Pfd     Pfd                               12.45
----------------------------------------------------      --------        -------
$25.0mm 7.010%                   Bullet  ss                                 25.0
----------------------------------------------------      --------        -------
                                                                            62.5
</TABLE>

<PAGE>

<TABLE>
Atlantic City Electric                                                                            CAPITAL REDUCTION COSTS
PV-Based Priority List for Outstanding Long-Term Debt and Preferred Stock                         ASSUMING AUTHORIZED CAPITALIZATION
(Highlighted Securities Included on RAR-12 - Use of Securitization Proceeds)                      RATIOS ARE MAINTAINED
As of August 22, 2002
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Sorted By NPV (%)                              Repurchase Pricing                                     Capital Reduction Costs
                                               -------------------------------------------------------------------------------------
Security Description             Type    Type  UST  Spread   Yield  Price   Cash  Capital    Planned    Tender  Unamortized  Accrued
                                               (%)   (bp)     (%)    (%)    Cost  Reduction  Cap Reduct  $mm     Issuance      Int
                                                                            $mm   Cost $mm   Cost $mm              $mm         $mm
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>    <C>    <C>    <C>    <C>    <C>     <C>    <C>        <C>       <C>       <C>         <C>
$70.00 mm 8.250% QUIPS           Pfd     Pfd    NA    NA      NA    100.0   70.0      -
---------------------------------------------------------------------------------
$0.41 mm 5.000% undated          Pfd     Pfd   5.08   -50    4.58   109.1    0.4    0.0
---------------------------------------------------------------------------------
$2.43 mm 4.000% undated          Pfd     Pfd   5.08   -50    4.58    87.3    2.1   (0.3)
---------------------------------------------------------------------------------
$0.86 mm 4.750% undated          Pfd     Pfd   5.08   -50    4.58   103.6    0.9    0.0
---------------------------------------------------------------------------------
$0.17 mm 4.350% undated          Pfd     Pfd   5.08   -50    4.58    94.9    0.2   (0.0)
---------------------------------------------------------------------------------
$0.31 mm 4.350% undated          Pfd     Pfd   5.08   -50    4.58    94.9    0.3   (0.0)
---------------------------------------------------------------------------------
$2.05 mm 4.100% undated          Pfd     Pfd   5.08   -50    4.58    89.4    1.8   (0.2)
---------------------------------------------------------------------------------
$25.00 mm 7.375% QUIPS           Pfd     Pfd   1.78    50    2.28   105.9   26.5    1.5
---------------------------------------------------------------------------------
$19.5mm 7.980% due May 2004- 02  Call    ss      NA    NA      NA   100.0   19.5      -        0.6         -        0.0         0.5
---------------------------------------------------------------------------------
$10.5mm 7.970% due May 2004- 02  Call    ss      NA    NA      NA   100.0   10.5      -        0.3         -        0.0         0.3
---------------------------------------------------------------------------------
$28.0mm 7.125% due Feb 2004- 03  Call    ss    1.63    28    1.91   102.2   28.6    0.6        1.1       0.6        0.0         0.5
---------------------------------------------------------------------------------
$62.5mm 7.000% due Sep 2023- 03  Call    ss    1.70    29    1.99   107.8   67.3    4.8
---------------------------------------------------------------------------------
$7.0mm 7.630% due Aug 2014       Bullet  ss    4.30   128    5.58   117.8    8.2    1.2        1.3       1.2        0.0         0.0
---------------------------------------------------------------------------------
$68.6mm 6.625% due Aug 2013      Bullet  ss    4.30   125    5.55   108.7   74.6    6.0
---------------------------------------------------------------------------------
$1.0mm 7.250% due Aug 2010       Bullet  ss    4.05   119    5.24   113.0    1.1    0.1
---------------------------------------------------------------------------------
$15.0mm 7.680% due Aug 2015      Bullet  ss    4.30   131    5.61   118.9   17.8    2.8        3.2       2.8        0.1         0.3
---------------------------------------------------------------------------------
$75.0mm 7.000% due Aug 2028- 03  Call    ss    1.67    29    1.96   107.4   80.6    5.6
---------------------------------------------------------------------------------
$5.0mm 6.710% due Jun 2008       Bullet  ss    3.61   116    4.77   109.8    5.5    0.5        0.6       0.5        0.0         0.1
---------------------------------------------------------------------------------
$4.0mm 6.730% due Jun 2008       Bullet  ss    3.61   116    4.77   109.9    4.4    0.4        0.5       0.4        0.0         0.1
---------------------------------------------------------------------------------
$11.0mm 6.750% due May 2008      Bullet  ss    3.53   116    4.69   110.2   12.1    1.1
---------------------------------------------------------------------------------
$10.0mm 6.750% due May 2008      Bullet  ss    3.53   116    4.69   110.2   11.0    1.0
---------------------------------------------------------------------------------
$1.0mm 6.770% due Apr 2008       Bullet  ss    3.53   116    4.69   110.1    1.1    0.1
---------------------------------------------------------------------------------
$5.0mm 6.810% due Mar 2008       Bullet  ss    3.53   116    4.69   110.3    5.5    0.5        0.6       0.5        0.0         0.1
---------------------------------------------------------------------------------
$10.0mm 6.780% due Mar 2008      Bullet  ss    3.53   116    4.69   110.1   11.0    1.0
---------------------------------------------------------------------------------
$4.0mm 6.730% due May 2008       Bullet  ss    3.53   116    4.69   110.1    4.4    0.4
---------------------------------------------------------------------------------
$2.0mm 7.680% due Aug 2016       Bullet  ss    4.30   134    5.64   119.6    2.4    0.4        0.4       0.4        0.0         0.0
---------------------------------------------------------------------------------
$50.0mm 6.190% due Jan 2006      Bullet  ss    2.79    98    3.77   107.6   53.8    3.8
---------------------------------------------------------------------------------
$15.0mm 6.180% due Jan 2006      Bullet  ss    2.79    98    3.77   107.5   16.1    1.1
---------------------------------------------------------------------------------
$1.0mm 7.150% due May 2007       Bullet  ss    3.22   102    4.24   112.4    1.1    0.1
---------------------------------------------------------------------------------
$20.0mm 6.000% due Jan 2003      Bullet  ss    1.63    28    1.91   101.5   20.3    0.3        0.3       0.3        0.0           -
---------------------------------------------------------------------------------
$30.0mm 6.630% due Jun 2003      Bullet  su    1.67    20    1.87   103.5   31.1    1.1
---------------------------------------------------------------------------------
$3.3mm 6.300% due Aug 2005       Bullet  ss    2.58    65    3.23   108.6    3.5    0.3
---------------------------------------------------------------------------------
$2.0mm 6.290% due Jul 2005       Bullet  ss    2.58    65    3.23   108.4    2.2    0.2
---------------------------------------------------------------------------------
$1.5mm 6.350% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    1.6    0.1
---------------------------------------------------------------------------------
$1.0mm 6.350% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    1.1    0.1
---------------------------------------------------------------------------------
$1.5mm 6.300% due Jul 2005       Bullet  ss    2.58    65    3.23   108.4    1.6    0.1
---------------------------------------------------------------------------------
$1.1mm 6.330% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    1.2    0.1
---------------------------------------------------------------------------------
$2.5mm 6.340% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    2.7    0.2
---------------------------------------------------------------------------------
$2.2mm 6.350% due Jul 2005       Bullet  ss    2.58    65    3.23   108.5    2.3    0.2
---------------------------------------------------------------------------------
$2.0mm 6.380% due Aug 2005       Bullet  ss    2.58    65    3.23   108.7    2.2    0.2
---------------------------------------------------------------------------------
$11.0mm 6.400% due Jul 2005      Bullet  ss    2.58    65    3.23   108.6   11.9    0.9
---------------------------------------------------------------------------------
$10.0mm 7.160% due Jan 2003      Bullet  ss    1.63    28    1.91   102.1   10.2    0.2        0.2       0.2        0.0           -
---------------------------------------------------------------------------------
$8.0mm 7.190% due Jan 2003       Bullet  ss    1.63    28    1.91   102.1    8.2    0.2        0.2       0.2        0.0           -
---------------------------------------------------------------------------------
$2.0mm 7.200% due Jan 2003       Bullet  ss    1.63    28    1.91   102.1    2.0    0.0        0.0       0.0        0.0           -
---------------------------------------------------------------------------------
$2.0mm 6.650% due Mar 2005       Bullet  ss    2.46    43    2.89   109.2    2.2    0.2
---------------------------------------------------------------------------------
$10.0mm 6.670% due Mar 2005      Bullet  ss    2.46    43    2.89   109.3   10.9    0.9
---------------------------------------------------------------------------------
$9.0mm 7.150% due May 2004       Bullet  ss    1.96    31    2.27   108.3    9.7    0.7
---------------------------------------------------------------------------------
$5.0mm 7.520% due Apr 2007       Bullet  su    3.22    24    3.46   117.1    5.9    0.9
---------------------------------------------------------------------------------
$10.0mm 7.500% due Apr 2007      Bullet  su    3.22    24    3.46   117.0   11.7    1.7
---------------------------------------------------------------------------------
                                                                    106.5  681.6   41.3        9.4       7.2        0.3         1.9
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               0.3 Miscellaneous & Contingency
---------------------------------------------------------------------------------
                                                                                               9.7
------------------------------------------------------------------------------------------------------------------------------------
2002 Retirements
----------------------------------------------------      --------        -------
$20.0mm 6.460%                   Bullet  su                                 20.0
----------------------------------------------------      --------        -------
$5.0mm 7.040%                    Bullet  ss                                  5.0
----------------------------------------------------      --------        -------
$12.45 mm 7.800%                 Pfd     Pfd                               12.45
----------------------------------------------------      --------        -------
$25.0mm 7.010%                   Bullet  ss                                 25.0
----------------------------------------------------      --------        -------
                                                                            62.5

