8192--2/26/2010--ATLANTIC_CITY_ELECTRIC

related topics

{gas, price, oil}

{operation, natural, condition}

{cost, contract, operation}

{tax, income, asset}

{competitive, industry, competition}

{control, financial, internal}

{capital, credit, financial}

{debt, indebtedness, cash}

{loss, insurance, financial}

{cost, regulation, environmental}

{financial, litigation, operation}

{provision, law, control}

{personnel, key, retain}

{regulation, change, law}

{condition, economic, financial}

PHI and its subsidiaries are subject to substantial governmental regulation, and unfavorable regulatory treatment could have a negative effect. Pepco may be required to make additional divestiture proceeds gain-sharing payments to customers in the District of Columbia. (PHI and Pepco only) The operating results of the Power Delivery business and the Competitive Energy business fluctuate on a seasonal basis and can be adversely affected by changes in weather. Facilities may not operate as planned or may require significant maintenance expenditures, which could decrease revenues or increase expenses. The transmission facilities of the Power Delivery business are interconnected with the facilities of other transmission facility owners whose actions could have a negative impact on Power Delivery s operations. The cost of compliance with environmental laws, including laws relating to emissions of greenhouse gases, is significant and implementation of new and existing environmental laws may increase operating costs. Failure to retain and attract key skilled professional and technical employees could have an adverse effect on operations. PHI s Competitive Energy business is highly competitive. (PHI only) PHI s Competitive Energy business relies on some generation, transmission, storage, and distribution assets that they do not own or control to deliver wholesale and retail electricity and natural gas and to obtain fuel for their generation facilities. (PHI only) Changes in technology may adversely affect the Power Delivery business and the Competitive Energy business. PHI s risk management procedures may not prevent losses in the operation of its Competitive Energy business. (PHI only) The commodity hedging procedures used by the Competitive Energy business may not protect it from significant losses caused by volatile commodity prices. (PHI only) The operations of the Competitive Energy business can give rise to significant collateral requirements. The inability to fund those requirements may prevent the business from hedging associated price risks or may require curtailment of their operations. (PHI only) PHI and its subsidiaries have significant exposure to counterparty risk. (PHI only) Business operations could be adversely affected by terrorism. Insurance coverage may not be sufficient to cover all casualty losses that the companies might incur. Revenues, profits and cash flows may be adversely affected by economic conditions. The IRS challenge to cross-border energy sale and lease-back transactions entered into by a PHI subsidiary could result in loss of prior and future tax benefits. (PHI only) PHI and its subsidiaries are dependent on access to capital markets and bank funding to satisfy their capital and liquidity requirements. The inability to obtain required financing would have an adverse effect on their respective businesses. PHI has a significant goodwill balance related to its Power Delivery business. A determination that goodwill is impaired could result in a significant charge to earnings. The funding of future defined benefit pension plan and post-retirement benefit plan obligations is based on assumptions regarding the valuation of future benefit obligations and the performance of plan assets. If market performance decreases plan assets or changes in assumptions regarding the valuation of benefit obligations increase their liabilities, PHI, Pepco, DPL or ACE may be required to make significant cash contributions to fund these plans. PHI s cash flow, ability to pay dividends and ability to satisfy debt obligations depend on the performance of its operating subsidiaries. PHI s unsecured obligations are effectively subordinated to the liabilities and the outstanding preferred stock of its subsidiaries. (PHI only) Energy companies are subject to adverse publicity which makes them vulnerable to negative regulatory and litigation outcomes. Provisions of the Delaware General Corporation Law may discourage an acquisition of PHI. (PHI only) Because Pepco is a wholly owned subsidiary of PHI, and each of DPL and ACE is an indirect wholly owned subsidiary of PHI, PHI can exercise substantial control over their dividend policies and businesses and operations. (Pepco, DPL and ACE only)

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8192--2/26/2010--ATLANTIC_CITY_ELECTRIC_CO