Debt

12 Months Ended

Dec. 31, 2013

Debt

(10) DEBT

Long-Term Debt

The components of long-term debt are shown in the table below:

		At December 31,
Interest Rate	Maturity	2013		2012
		(millions of dollars)
First Mortgage Bonds
Pepco:
4.95% (a)(b)	2013	$	—	$	200
4.65% (a)(b)	2014		175		175
3.05%	2022		200		200
6.20% (c)(d)	2022		110		110
5.75% (a)(b)	2034		100		100
5.40% (a)(b)	2035		175		175
6.50% (a)(c)	2037		500		500
7.90%	2038		250		250
4.15%	2043		250		—
4.95%	2043		150		—
ACE:
6.63%	2013		—		69
7.63% (e)	2014		7		7
7.68% (e)	2015 - 2016		17		17
7.75%	2018		250		250
6.80% (b)(f)	2021		39		39
4.35%	2021		200		200
4.875% (c)(f)	2029		23		23
5.80% (b)(g)	2034		120		120
5.80% (b)(g)	2036		105		105
DPL:
6.40%	2013		—		250
5.22% (h)	2016		100		100
3.50%	2023		300		—
4.00%	2042		250		250
Total First Mortgage Bonds			3,321		3,140
Unsecured Tax-Exempt Bonds
DPL:
5.40%	2031		78		78
Total Unsecured Tax-Exempt Bonds		$	78	$	78

		At December 31,
Interest Rate	Maturity	2013			2012
		(millions of dollars)
Medium-Term Notes (unsecured)
DPL:
7.56% - 7.58%	2017	$	14		$	14
6.81%	2018		4			4
7.61%	2019		12			12
7.72%	2027		10			10
Total Medium-Term Notes (unsecured)			40			40
ACE Variable Rate Term Loan	2014		100			—
Recourse Debt
PCI:
6.59% - 6.69%	2014		11			11
Notes (secured)
Pepco Energy Services:
5.90% - 7.46%	2017-2024		14			15
Notes (unsecured)
PHI:
2.70%	2015		250			250
5.90%	2016		190			190
6.125%	2017		81			81
7.45%	2032		185			185
DPL:
5.00%	2014		100			100
5.00%	2015		100			100
Total Notes (unsecured)			906			906
Total Long-Term Debt			4,470			4,190
Net unamortized discount			(14	)		(13	)
Current portion of long-term debt			(403	)		(529	)
Total Net Long-Term Debt		$	4,053		$	3,648

(a) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by Pepco.

(b) Represents a series of Collateral First Mortgage Bonds (as defined herein) which must be cancelled and released as security for the issuer’s obligations under the corresponding series of issuer notes (as defined herein) or tax-exempt bonds, at such time as the issuer does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds).

(c) Represents a series of Collateral First Mortgage Bonds which must be cancelled and released as security for the issuer’s obligations under the corresponding series of issuer notes or tax-exempt bonds, at such time as the issuer does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds), except that the issuer may not permit such release of collateral unless the issuer substitutes comparable obligations for such collateral.

(d) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by Pepco, which in turn secures a series of tax-exempt bonds issued for the benefit of Pepco.

(e) Represents a series of Collateral First Mortgage Bonds securing a series of medium term notes issued by ACE.

(f) Represents a series of Collateral First Mortgage Bonds securing a series of tax-exempt bonds issued for the benefit of ACE.

(g) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by ACE.

(h) Represents a series of Collateral First Mortgage Bonds securing a series of debt securities issued by DPL.

The outstanding first mortgage bonds issued by each of Pepco, DPL and ACE are issued under a mortgage and deed of trust and are secured by a first lien on substantially all of the issuing company’s property, plant and equipment, except for certain property excluded from the lien of the respective mortgage.

PHI’s long-term debt is subject to certain covenants. As of December 31, 2013, PHI and its subsidiaries were in compliance with all such covenants.