</TABLE>

<PAGE>

Atlantic City Electric Company                                         Exhibit A
Net Present Value
 of Securitization Savings
<TABLE>
<CAPTION>
                                    ($000's)
                           Table 1 - No Securitization
                                     Rev Req
                                                                                      Combined 15 Year
                                                                    Combined 15 Year  Nuclear/ 20 Year
         Nuclear - 15 Year     NUGS - 15 Year      NUGS - 20 Year     Nuclear/NUG           NUG
     -------------------------------------------------------------------------------------------------
 Year
<S>          <C>                 <C>                 <C>              <C>               <C>
   1         $  67,770           $  21,941           $  18,946        $    89,711       $    86,716
   2         $  65,341           $  21,941           $  18,946        $    87,281       $    84,286
   3         $  62,911           $  21,941           $  18,946        $    84,852       $    81,857
   4         $  60,481           $  21,941           $  18,946        $    82,422       $    79,427
   5         $  58,052           $  21,941           $  18,946        $    79,992       $    76,998
   6         $  55,622           $  21,941           $  18,946        $    77,563       $    74,568
   7         $  53,193           $  21,941           $  18,946        $    75,133       $    72,138
   8         $  50,763           $  21,941           $  18,946        $    72,704       $    69,709
   9         $  48,333           $  21,941           $  18,946        $    70,274       $    67,279
  10         $  45,904           $  21,941           $  18,946        $    67,844       $    64,850
  11         $  43,474           $  21,941           $  18,946        $    65,415       $    62,420
  12         $  41,045           $  21,941           $  18,946        $    62,985       $    59,990
  13         $  38,615           $  21,941           $  18,946        $    60,556       $    57,561
  14         $  36,186           $  21,941           $  18,946        $    58,126       $    55,131
  15         $  33,756           $  21,941           $  18,946        $    55,697       $    52,702
  16         $       -           $       -           $  18,946        $         -       $    18,946
  17         $       -           $       -           $  18,946        $         -       $    18,946
  18         $       -           $       -           $  18,946        $         -       $    18,946
  19         $       -           $       -           $  18,946        $         -       $    18,946
  20         $       -           $       -           $  18,946        $         -       $    18,946
     -------------------------------------------------------------------------------------------------
             $ 761,446           $ 329,109           $ 378,915        $ 1,090,555       $ 1,140,361
     =================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                    ($000's)
                  Table 2 - Securitization Transaction Options
                                     Rev Req
                                                                                      Combined 15 Year
                                                                    Combined 15 Year  Nuclear/ 20 Year
         Nuclear - 15 Year     NUGS - 15 Year      NUGS - 20 Year     Nuclear/NUG           NUG
     -------------------------------------------------------------------------------------------------
Year
<S>          <C>                 <C>                 <C>              <C>               <C>
   1         $  44,297           $  22,275           $  17,981        $  66,573         $    62,635
   2         $  37,122           $  18,663           $  15,035        $  55,785         $    52,447
   3         $  39,637           $  19,923           $  16,030        $  59,560         $    55,971
   4         $  40,137           $  20,170           $  16,206        $  60,308         $    56,643
   5         $  41,002           $  20,601           $  16,532        $  61,603         $    57,833
   6         $  41,815           $  21,005           $  16,840        $  62,820         $    58,953
   7         $  42,449           $  21,320           $  17,099        $  63,769         $    59,845
   8         $  43,119           $  21,653           $  17,374        $  64,772         $    60,790
   9         $  43,798           $  21,990           $  17,656        $  65,787         $    61,751
  10         $  44,389           $  22,284           $  17,916        $  66,673         $    62,602
  11         $  45,012           $  22,594           $  18,190        $  67,606         $    63,499
  12         $  45,666           $  22,919           $  18,480        $  68,585         $    64,443
  13         $  46,314           $  23,241           $  18,771        $  69,554         $    65,375
  14         $  46,819           $  23,492           $  19,010        $  70,312         $    66,080
  15         $  47,361           $  23,761           $  19,269        $  71,122         $    66,841
  16         $  (5,177)          $  (2,591)          $  20,232        $  (7,768)        $    11,983
  17         $       -           $       -           $  20,560        $       -         $    21,213
  18         $       -           $       -           $  20,821        $       -         $    20,075
  19         $       -           $       -           $  21,157        $       -         $    20,630
  20         $       -           $       -           $  21,492        $       -         $    20,930
  21                                                 $  (2,507)                         $    (3,839)
     -------------------------------------------------------------------------------------------------
             $ 643,761           $ 323,299           $ 364,145        $ 967,060         $ 1,006,700
     =================================================================================================
</TABLE>

