9466--2/27/2007--BALTIMORE_GAS_&_ELECTRIC

related topics

{operation, natural, condition}

{cost, regulation, environmental}

{cost, contract, operation}

{competitive, industry, competition}

{acquisition, growth, future}

{capital, credit, financial}

{gas, price, oil}

{customer, product, revenue}

{financial, litigation, operation}

{cost, operation, labor}

Our merchant energy business may incur substantial costs and liabilities and be exposed to price volatility and counterparty performance risk as a result of its participation in the wholesale energy markets. The operation of power generation facilities, including nuclear facilities, involves significant risks that could adversely affect our financial results. We are subject to numerous environmental laws and regulations that require capital expenditures, increase our cost of operations and may expose us to environmental liabilities. Our generation business may incur substantial costs and liabilities due to its ownership and operation of nuclear generating facilities. We often rely on single suppliers and at times on single customers, exposing us to significant financial risks if either should fail to perform their obligations. Reduced liquidity in the markets in which we operate could impair our ability to appropriately manage the risks of our operations. We may not fully hedge our generation assets, competitive supply or other market positions against changes in commodity prices, and our hedging procedures may not work as planned. The use of derivative contracts by us in the normal course of business could result in financial losses that negatively impact our financial results. We operate in deregulated segments of the electric and gas industries created by federal and state restructuring initiatives. If competitive restructuring of the electric or gas industries is reversed, discontinued, restricted or delayed, our business prospects and financial results could be materially adversely affected. Our financial results may be harmed if transportation and transmission availability is limited or unreliable. Our merchant energy business has contractual obligations to certain customers to provide full requirements service, which makes it difficult to predict and plan for load requirements and may result in increased operating costs to our business. Our financial results may fluctuate on a seasonal and quarterly basis or as a result of severe weather. A downgrade in our credit ratings could negatively affect our ability to access capital and/or operate our wholesale and retail competitive supply businesses. We, and BGE in particular, are subject to extensive state and federal regulation that could affect our operations and costs. Poor market performance will affect our benefit plan and nuclear decommissioning trust asset values, which may adversely affect our liquidity and financial results. War and threats of terrorism and catastrophic events that could result from terrorism may impact our results of operations in unpredictable ways. We are subject to employee workforce factors that could affect our businesses and financial results. Our ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including the effect of increased competition.

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9466--2/27/2007--BALTIMORE_GAS_&_ELECTRIC_CO