(5) SEGMENT INFORMATION

Pepco Holdings' management has identified its operating segments at September 30, 2011 as Power Delivery, Pepco Energy Services and Other Non-Regulated. In the tables below, the Corporate and Other column is included to reconcile the segment data with consolidated data and includes unallocated Pepco Holdings' (parent company) capital costs, such as financing costs. Segment financial information for continuing operations for the three and nine months ended September 30, 2011 and 2010 is as follows:


	Three Months Ended September 30, 2011
	*(millions of dollars)*
	Power Delivery		Pepco Energy Services		Other Non- Regulated			Corporate and Other (a)			PHI Consolidated
Operating Revenue	$	1,329	$	312	$	7		$	(5	)	$	1,643
Operating Expenses (b)		1,167		300		2			(21	)		1,448
Operating Income		162		12		5			16			195
Interest Income		1		1		—			(2	)		—
Interest Expense		53		1		3			7			64
Other Income (Expense)		7		1		(3	)		(1	)		4
Preferred Stock Dividends		—		—		1			(1	)		—
Income Tax Expense (Benefit)		51		5		(7	)		6			55
Net Income from Continuing Operations		66		8		5			1			80
Total Assets (excluding Assets Held For Sale)		11,015		611		1,467			1,475			14,568
Construction Expenditures	$	239	$	4	$	—		$	9		$	252

(a)

Total Assets in this column includes Pepco Holdings' goodwill balance of $1.4 billion, all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit the Power Delivery business. These expenditures are recorded as incurred in the Corporate and Other segment and are allocated to Power Delivery once the assets are placed in service. Additionally, Corporate and Other includes intercompany amounts of $(5) million for Operating Revenue, $(6) million for Operating Expense, $(7) million for Interest Income and $(6) million for Interest Expense.

(b)	Includes depreciation and amortization of $115 million, consisting of $107 million for Power Delivery, $4 million for Pepco Energy Services, and $4 million for Corporate and Other.


	Three Months Ended September 30, 2010
	*(millions of dollars)*
	Power Delivery			Pepco Energy Services		Other Non- Regulated			Corporate and Other (a)			PHI Consolidated
Operating Revenue	$	1,600		$	457	$	15		$	(5	)	$	2,067
Operating Expenses (b) (c)		1,418	(d)		442		—			(5	)		1,855
Operating Income		182			15		15			—			212
Interest Expense		51			3		2			12			68
Other Income (Expense)		6			—		(1	)		1			6
Loss on Extinguishment of Debt		—			—		—			135			135
Preferred Stock Dividends		—			—		1			(1	)		—
Income Tax Expense (Benefit)		61			4		2			(73	)(e)		(6	)
Net Income (Loss) from Continuing Operations		76			8		9			(72	)		21
Total Assets (excluding Assets Held For Sale)		10,569			617		1,524			1,325			14,035
Construction Expenditures	$	181		$	2	$	—		$	4		$	187

(a)

Total Assets in this column includes Pepco Holdings' goodwill balance of $1.4 billion, all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit the Power Delivery business. These expenditures are recorded as incurred in the Corporate and Other segment and are allocated to Power Delivery once the assets are placed in service. Additionally, Corporate and Other includes intercompany amounts of $(5) million for Operating Revenue, $(2) million for Operating Expense, $(6) million for Interest Income, $(5) million for Interest Expense, and $(1) million for Preferred Stock Dividends.

(b)	Includes depreciation and amortization of $104 million, consisting of $97 million for Power Delivery, $5 million for Pepco Energy Services and $2 million for Corporate and Other.

(c)	Includes restructuring charge of $14 million, consisting of $13 million for Power Delivery and $1 million for Corporate and Other.

(d)	Includes $9 million expense related to effects of Pepco divestiture-related claims.

(e)	Includes current state tax benefits resulting from the restructuring of certain Pepco Holdings subsidiaries which have subjected Pepco Holdings to state income taxes in new jurisdictions.