                                   Page 1 of 3
<PAGE>

<TABLE>
<CAPTION>
                                    ($000's)
                        Table 3 - Securitization Savings
                                                                                      Combined 15 Year
                                                                    Combined 15 Year  Nuclear/ 20 Year
         Nuclear - 15 Year     NUGS - 15 Year      NUGS - 20 Year     Nuclear/NUG           NUG
     -------------------------------------------------------------------------------------------------
Year
<S>          <C>                 <C>                 <C>              <C>               <C>
   1         $  23,473           $   (335)           $    965         $  23,138         $  24,081
   2         $  28,219           $  3,278            $  3,911         $  31,497         $  31,840
   3         $  23,274           $  2,017            $  2,915         $  25,291         $  25,886
   4         $  20,344           $  1,770            $  2,739         $  22,114         $  22,784
   5         $  17,049           $  1,340            $  2,414         $  18,389         $  19,165
   6         $  13,807           $    936            $  2,105         $  14,743         $  15,615
   7         $  10,743           $    621            $  1,847         $  11,364         $  12,293
   8         $   7,644           $    288            $  1,572         $   7,932         $   8,919
   9         $   4,536           $    (49)           $  1,290         $   4,487         $   5,529
  10         $   1,515           $   (343)           $  1,030         $   1,172         $   2,248
  11         $  (1,538)          $   (653)           $    755         $  (2,191)        $  (1,079)
  12         $  (4,621)          $   (978)           $    465         $  (5,599)        $  (4,453)
  13         $  (7,699)          $ (1,300)           $    175         $  (8,999)        $  (7,814)
  14         $ (10,634)          $ (1,551)           $    (65)        $ (12,185)        $ (10,949)
  15         $ (13,605)          $ (1,821)           $   (323)        $ (15,426)        $ (14,139)
  16         $   5,177           $  2,591            $ (1,287)        $   7,768         $   6,963
  17         $       -           $      -            $ (1,614)        $       -         $  (2,267)
  18         $       -           $      -            $ (1,875)        $       -         $  (1,130)
  19         $       -           $      -            $ (2,211)        $       -         $  (1,684)
  20         $       -           $      -            $ (2,546)        $       -         $  (1,985)
  21         $       -           $      -            $  2,507         $       -         $   3,839
     -------------------------------------------------------------------------------------------------
             $ 117,685           $  5,809            $ 14,770         $ 123,495         $ 133,662
     =================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                    ($000's)
                              Table 4 - NPV@ 7.76%
                                                                                      Combined 15 Year
                                                                    Combined 15 Year  Nuclear/ 20 Year
         Nuclear - 15 Year     NUGS - 15 Year      NUGS - 20 Year     Nuclear/NUG           NUG
     -------------------------------------------------------------------------------------------------
Year
<S>          <C>                 <C>                 <C>              <C>               <C>
   1         $  21,783           $  (311)            $    895         $  21,473         $  22,348
   2         $  24,303           $ 2,823             $  3,368         $  27,126         $  27,421
   3         $  18,602           $ 1,612             $  2,330         $  20,214         $  20,689
   4         $  15,090           $ 1,313             $  2,032         $  16,403         $  16,899
   5         $  11,736           $   922             $  1,662         $  12,658         $  13,192
   6         $   8,820           $   598             $  1,345         $   9,418         $   9,975
   7         $   6,369           $   368             $  1,095         $   6,737         $   7,288
   8         $   4,205           $   158             $    865         $   4,364         $   4,907
   9         $   2,316           $   (25)            $    658         $   2,291         $   2,823
  10         $     718           $  (163)            $    488         $     555         $   1,065
  11         $    (676)          $  (287)            $    332         $    (963)        $    (475)
  12         $  (1,886)          $  (399)            $    190         $  (2,285)        $  (1,817)
  13         $  (2,915)          $  (492)            $     66         $  (3,408)        $  (2,959)
  14         $  (3,737)          $  (545)            $    (23)        $  (4,282)        $  (3,848)
  15         $  (4,437)          $  (594)            $   (105)        $  (5,031)        $  (4,611)
  16         $   1,567           $   784             $   (389)        $   2,351         $   2,107
  17         $       -           $     -             $   (453)        $       -         $    (637)
  18         $       -           $     -             $   (489)        $       -         $    (294)
  19         $       -           $     -             $   (535)        $       -         $    (407)
  20         $       -           $     -             $   (572)        $       -         $    (446)
  21         $       -           $     -             $    522         $       -         $     800
     -------------------------------------------------------------------------------------------------
             $ 101,856           $ 5,763             $ 13,283         $ 107,619         $ 114,020
     =================================================================================================
</TABLE>

                                   Page 2 of 3

<PAGE>

Exhibit A
Atlantic City Electric Company
Net Present Value
 of Securitization Savings

Assumptions

1. Capital Structure Used for Nuclear Non-Securitization Analysis

<TABLE>
<CAPTION>
                                          Coupon         Rate Making
                          3/31/2002       Nominal          Weighted    Pre-Tax    AfterTax
Capital Structure        Percentage        Cost              Cost        WACC       Cost
---------------------------------------------------------------------------------------------
<S>                       <C>             <C>               <C>         <C>         <C>
Debt                       49.38%          6.76%     A      3.34%        3.34%      1.97%
Senior Equity               7.90%          8.61%     B      0.68%        0.74%      0.44%
Common Equity              42.73%         12.50%     B      5.34%        9.03%      5.34%
                                                         ----------   ----------  ----------
Total Capital Cost        100.00%                           9.36%       13.11%      7.76%
                                                         ----------   ----------  ----------

Federal Tax Rate                          40.00%
State Tax Rate                             9.00%
                                      ----------
Effective Tax Rate                        40.85%
                                      ----------
</TABLE>

Notes
A - cost rate of debt
B - these costs are actually after tax since they are set by NJBPU

2. Debt Rates Used for NUG Non-Securitization Analysis

Assumptions:
                     Recovery Period (yrs.)                       20
                     Principal Amount                       $142,887
                     After Tax 20 yr. Debt Rate                4.73%
                     Pre Tax 20 yr. Debt Rate                  8.00%

Assumptions:
                     Recovery Period (yrs.)                       15
                     Principal Amount                       $142,887
                     After Tax 15 yr. Debt Rate                4.14%
                     Pre Tax 15 yr. Debt Rate                  7.00%

3. Securitization Assumptions

Duration Weighted Coupon:
15 yr Nuclear/ 20 yr NUG Contract         5.62%

                                  Page 3 of 3

<PAGE>

Exhibit B Debt Design

Debt Design Variables:

Original Principal                                                   440,000,000
Overcollateralization                           0.50%                  2,200,000
Issuance Costs                                                        19,167,000
Use of Funds Cost - Deductible                                                 0
Use of Funds Cost - Non-Deductible                                             0
SPE Equity                                      0.50%                  2,200,000
Federal Income Tax Rate                                                   35.00%
State Income Tax Rate                                                      9.00%
Trustee & Other Fees (Admin Fees)                                        350,000
Servicing Fee (Annual)                                                     0.10%
Interest Rate                                                              5.62%

<TABLE>
<CAPTION>
               1                  2                3                        4                 5               6            7
           TBC Charge         Sales Tax        TBC Charge              TBC Charge
             Billed            Billed            Billed                 Collected                                        Admin
Year  (including Sales Tax)               (excluding Sales Tax)   (excluding Sales Tax)    Interest       Principal       Fees
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>                <C>              <C>                     <C>                <C>            <C>            <C>
  1        48,449,899         2,742,447        45,707,452              41,392,561         22,735,228     17,757,333     350,000
  2        43,889,779         2,484,327        41,405,452              41,602,708         22,032,337     18,670,371     350,000
  3        45,030,386         2,548,890        42,481,496              41,968,279         21,437,789     19,630,489     350,000
  4        45,336,922         2,566,241        42,770,681              42,315,288         20,775,165     20,640,123     350,000
  5        45,746,164         2,589,405        43,156,758              42,688,961         20,087,128     21,701,833     350,000
  6        46,113,686         2,610,209        43,503,478              43,034,035         19,315,722     22,818,313     350,000
  7        46,203,610         2,615,299        43,588,311              43,137,672         18,245,274     23,992,398     350,000
  8        46,282,108         2,619,742        43,662,366              43,210,980         17,083,911     25,227,069     350,000
  9        46,336,645         2,622,829        43,713,816              43,263,919         15,838,458     26,525,461     350,000
 10        46,233,183         2,616,973        43,616,210              43,178,978         14,388,104     27,890,875     350,000
 11        46,115,187         2,610,294        43,504,893              43,069,871         12,843,092     29,326,778     350,000
 12        45,992,107         2,603,327        43,388,780              42,955,317         11,218,494     30,836,824     350,000
 13        45,801,503         2,592,538        43,208,965              42,782,323          9,457,474     32,424,850     350,000
 14        45,325,898         2,565,617        42,760,281              42,359,266          7,364,369     34,094,896     350,000
 15        44,823,284         2,537,167        42,286,117              41,891,933          5,140,720     35,851,213     350,000
 16        11,778,285           666,695        11,111,589              13,438,922          3,138,706      9,400,216     350,000
 17        14,669,371           830,342        13,839,029              13,484,342          2,653,880      9,930,462     350,000
 18        14,283,296           808,488        13,474,808              13,365,883          1,975,265     10,490,619     350,000
 19        14,216,209           804,691        13,411,518              13,279,679          1,297,308     11,082,372     350,000
 20        14,105,477           798,423        13,307,054              13,179,504            571,999     11,707,505     350,000

      ------------------------------------------------------------------------------------------------------------------------------
Total     756,732,999        42,833,943       713,899,055             705,600,424        247,600,424    440,000,000   7,000,000
      ==============================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                         11                  12                 13
                                                                      Aggregate              TBC
               8               9                    10            Customer Charge            per
                                                                    for TBC plus          column 1        MTC -Tax Billed
           Servicing          Over-            Debt Balance           MTC -Tax              above      (including Sales Tax)
Year          Fee       collateralization      Outstanding      (including Sales Tax)
----------------------------------------------------------------------------------------------------------------------------
<S>        <C>              <C>                <C>                 <C>                  <C>                 <C>
                                               440,000,000
  1          440,000          110,000          422,242,667            66,393,266         48,449,899          17,943,367
  2          440,000          110,000          403,572,296            55,593,533         43,889,779          11,703,753
  3          440,000          110,000          383,941,806            59,329,221         45,030,386          14,298,835
  4          440,000          110,000          363,301,684            60,041,946         45,336,922          14,705,024
  5          440,000          110,000          341,599,851            61,302,570         45,746,164          15,556,406
  6          440,000          110,000          318,781,538            62,489,728         46,113,686          16,376,041
  7          440,000          110,000          294,789,140            63,435,975         46,203,610          17,232,365
  8          440,000          110,000          269,562,072            64,437,028         46,282,108          18,154,920
  9          440,000          110,000          243,036,610            65,455,535         46,336,645          19,118,890
 10          440,000          110,000          215,145,736            66,357,746         46,233,183          20,124,563
 11          440,000          110,000          185,818,957            67,309,410         46,115,187          21,194,223
 12          440,000          110,000          154,982,134            68,310,086         45,992,107          22,317,979
 13          440,000          110,000          122,557,284            69,297,016         45,801,503          23,495,513
 14          440,000          110,000           88,462,388            70,045,177         45,325,898          24,719,279
 15          440,000          110,000           52,611,174            70,851,263         44,823,284          26,027,979
 16          440,000          110,000           43,210,958            12,701,924         11,778,285             923,639
 17          440,000          110,000           33,280,495            22,485,641         14,669,371           7,816,270
 18          440,000          110,000           22,789,877            21,279,953         14,283,296           6,996,657
 19          440,000          110,000           11,707,505            21,867,380         14,216,209           7,651,171
 20          440,000          110,000                    0            22,186,227         14,105,477           8,080,750

      ----------------------------------------------------------------------------------------------------------------------
Total      8,800,000        2,200,000                              1,071,170,624        756,732,999         314,437,625
      ======================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                     14               15            16
                                     Total         Total
                                  MTC - Tax      MTC - Tax
              MTC -Tax Related      Billed       Collected
                 Sales Tax        (excluding    (excluding
Year               Billed         Sales Tax)     Sales Tax)
------------------------------------------------------------
<S>              <C>              <C>            <C>
  1               1,015,662        16,927,705     15,329,689
  2                 662,477        11,041,277     11,493,998
  3                 809,368        13,489,467     13,161,458
  4                 832,360        13,872,664     13,702,287
  5                 880,551        14,675,855     14,464,151
  6                 926,946        15,449,096     15,231,478
  7                 975,417        16,256,948     16,028,100
  8               1,027,637        17,127,283     16,884,359
  9               1,082,201        18,036,689     17,781,522
 10               1,139,126        18,985,437     18,717,513
 11               1,199,673        19,994,550     19,711,607
 12               1,263,282        21,054,698     20,756,946
 13               1,329,935        22,165,578     21,852,524
 14               1,399,204        23,320,074     22,991,830
 15               1,473,282        24,554,697     24,207,587
 16                  52,281           871,358      2,716,650
 17                 442,430         7,373,839      6,789,546
 18                 396,037         6,600,620      6,593,831
 19                 433,085         7,218,086      7,096,122
 20                 457,401         7,623,349      7,513,865

      ------------------------------------------------------
Total            17,798,356       296,639,269    293,025,064
      ======================================================
</TABLE>