The table above does not separately identify $1,060 million, $100 million and $249 million in aggregate principal amount of senior notes, medium term notes and other debt securities (issuer notes) issued by each of Pepco, DPL and ACE, respectively, and $110 million and $62 million in aggregate principal amount of tax-exempt bonds issued for the benefit of Pepco and ACE, respectively. These issuer notes are secured by a like amount of first mortgage bonds (Collateral First Mortgage Bonds) of each respective issuer. In addition, these tax-exempt bonds are secured by a like amount of Collateral First Mortgage Bonds issued by the utility subsidiary for whose benefit the tax-exempt bonds were issued. The principal terms of each such series of issuer notes, or the issuer’s obligations in respect of each such series of tax-exempt bonds, are identical to the same terms of the corresponding series of Collateral First Mortgage Bonds. Payments of principal and interest made on a series of such issuer notes, or the satisfaction of the issuer’s obligations in respect of a series of such tax-exempt bonds, satisfy the corresponding obligations on the related series of Collateral First Mortgage Bonds. For these reasons, each such series of Collateral First Mortgage Bonds and the corresponding issuer notes and/or tax-exempt bonds together effectively represent a single financial obligation and are not identified in the table above separately.

Bond Issuances

During 2013, Pepco issued $250 million of 4.15% first mortgage bonds due March 15, 2043 and $150 million of 4.95% first mortgage bonds due November 15, 2043. Net proceeds from the issuance of the 4.15% bonds were used to repay Pepco’s outstanding commercial paper and for general corporate purposes. The net proceeds from the 4.95% bonds were used to repay outstanding commercial paper, including commercial paper issued to repay in full at maturity $200 million of Pepco’s 4.95% senior notes due November 15, 2013, plus accrued but unpaid interest thereon. The senior notes were secured by a like principal amount of Pepco’s first mortgage bonds, which under Pepco’s Mortgage and Deed of Trust were deemed to be satisfied with the repayment of the senior notes.

During 2013, DPL issued $300 million of 3.50% first mortgage bonds due November 15, 2023. The net proceeds from the issuance of the long-term debt were used to repay at maturity $250 million of DPL’s 6.40% first mortgage bonds, plus accrued but unpaid interest thereon, to repay outstanding commercial paper and for general corporate purposes.

Bond Redemptions

During 2013, Pepco repaid at maturity $200 million of its 4.95% senior notes, which were secured by a like principal amount of its first mortgage bonds as previously discussed.

During 2013, DPL repaid at maturity $250 million of its 6.40% first mortgage bonds.

During 2013, ACE repaid at maturity $69 million of its 6.63% non-callable first mortgage bonds. ACE also funded the redemption, prior to maturity, of $4 million of outstanding weekly variable rate pollution control revenue refunding bonds due 2017, issued by the Pollution Control Financing Authority of Salem County, New Jersey for ACE’s benefit.

ACE Term Loan Agreement

On May 10, 2013, ACE entered into a $100 million term loan agreement, pursuant to which ACE has borrowed (and may not re-borrow) $100 million at a rate of interest equal to the prevailing Eurodollar rate, which is determined by reference to the London Interbank Offered Rate (LIBOR) with respect to the relevant interest period, all as defined in the loan agreement, plus a margin of 0.75%. ACE’s Eurodollar borrowings under the loan agreement may be converted into floating rate loans under certain circumstances, and, in that event, for so long as any loan remains a floating rate loan, interest would accrue on that loan at a rate per year equal to (i) the highest of (a) the prevailing prime rate, (b) the federal funds effective rate plus 0.5%, or (c) the one-month Eurodollar rate plus 1%, plus (ii) a margin of 0.75%. As of December 31, 2013, outstanding borrowings under the loan agreement bore interest at an annual rate of 0.92%, which is subject to adjustment from time to time. All borrowings under the loan agreement are unsecured, and the aggregate principal amount of all loans, together with any accrued but unpaid interest due under the loan agreement, must be repaid in full on or before November 10, 2014.

Under the terms of the term loan agreement, ACE must maintain compliance with specified covenants, including (i) the requirement that ACE maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the loan agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) a restriction on sales or other dispositions of assets, other than certain permitted sales and dispositions, and (iii) a restriction on the incurrence of liens (other than liens permitted by the loan agreement) on the assets of ACE. The loan agreement does not include any rating triggers. ACE was in compliance with all covenants under this loan agreement as of December 31, 2013.

Transition Bonds Issued by ACE Funding

The components of transition bonds are shown in the table below:

			At December 31,
Interest Rate	Maturity		2013			2012
			(millions of dollars)
4.46%		2016	$	8		$	19
4.91%		2017		46			75
5.05%		2020		54			54
5.55%		2023		147			147
Total Transition Bonds				255			295
Net unamortized discount				—			—
Current portion of long-term debt				(41	)		(39	)
Total Net Long-Term Transition Bonds			$	214		$	256

For a description of the Transition Bonds, see Note (16), “Variable Interest Entities – ACE Funding.”