	Nine Months Ended September 30, 2011
	*(millions of dollars)*
	Power Delivery		Pepco Energy Services		Other Non- Regulated			Corporate and Other (a)			PHI Consolidated
Operating Revenue	$	3,671	$	993	$	35		$	(13	)	$	4,686
Operating Expenses (b)		3,255		952		(34	)(c)		(33	)		4,140
Operating Income		416		41		69			20			546
Interest Income		1		1		2			(4	)		—
Interest Expense		155		3		10			21			189
Other Income (Expenses)		23		3		(4	)		1			23
Preferred Stock Dividends		—		—		2			(2	)		—
Income Tax Expense (d)		100		16		25			2			143
Net Income (Loss) from Continuing Operations		185		26		30	(c)		(4	)		237
Total Assets (excluding Assets Held For Sale)		11,015		611		1,467			1,475			14,568
Construction Expenditures	$	603	$	11	$	—		$	25		$	639

(a)

Total Assets in this column includes Pepco Holdings' goodwill balance of $1.4 billion, all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit the Power Delivery business. These expenditures are recorded as incurred in the Corporate and Other segment and are allocated to Power Delivery once the assets are placed in service. Additionally, Corporate and Other includes intercompany amounts of $(13) million for Operating Revenue, $(12) million for Operating Expense, $(17) million for Interest Income, $(15) million for Interest Expense, and $(2) million for Preferred Stock Dividends.

(b)	Includes depreciation and amortization of $325 million, consisting of $301 million for Power Delivery, $13 million for Pepco Energy Services, $1 million for Other Non-Regulated, and $10 million for Corporate and Other.

(c)	Includes $39 million pre-tax ($3 million after-tax) gain from the early termination of cross-border energy leases held in trust.

(d)

Includes tax benefits of $14 million for Power Delivery primarily associated with an interest benefit related to federal tax liabilities and a $22 million reversal of previously recognized tax benefits for Other Non-Regulated associated with the early termination of cross-border energy leases held in trust.


	Nine Months Ended September 30, 2010
	*(millions of dollars)*
	Power Delivery			Pepco Energy Services		Other Non- Regulated			Corporate and Other (a)			PHI Consolidated
Operating Revenue	$	4,011		$	1,480	$	41		$	(10	)	$	5,522
Operating Expenses (b) (c)		3,583	(d)		1,417		3			(17	)		4,986
Operating Income		428			63		38			7			536
Interest Income		1			—		2			(3	)		—
Interest Expense		155			13		9			63			240
Other Income (Expenses)		15			1		(2	)		2			16
Loss on Extinguishment of Debt		—			—		—			135			135
Preferred Stock Dividends		—			—		2			(2	)		—
Income Tax Expense (Benefit)		128	(e)		20		8			(104	)(f)		52
Net Income (Loss) from Continuing Operations		161			31		19			(86	)		125
Total Assets (excluding Assets Held For Sale)		10,569			617		1,524			1,325			14,035
Construction Expenditures	$	526		$	3	$	—		$	22		$	551

(a)

Total Assets in this column includes Pepco Holdings' goodwill balance of $1.4 billion, all of which is allocated to the Power Delivery segment for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit the Power Delivery business. These expenditures are recorded as incurred in the Corporate and Other segment and are allocated to Power Delivery once the assets are placed in service. Additionally, Corporate and Other includes intercompany amounts of $(10) million for Operating Revenue, $(7) million for Operating Expense, $(31) million for Interest Income, $(30) million for Interest Expense, and $(2) million for Preferred Stock Dividends.

(b)	Includes depreciation and amortization of $286 million, consisting of $264 million for Power Delivery, $14 million for Pepco Energy Services, $1 million for Other Non-Regulated and $7 million for Corporate and Other.

(c)	Includes restructuring charge of $14 million, consisting of $13 million for Power Delivery and $1 million for Corporate and Other.

(d)	Includes $11 million expense related to effects of Pepco divestiture-related claims.

(e)	Includes $8 million reversal of accrued interest income on uncertain and effectively settled state income tax positions.

(f)	Includes $14 million of state tax benefits resulting from the restructuring of certain Pepco Holdings subsidiaries, partially offset by a charge of $4 million to write off deferred tax assets related to the Medicare Part D subsidy.

Segment Information

(5) SEGMENT INFORMATION

The company operates its business as one regulated utility segment, which includes all of its services as described above.

Segment Information

(5) SEGMENT INFORMATION

The company operates its business as one regulated utility segment, which includes all of its services as described above.

Segment Information

(5) SEGMENT INFORMATION

The company operates its business as one regulated utility segment, which includes all of its services as described above.