<PAGE>

Exhibit B TBC Development

<TABLE>
<CAPTION>
                                                      Year 1            Year 2            Year 3            Year 4            Year 5
                                              ---------------   --------------------------------------------------------------------
<S>                                           <C>               <C>               <C>               <C>               <C>
  Principal                                       17,757,333        18,670,371        19,630,489        20,640,123        21,701,833
  Interest                                        22,735,228        22,032,337        21,437,789        20,775,165        20,087,128
  Administration Fees                                350,000           350,000           350,000           350,000           350,000
  Servicing Fees                                     440,000           440,000           440,000           440,000           440,000
  Over-collateralization                             110,000           110,000           110,000           110,000           110,000
                                              ---------------   --------------------------------------------------------------------
A Transition Bond Periodic Payment
  Requirement                                     41,392,561        41,602,708        41,968,279        42,315,288        42,688,961

B Less TBC Billed & Expected to be
  Collected During the Upcoming Period                   N/A         3,858,950         3,244,093         3,327,848         3,349,879

                                              ---------------   --------------------------------------------------------------------
C Transition Bond Debt Service to be
  Collected During the Period                     41,392,561        37,743,759        38,724,186        38,987,440        39,339,082

D True-up Adjustment for Under/(Over)
  Collections of Prior Period                            N/A

                                              ---------------   --------------------------------------------------------------------
E Total TBC to be Billed and Collected
  During the Period                               41,392,561        37,743,759        38,724,186        38,987,440        39,339,082

F Projected Kwh's to be Delivered,
  Billed, & Cash Collected During
  the Period                                   8,935,292,434     9,832,485,684     9,972,043,801    10,108,808,512    10,244,698,489

G TBC Rate per Kwh Before Sales Tax
  ($ per Kwh)                                       0.004632          0.003839          0.003883          0.003857          0.003840

H TBC Rate per Kwh Including Sales Tax
  ($ per Kwh)                                       0.004910          0.004069          0.004116          0.004088          0.004070

  Kwh's Billed                                 9,866,735,480    10,786,379,794    10,939,606,032    11,089,741,336    11,238,899,294
  TBC Charged                                     45,707,452  0     41,405,452        42,481,496        42,770,681        43,156,758

                                                      Year 6            Year 7            Year 8            Year 9           Year 10
                                              --------------------------------------------------------------------------------------
  Principal                                       22,818,313        23,992,398        25,227,069        26,525,461        27,890,875
  Interest                                        19,315,722        18,245,274        17,083,911        15,838,458        14,388,104
  Administration Fees                                350,000           350,000           350,000           350,000           350,000
  Servicing Fees                                     440,000           440,000           440,000           440,000           440,000
  Over-collateralization                             110,000           110,000           110,000           110,000           110,000
                                              --------------------------------------------------------------------------------------
A Transition Bond Periodic Payment
  Requirement                                     43,034,035        43,137,672        43,210,980        43,263,919        43,178,978

B Less TBC Billed & Expected to be
  Collected During the Upcoming Period             3,379,447         3,406,177         3,412,304         3,418,347         3,422,375
                                              --------------------------------------------------------------------------------------
C Transition Bond Debt Service to be
  Collected During the Period                     39,654,589        39,731,495        39,798,675        39,845,573        39,756,604

D True-up Adjustment for Under/(Over)
  Collections of Prior Period
                                              --------------------------------------------------------------------------------------
E Total TBC to be Billed and Collected
  During the Period                               39,654,589        39,731,495        39,798,675        39,845,573        39,756,604

F Projected Kwh's to be Delivered,
  Billed, & Cash Collected During
  the Period                                  10,378,452,082    10,512,278,213    10,642,832,674    10,775,868,083    10,910,566,434

G TBC Rate per Kwh Before Sales Tax
  ($ per Kwh)                                       0.003821          0.003780          0.003739          0.003698          0.003644

H TBC Rate per Kwh Including Sales Tax
  ($ per Kwh)                                       0.004050          0.004006          0.003964          0.003920          0.003862

  Kwh's Billed                                11,385,788,525    11,532,726,004    11,676,048,302    11,821,998,906    11,969,773,892
  TBC Charged                                     43,503,478        43,588,311        43,662,366        43,713,816        43,616,210

                                                     Year 11           Year 12           Year 13           Year 14           Year 15
                                              --------------------------------------------------------------------------------------
  Principal                                       29,326,778        30,836,824        32,424,850        34,094,896        35,851,213
  Interest                                        12,843,092        11,218,494         9,457,474         7,364,369         5,140,720
  Administration Fees                                350,000           350,000           350,000           350,000           350,000
  Servicing Fees                                     440,000           440,000           440,000           440,000           440,000
  Over-collateralization                             110,000           110,000           110,000           110,000           110,000
                                              --------------------------------------------------------------------------------------
A Transition Bond Periodic Payment
  Requirement                                     43,069,871        42,955,317        42,782,323        42,359,266        41,891,933

B Less TBC Billed & Expected to be
  Collected During the Upcoming Period             3,414,733         3,406,018         3,396,928         3,382,850         3,347,722
                                              --------------------------------------------------------------------------------------
C Transition Bond Debt Service to be
  Collected During the Period                     39,655,138        39,549,299        39,385,396        38,976,416        38,544,211

D True-up Adjustment for Under/(Over)
  Collections of Prior Period
                                              --------------------------------------------------------------------------------------
E Total TBC to be Billed and Collected
  During the Period                               39,655,138        39,549,299        39,385,396        38,976,416        38,544,211

F Projected Kwh's to be Delivered,
  Billed, & Cash Collected During
  the Period                                  11,046,948,514    11,185,035,371    11,324,848,313    11,466,408,917    11,609,739,028

G TBC Rate per Kwh Before Sales Tax
  ($ per Kwh)                                       0.003590          0.003536          0.003478          0.003399          0.003320

H TBC Rate per Kwh Including Sales Tax
  ($ per Kwh)                                       0.003805          0.003748          0.003686          0.003603          0.003519

  Kwh's Billed                                12,119,396,066    12,270,888,517    12,424,274,623    12,579,578,056    12,736,822,781
  TBC Charged                                     43,504,893        43,388,780        43,208,965        42,760,281        42,286,117

                                                     Year 16           Year 17           Year 18           Year 19           Year 20
                                              --------------------------------------------------------------------------------------
  Principal                                        9,400,216         9,930,462        10,490,619        11,082,372        11,707,505
  Interest                                         3,138,706         2,653,880         1,975,265         1,297,308           571,999
  Administration Fees                                350,000           350,000           350,000           350,000           350,000
  Servicing Fees                                     440,000           440,000           440,000           440,000           440,000
  Over-collateralization                             110,000           110,000           110,000           110,000           110,000
                                              --------------------------------------------------------------------------------------
A Transition Bond Periodic Payment
  Requirement                                     13,438,922        13,484,342        13,365,883        13,279,679        13,179,504