Maturities of PHI’s long-term debt and Transition Bonds outstanding at December 31, 2013 are $444 million in 2014, $409 million in 2015, $338 million in 2016, $133 million in 2017, $286 million in 2018 and $3,115 million thereafter.

Long-Term Project Funding

As of December 31, 2013 and 2012, Pepco Energy Services had total outstanding long-term project funding (including current maturities) of $12 million and $13 million, respectively, related to energy savings contracts performed by Pepco Energy Services. The aggregate amounts of maturities for the project funding debt outstanding at December 31, 2013, are $2 million for 2014, $2 million for 2015, $1 million for each year 2016 and 2017, $2 million for 2018, and $4 million thereafter.

Short-Term Debt

PHI and its regulated utility subsidiaries have traditionally used a number of sources to fulfill short-term funding needs, such as commercial paper, short-term notes, and bank lines of credit. Proceeds from short-term borrowings are used primarily to meet working capital needs, but may also be used to temporarily fund long-term capital requirements. The components of PHI’s short-term debt at December 31, 2013 and 2012 are as follows:

	2013		2012
	(millions of dollars)
Commercial paper	$	442	$	637
Variable rate demand bonds		123		128
Term loan agreement		—		200
Total	$	565	$	965

Commercial Paper

PHI, Pepco, DPL and ACE maintain ongoing commercial paper programs to address short-term liquidity needs. As of December 31, 2013, the maximum capacity available under these programs was $875 million, $500 million, $500 million and $350 million, respectively, subject to available borrowing capacity under the credit facility.

PHI, Pepco, DPL and ACE had $24 million, $151 million, $147 million and $120 million, respectively, of commercial paper outstanding at December 31, 2013. The weighted average interest rate for commercial paper issued by PHI, Pepco, DPL and ACE during 2013 was 0.70%, 0.34%, 0.29% and 0.31%, respectively. The weighted average maturity of all commercial paper issued by PHI, Pepco, DPL and ACE during 2013 was five, five, three and four days, respectively.

PHI, Pepco, DPL and ACE had $264 million, $231 million, $32 million and $110 million, respectively, of commercial paper outstanding at December 31, 2012. The weighted average interest rate for commercial paper issued by PHI, Pepco, DPL and ACE during 2012 was 0.87%, 0.43%, 0.43% and 0.41%, respectively. The weighted average maturity of all commercial paper issued by PHI, Pepco, DPL and ACE in 2012 was ten, five, four and three days, respectively.

Variable Rate Demand Bonds

PHI’s utility subsidiaries DPL and ACE, each have outstanding obligations in respect of Variable Rate Demand Bonds (VRDB). VRDBs are subject to repayment on the demand of the holders and, for this reason, are accounted for as short-term debt in accordance with GAAP. However, bonds submitted for purchase are remarketed by a remarketing agent on a best efforts basis. PHI expects that any bonds submitted for purchase will be remarketed successfully due to the creditworthiness of the issuer and, as applicable, the credit support, and because the remarketing resets the interest rate to the then-current market rate. The bonds may be converted to a fixed-rate, fixed-term option to establish a maturity which corresponds to the date of final maturity of the bonds. On this basis, PHI views VRDBs as a source of long-term financing. As of December 31, 2013, $105 million of VRDBs issued on behalf of DPL (of which $72 million were secured by Collateral First Mortgage Bonds issued by DPL) and $18 million of VRDBs issued on behalf of ACE were outstanding.

The VRDBs outstanding at December 31, 2013 mature as follows: 2014 to 2017 ($44 million), 2024 ($33 million) and 2028 to 2029 ($46 million). The weighted average interest rate for VRDBs was 0.24% during 2013 and 0.34% during 2012.

Credit Facility

PHI, Pepco, DPL and ACE maintain an unsecured syndicated credit facility to provide for their respective liquidity needs, including obtaining letters of credit, borrowing for general corporate purposes and supporting their commercial paper programs. On August 1, 2011, PHI, Pepco, DPL and ACE entered into an amended and restated credit agreement which, on August 2, 2012, was amended to extend the term of the credit facility to August 1, 2017 and to amend the pricing schedule to decrease certain fees and interest rates payable to the lenders under the facility. On August 1, 2013, as permitted under the existing terms of the credit agreement, a request by PHI, Pepco, DPL and ACE to extend the credit facility termination date to August 1, 2018 was approved. All of the terms and conditions as well as pricing remained the same.

