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PEPCO HOLDINGS, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (Dollars in Millions, Except Per Share Amounts) (Unaudited)
			Twelve Months Ended June 30, 2003		Pro Forma Adjustments		Pro Forma
OPERATING REVENUES
	Pepco		$   1,530.1		$                -		$  1,530.1
	Conectiv Power Delivery		2,356.5		15.6	(3)	2,372.1
	Conectiv Energy		2,200.4		-		2,200.4
	Pepco Energy Services		1,054.1		-		1,054.1
	Other Non-Regulated		134.8		-		134.8
			7,275.9		15.6		7,291.5
OPERATING EXPENSES
	Fuel and purchased energy		4,601.5		-		4,601.5
	Operation and maintenance		1,410.6		-		1,410.6
	Impairment losses		50.4		-		50.4
	Depreciation and amortization		388.5		7.6	(4)	396.1
	Taxes other than income taxes		259.8		-		259.8
	Deferred electric service costs		13.4		-		13.4
			6,724.2		7.6		6,731.8
OPERATING INCOME			551.7		8.0		559.7
OTHER INCOME (EXPENSES)
	Interest and dividend income		27.8		-		27.8
	Interest expense		(341.0)		(5.2)	(5)	(346.2)
	Loss from equity investments		(14.8)		-		(14.8)
	Other income		22.3		-		22.3
		Total Other (Expenses)	(305.7)		(5.2)		(310.9)
PREFERRED STOCK DIVIDEND     REQUIREMENTS OF SUBSIDIARIES			27.2		-		27.2
INCOME FROM CONTINUING OPERATIONS     BEFORE INCOME TAXES			218.8		2.8		221.6
INCOME TAXES			79.5		1.0	(6)	80.5
INCOME FROM CONTINUING OPERATIONS			139.3		1.8		141.1
EXTRAORDINARY ITEM (net of income taxes of $4.1)			5.9		-		5.9
NET INCOME (LOSS)			$      145.2		$            1.8		$     147.0
AVERAGE COMMON SHARES OUTSTANDING			163.6	(7)	163.6		163.6
BASIC AND DILUTED EARNINGS PER SHARE OF COMMON STOCK			$         0.89		$          0.01		$        0.90

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PEPCO HOLDINGS, INC. AND SUBSIDIARIES PRO FORMA NOTES
In accordance with Article 11 of Regulation S-X, the pro forma adjustments related to the balance sheet were made assuming the transactions were made at the end of the balance sheet period and the adjustments related to the income statement were made assuming the transactions were made at the beginning of the period presented.
(1)	Represents the use of proceeds from the issue of transition bonds to pay off short-term debt of $66.8 million from ACE and $70.0 million from PHI.
(2)	Represents the issue of $152.0 million in Transition Bonds, less the redemption of $15.2 million in long-term debt of ACE from use of proceeds from issue of Transition bonds.
(3)	Represents transition bond charge, a per kWh charge paid by electric transmission and distribution customers. The charge is computed to recover the principal amount of the transition bonds plus interest. Amortization of $7.6 plus interest of $8.0 = $15.6.
(4)	Represents the annual amortization of stranded costs, 152.0 million over 240 months. (152.0 / 240 = .633/month x 12 months = 7.6 million).
(5)	Represents annual interest expense on 152.0 million of long-term debt @5.25%. Transition Bonds, less the interest expense savings from redeeming $66.8 million of ACE short-term debt @1.25%, $15.2 million of long-term ACE debt @7.0%, and $70.0 million of PHI short-term debt @1.25%. 152.0 x 5.25% = 8.0 million 66.8 x 1.25% = (0.8) million 15.2 x 7.0% = (1.1) million 70.0 x 1.25% = (0.9) million      total          5.2 million
(6)	Represents the federal tax impact, at 35%, of (3), (4), and (5).
(7)	Shares outstanding are first reported shares outstanding for PHI Consolidated after the merger.