B Less TBC Billed & Expected to be
  Collected During the Upcoming Period             3,310,600           869,931         1,083,464         1,054,949         1,049,994
                                              --------------------------------------------------------------------------------------
C Transition Bond Debt Service to be
  Collected During the Period                     10,128,323        12,614,411        12,282,420        12,224,731        12,129,510

D True-up Adjustment for Under/(Over)
  Collections of Prior Period
                                              --------------------------------------------------------------------------------------
E Total TBC to be Billed and Collected
  During the Period                               10,128,323        12,614,411        12,282,420        12,224,731        12,129,510

F Projected Kwh's to be Delivered,
  Billed, & Cash Collected During
  the Period                                  11,754,860,766    11,901,796,526    12,050,568,982    12,201,201,095    12,353,716,108

G TBC Rate per Kwh Before Sales Tax
  ($ per Kwh)                                       0.000862          0.001060          0.001019          0.001002          0.000982

H TBC Rate per Kwh Including Sales Tax
  ($ per Kwh)                                       0.000913          0.001123          0.001080          0.001062          0.001041

  Kwh's Billed                                12,896,033,066    13,057,233,480    13,220,448,898    13,385,704,509    13,553,025,816
  TBC Charged                                     11,111,589        13,839,029        13,474,808        13,411,518        13,307,054
</TABLE>

A = Total Annual Transition Bond Debt Service Requirement and Fees Related to
    Debt Service (See Exhibit C-1)
B = TBC revenues billed in the prior period and expected to be collected in
    the current period. (prior period G times kwh's billed during the prior
    period less actual period collections and expected uncollectable accounts)
C = Amount of Total Debt service required to be funded through TBC collections
    during the period.  (A minus B)
D = Amount of Under or (Over) collection of the prior period TBC as computed
    under the methodology described in Exhibit C-3.
E = total amount required to be collected during the upcoming period through the
    TBC (C plus D).
F = Projected kwh's that will be sold, delivered, billed, and collected during
    the upcoming period. This amount is computed by multiplying forecasted kwh
    sales on a monthly basis times a percentage expected to be collected in cash
    each month subsequent to the sale. The collection percentage is developed
    based on historical collection experience inherent in ACE's electric sales.
    See Exhibit C-4.
G = TBC before statutory addition of sales tax (E divided by F).
H = TBC including statutory addition of sales tax (G times 1.06).

<TABLE>
<CAPTION>
                                Kwh's
                                Billed                Year 1            Year 2            Year 3            Year 4            Year 5
                                -----------------------------   --------------------------------------------------------------------

<S>                                           <C>               <C>               <C>               <C>               <C>
                                Residential    3,868,332,873     4,098,874,211     4,133,816,807     4,166,706,316     4,199,181,568
                                Commercial     4,801,738,667     5,440,065,246     5,555,304,365     5,669,370,173     5,782,916,857
                                Industrial     1,196,663,940     1,247,440,337     1,250,484,860     1,253,664,847     1,256,800,869
                                              ---------------   --------------------------------------------------------------------
                                               9,866,735,480    10,786,379,794    10,939,606,032    11,089,741,336    11,238,899,294
                                              ===============   ====================================================================

                                Kwh's
                                Billed                Year 6            Year 7            Year 8            Year 9           Year 10
                                ---------------------------------------------------------------------------------------------------

                                Residential    4,230,102,772     4,260,902,102     4,311,011,773     4,364,899,421     4,419,460,663
                                Commercial     5,896,290,679     6,009,704,973     6,088,130,453     6,164,232,084     6,241,284,985
                                Industrial     1,259,395,074     1,262,118,928     1,276,906,075     1,292,867,401     1,309,028,244
                                              --------------------------------------------------------------------------------------
                                              11,385,788,525    11,532,726,004    11,676,048,302    11,821,998,906    11,969,773,892
                                              ======================================================================================

                                Kwh's
                                Billed               Year 11           Year 12           Year 13           Year 14           Year 15
                                ----------------------------------------------------------------------------------------------------

                                Residential    4,474,703,922     4,530,637,721     4,587,270,692     4,644,611,576     4,702,669,220
                                Commercial     6,319,301,047     6,398,292,310     6,478,270,964     6,559,249,351     6,641,239,968
                                Industrial     1,325,391,097     1,341,958,485     1,358,732,966     1,375,717,129     1,392,913,593
                                              --------------------------------------------------------------------------------------
                                              12,119,396,066    12,270,888,517    12,424,274,623    12,579,578,056    12,736,822,781
                                              ======================================================================================

                                Kwh's
                                Billed               Year 16           Year 17           Year 18           Year 19           Year 20
                                ----------------------------------------------------------------------------------------------------

                                Residential    4,761,452,586     4,820,970,743     4,881,232,877     4,942,248,288     5,004,026,392
                                Commercial     6,724,255,468     6,808,308,661     6,893,412,520     6,979,580,176     7,066,824,928
                                Industrial     1,410,325,013     1,427,954,075     1,445,803,501     1,463,876,045     1,482,174,495
                                              --------------------------------------------------------------------------------------
                                              12,896,033,066    13,057,233,480    13,220,448,898    13,385,704,509    13,553,025,816
                                              ======================================================================================
</TABLE>

                                  Page 1 of 3

<PAGE>

Exhibit B MTC-Tax Charge Development & True-Up

<TABLE>
<CAPTION>
                                                              Year 1          Year 2          Year 3          Year 4          Year 5
                                                     ----------------  -------------------------------------------------------------
<S>                                                  <C>              <C>             <C>             <C>             <C>
A  Forecasted TBC Billed (excluding sales tax)            45,707,452      41,405,452      42,481,496      42,770,681      43,156,758
   (TBC Rate times forecasted kwh sales)

B  Forecasted MTC-Tax Billed (excluding sales tax)        16,927,705      11,041,277      13,489,467      13,872,664      14,675,855
   (MTC-Tax Rate times forecasted kwh sales)
                                                     ----------------  -------------------------------------------------------------
C  Total Taxable Revenue                                  62,635,156      52,446,729      55,970,963      56,643,345      57,832,613

   Less Deductible Expenses:

   Interest on Transition Bonds                           22,735,228      22,032,337      21,437,789      20,775,165      20,087,128
   Amortization of Transition Bond Issuance Expense          958,350         958,350         958,350         958,350         958,350
   Uncollectables                                            624,799         528,959         565,832         576,900         589,175
   Administration and Servicing Fees                         790,000         790,000         790,000         790,000         790,000
   Other                                                           -               -               -               -               -
                                                     ----------------  -------------------------------------------------------------
D  Total Deductions                                       25,108,377      24,309,646      23,751,971      23,100,415      22,424,654

E  Taxable Income                                         37,526,780      28,137,083      32,218,992      33,542,930      35,407,959

F  Tax Rate                                                   40.85%          40.85%          40.85%          40.85%          40.85%
                                                     ----------------  -------------------------------------------------------------
G  Tax Obligation                                         15,329,689      11,493,998      13,161,458      13,702,287      14,464,151

H  Less MTC-Tax Billed and expected to be                                  1,429,158         865,078       1,056,717       1,086,533
     collected during the upcoming period
                                                     ----------------  -------------------------------------------------------------
I  Tax to be billed & collected                           15,329,689      10,064,841      12,296,381      12,645,570      13,377,618

J  Projected kwh's to be delivered, billed and         8,935,292,434   9,832,485,684   9,972,043,801  10,108,808,512  10,244,698,489
     cash collected during the period

K  MTC -Tax Charge before sales tax ($ per kwh)             0.001716        0.001024        0.001233        0.001251        0.001306

L  MTC-Tax Charge including sales tax ($ per kwh)           0.001819        0.001085        0.001307        0.001326        0.001384

                                                              Year 6          Year 7          Year 8          Year 9         Year 10
                                                     -------------------------------------------------------------------------------
A  Forecasted TBC Billed (excluding sales tax)            43,503,478      43,588,311      43,662,366      43,713,816      43,616,210
   (TBC Rate times forecasted kwh sales)

B  Forecasted MTC-Tax Billed (excluding sales tax)        15,449,096      16,256,948      17,127,283      18,036,689      18,985,437
   (MTC-Tax Rate times forecasted kwh sales)
                                                     -------------------------------------------------------------------------------
C  Total Taxable Revenue                                  58,952,573      59,845,259      60,789,649      61,750,505      62,601,647

   Less Deductible Expenses:

   Interest on Transition Bonds                           19,315,722      18,245,274      17,083,911      15,838,458      14,388,104
   Amortization of Transition Bond Issuance Expense          958,350         958,350         958,350         958,350         958,350
   Uncollectables                                            602,142         615,159         624,807         634,880         645,088
   Administration and Servicing Fees                         790,000         790,000         790,000         790,000         790,000
   Other                                                           -               -               -               -               -
                                                     -------------------------------------------------------------------------------
D  Total Deductions                                       21,666,214      20,608,783      19,457,068      18,221,688      16,781,542

E  Taxable Income                                         37,286,359      39,236,476      41,332,581      43,528,817      45,820,105

F  Tax Rate                                                   40.85%          40.85%          40.85%          40.85%          40.85%
                                                     -------------------------------------------------------------------------------
G  Tax Obligation                                         15,231,478      16,028,100      16,884,359      17,781,522      18,717,513

H  Less MTC-Tax Billed and expected to be                  1,149,212       1,209,612       1,272,673       1,340,903       1,412,101
     collected during the upcoming period
                                                     -------------------------------------------------------------------------------
I  Tax to be billed & collected                           14,082,266      14,818,488      15,611,686      16,440,619      17,305,412

J  Projected kwh's to be delivered, billed and        10,378,452,082  10,512,278,213  10,642,832,674  10,775,868,083  10,910,566,434
     cash collected during the period

K  MTC -Tax Charge before sales tax ($ per kwh)             0.001357        0.001410        0.001467        0.001526        0.001586

L  MTC-Tax Charge including sales tax ($ per kwh)           0.001438        0.001494        0.001555        0.001617        0.001681

                                                             Year 11         Year 12         Year 13         Year 14         Year 15
                                                     -------------------------------------------------------------------------------
A  Forecasted TBC Billed (excluding sales tax)            43,504,893      43,388,780      43,208,965      42,760,281      42,286,117
   (TBC Rate times forecasted kwh sales)

B  Forecasted MTC-Tax Billed (excluding sales tax)        19,994,550      21,054,698      22,165,578      23,320,074      24,554,697
   (MTC-Tax Rate times forecasted kwh sales)
                                                     ---------------  --------------------------------------------------------------
C  Total Taxable Revenue                                  63,499,443      64,443,478      65,374,543      66,080,355      66,840,814

   Less Deductible Expenses:

   Interest on Transition Bonds                           12,843,092      11,218,494       9,457,474       7,364,369       5,140,720
   Amortization of Transition Bond Issuance Expense          958,350         958,350         958,350         958,350         958,350
   Uncollectables                                            654,373         664,037         674,168         684,087         692,046
   Administration and Servicing Fees                         790,000         790,000         790,000         790,000         790,000
   Other                                                           -               -               -               -               -
                                                     ---------------  --------------------------------------------------------------
D  Total Deductions                                       15,245,815      13,630,880      11,879,992       9,796,806       7,581,115

E  Taxable Income                                         48,253,628      50,812,597      53,494,552      56,283,549      59,259,699

F  Tax Rate                                                   40.85%          40.85%          40.85%          40.85%          40.85%
                                                     ---------------  --------------------------------------------------------------
G  Tax Obligation                                         19,711,607      20,756,946      21,852,524      22,991,830      24,207,587

H  Less MTC-Tax Billed and expected to be                  1,486,379       1,565,382       1,648,382       1,735,353       1,825,739
     collected during the upcoming period
                                                     ---------------  --------------------------------------------------------------
I  Tax to be billed & collected                           18,225,229      19,191,564      20,204,142      21,256,477      22,381,848

J  Projected kwh's to be delivered, billed and        11,046,948,514  11,185,035,371  11,324,848,313  11,466,408,917  11,609,739,028
     cash collected during the period

K  MTC -Tax Charge before sales tax ($ per kwh)             0.001650        0.001716        0.001784        0.001854        0.001928

L  MTC-Tax Charge including sales tax ($ per kwh)           0.001749        0.001819        0.001891        0.001965        0.002044

                                                             Year 16         Year 17         Year 18         Year 19         Year 20
                                                     ---------------  --------------------------------------------------------------
A  Forecasted TBC Billed (excluding sales tax)            11,111,589      13,839,029      13,474,808      13,411,518      13,307,054
   (TBC Rate times forecasted kwh sales)

B  Forecasted MTC-Tax Billed (excluding sales tax)           871,358       7,373,839       6,600,620       7,218,086       7,623,349
   (MTC-Tax Rate times forecasted kwh sales)
                                                     ---------------  --------------------------------------------------------------
C  Total Taxable Revenue                                  11,982,947      21,212,869      20,075,428      20,629,604      20,930,403

   Less Deductible Expenses:

   Interest on Transition Bonds                            3,138,706       2,653,880       1,975,265       1,297,308         571,999
   Amortization of Transition Bond Issuance Expense          958,350         958,350         958,350         958,350         958,350
   Uncollectables                                            445,586         189,963         210,243         212,780         216,260
   Administration and Servicing Fees                         790,000         790,000         790,000         790,000         790,000
   Other                                                           -               -               -               -               -
                                                     ---------------  --------------------------------------------------------------
D  Total Deductions                                        5,332,641       4,592,193       3,933,858       3,258,437       2,536,609

E  Taxable Income                                          6,650,306      16,620,676      16,141,570      17,371,167      18,393,794

F  Tax Rate                                                   40.85%          40.85%          40.85%          40.85%          40.85%
                                                     ---------------  --------------------------------------------------------------
G  Tax Obligation                                          2,716,650       6,789,546       6,593,831       7,096,122       7,513,865

H  Less MTC-Tax Billed and expected to be                  1,922,399          68,219         577,301         516,766         565,107
     collected during the upcoming period
                                                     ---------------  --------------------------------------------------------------
I  Tax to be billed & collected                              794,251       6,721,327       6,016,530       6,579,356       6,948,758

J  Projected kwh's to be delivered, billed and        11,754,860,766  11,901,796,526  12,050,568,982  12,201,201,095  12,353,716,108
     cash collected during the period

K  MTC -Tax Charge before sales tax ($ per kwh)             0.000068        0.000565        0.000499        0.000539        0.000562

L  MTC-Tax Charge including sales tax ($ per kwh)           0.000072        0.000599        0.000529        0.000572        0.000596
</TABLE>

                                  Page 2 of 3

<PAGE>

Exhibit B MTC-Tax Charge Development & True-Up
Line Item Descriptions

A = Total forecasted taxable revenue from the TBC equal to the TBC rate
    (excluding sales tax) multiplied by forecasted kwh sales for the period.
B = Total forecasted taxable revenue from the MTC - Tax Charge equal to the MTC
    - Tax Rate (excluding sales tax) times forecasted kwh sales for the period.
    Note that this computation is circular since this amount is used in
    developing the MTC - Tax Charge Rate. Therefore the amount of the MTC - Tax
    Charge Rate and the forecasted taxable revenue must be solved simultaneously
    in an iterative computation.
C = Total taxable revenue associated with the transition bonds (A plus B) (See
    Exhibit C-1 of Petition).
D = All deductible expenses associated with the transition bonds (See Exhibit
    C-1 of Petition). Amortization (See Ex. C-1 of Petition.) Amortization of
    transition bond issuance costs equals issuance costs divided by term of the
    transition bonds. Deduction for uncollectable accounts is estimated based on
    historical collection experience.
E = Taxable Income (C minus D).
F = Effective Tax Rate (NJ Corporate Business Tax Rate = 9%, Federal Tax Rate =
    35%).
G = Total Income Tax obligation (E times F).
H = MTC -Tax Charge revenues billed in the prior period and expected to be
    collected in the current period (prior period K times kwh billed during the
    prior period less actual prior period collections and expected uncollectable
    accounts).
I = Amount of Total Income Tax obligation required to be funded through MTC -
    Tax collections during the period.
J = Projected kwh's that will be sold, delivered, billed, and collected during
    the upcoming period. The amount is computed by multiplying forecasted kwh
    sales on a monthly basis times a percentage expected to be collected in cash
    each month subsequent to the sale. The collection percentage is developed
    based on historical collection experience. This methodology takes into
    account the collection lag and uncollectable experience inherent in ACE's
    electric sales (See Exhibit C-4 of the Petition).
K = MTC -Tax Charge Rate before statutory addition of sales tax (I divided by
    J).
L = MTC - Tax Charge Rate including statutory addition of sales tax (K times
    1.06).

                                  Page 3 of 3

<PAGE>

         In the Matter of the Petition of Atlantic City Electric Company
                    for a Bondable Stranded Costs Rate Order
                   in Accordance with N.J.S.A. 48:3-49 et seq.
                           BPU Docket No. EF 01060394

--------------------------------------------------------------------------------

Dr. Fred Grygiel, Chief Economist          Ray Lamboy, DAG
Office of the Economist                    Department of Law & Public Safety
Board of Public Utilities                  Division of Law
Two Gateway Center                         124 Halsey Street, P.O. Box 45029
Newark, NJ 07102                           Newark, NJ 07101
Phone:  (973) 648-3860                     Phone:  (973) 648-4726
Fax:  (973) 648-4410                       Fax:  (973) 648-3879

Mark Beyer, Manager                        Seema M. Singh, Director
Office of the Economist                    Division of Ratepayer Advocate
Board of Public Utilities                  31 Clinton Street, 11th Fl.,
Two Gateway Center                         P.O. Box 46005
Newark, NJ 07102                           Newark, NJ 07101
Phone:  (973) 648-3414                     Phone:  (973) 648-7112
Fax:  (973) 648-4410                       Fax:  (973) 624-1047

Nusha Wyner, Director                      Badrhn Ubushin, Esq.
Division of Energy                         Division of Ratepayer Advocate
Board of Public Utilities                  31 Clinton Street, 11th Fl.,
Two Gateway Center                         P.O. Box 46005
Newark, NJ 07102                           Newark, NJ 07101
Phone:  (973) 648-7290                     Phone:  (973) 648-2690
Fax:  (973) 648-2467                       Fax:  (973) 624-1047

George Riepe                               Stephen B. Genzer, Esq.
Division of Energy                         LeBoeuf, Lamb, Greene & MacRae, LLP
Board of Public Utilities                  One Riverfront Plaza, 6th Floor
Two Gateway Center                         Newark, NJ 07102-5490
Newark, NJ 07102                           Phone:  (973) 643-8000
Phone:  (973) 648-2160                     Fax:  (973) 643-6111
Fax:  (973) 648-2467
                                           Mark L. Mucci, Esq.
Elise Goldblat, SDAG                       LeBoeuf, Lamb, Greene & MacRae, LLP
Department of Law & Public Safety          One Riverfront Plaza, 6th Floor
Division of Law                            Newark, NJ 07102-5490
124 Halsey Street, P.O. Box 45029          Phone:  (973) 643-8000
Newark, NJ 07101                           Fax:  (973) 643-6111
Phone:  (973) 648-3174
Fax:  (973) 648-3879

<PAGE>

Colleen A. Foley, Esq.                     Geoffrey Hurley, Esq.
LeBoeuf, Lamb, Greene & MacRae, LLP        Latham & Watkins
One Riverfront Plaza, 6th Floor            885 Third Avenue
Newark, NJ 07102-5490                      New York, NY  10022
Phone:  (973) 643-6662                     Phone: (212) 906-1243
Fax:  (973) 643-6111
                                           Jack Kattan
Charles F. Morgan                          Morgan Stanley
Manager, Regulatory Restructuring          1585 Broadway
Conectiv Power Delivery                    New York, NY 10036
5100 Harding Highway, Suite 155            Phone: (212) 761-1850
Mays Landing, NJ 08330                     Fax: (212) 761-0872
Phone:  (609) 625-5856
Fax:  (609) 625-5838                       Andrea Zana
                                           Morgan Stanley
Donna Kinzel                               1585 Broadway
Assistant Treasurer                        New York, NY 10036
Conectiv
800 King Street                            David Rush
P.O. Box 231 Wilmington, DE 19899          Bear Stearns & Co., Inc.
Phone: (302) 429-3004                      245 Park Avenue
Fax: (302) 429-3188                        New York, NY 10167

Jay Ziminsky, Finance Manager              James A. Rothschild
Treasury Department                        Rothschild Financial Consulting
Conectiv                                   115 Scarlet Oak Drive
800 King Street                            Wilton, CT  06897
P.O. Box 231 Wilmington, DE 19899
Phone: (302) 429-3115
Fax: (302) 429-3006

Thomas P. Dwyer, Esq.
Special Counsel
Conectiv
800 King Street
P.O. Box 231 Wilmington, DE 19899
Phone: (302) 429-3045
Fax: (302) 429-3188

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