The aggregate borrowing limit under the amended and restated credit facility is $1.5 billion, all or any portion of which may be used to obtain loans and up to $500 million of which may be used to obtain letters of credit. The facility also includes a swingline loan sub-facility, pursuant to which each company may make same day borrowings in an aggregate amount not to exceed 10% of the total amount of the facility. Any swingline loan must be repaid by the borrower within fourteen days of receipt. The credit sublimit is $750 million for PHI and $250 million for each of Pepco, DPL and ACE. The sublimits may be increased or decreased by the individual borrower during the term of the facility, except that (i) the sum of all of the borrower sublimits following any such increase or decrease must equal the total amount of the facility and (ii) the aggregate amount of credit used at any given time by (a) PHI may not exceed $1.25 billion and (b) each of Pepco, DPL or ACE may not exceed the lesser of $500 million and the maximum amount of short-term debt the company is permitted to have outstanding by its regulatory authorities. The total number of the sublimit reallocations may not exceed eight per year during the term of the facility.

The interest rate payable by each company on utilized funds is, at the borrowing company’s election, (i) the greater of the prevailing prime rate, the federal funds effective rate plus 0.5% and the one month LIBOR plus 1.0%, or (ii) the prevailing Eurodollar rate, plus a margin that varies according to the credit rating of the borrower.

In order for a borrower to use the facility, certain representations and warranties must be true and correct, and the borrower must be in compliance with specified financial and other covenants, including (i) the requirement that each borrowing company maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the credit agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) with certain exceptions, a restriction on sales or other dispositions of assets, and (iii) a restriction on the incurrence of liens on the assets of a borrower or any of its significant subsidiaries other than permitted liens. The credit agreement contains certain covenants and other customary agreements and requirements that, if not complied with, could result in an event of default and the acceleration of repayment obligations of one or more of the borrowers thereunder. Each of the borrowers was in compliance with all covenants under this facility as of December 31, 2013.

The absence of a material adverse change in PHI’s business, property, results of operations or financial condition is not a condition to the availability of credit under the credit agreement. The credit agreement does not include any rating triggers.

As of December 31, 2013 and 2012, the amount of cash plus unused borrowing capacity under the credit facility available to meet the future liquidity needs of PHI and its utility subsidiaries on a consolidated basis totaled $1,063 million and $861 million, respectively. PHI’s utility subsidiaries had combined cash and unused borrowing capacity under the credit facility of $332 million and $477 million at December 31, 2013 and 2012, respectively.

Other Financing Activities

PHI Term Loan Agreement

On March 28, 2013, PHI entered into a $250 million term loan agreement due March 27, 2014, pursuant to which PHI had borrowed $250 million at a rate of interest equal to the prevailing Eurodollar rate, which is determined by reference to the LIBOR with respect to the relevant interest period, all as defined in the loan agreement, plus a margin of 0.875%. PHI used the net proceeds of the loan under the loan agreement to repay its outstanding $200 million term loan obtained in 2012, and for general corporate purposes. On May 29, 2013, PHI repaid the $250 million term loan with a portion of the net proceeds from the early termination of the cross-border energy lease investments.

Long-Term Project Funding

On October 24, 2013, Pepco Energy Services entered into an agreement with a lender to receive up to $8 million in construction financing at an interest rate of 4.68% for an energy savings project that is expected to be completed in 2014. The agreement includes a transfer of receivables from Pepco Energy Services to the lender after construction is completed, under which the customer would make contractual payments over a 23-year period to repay the financing. If there are shortfalls in Pepco Energy Services’ energy savings guarantee or other performance obligations to the customer that reduce customer payments below the contractual payment amounts, then Pepco Energy Services would compensate the lender for the unpaid amounts. PHI has guaranteed the performance obligations of Pepco Energy Services under the financing agreement.

Potomac Electric Power Co [Member]

Debt

(9) DEBT

Long-Term Debt

The components of long-term debt are shown in the table below:

Type of Debt	Interest Rate			Maturity		2013			2012
						(millions of dollars)
First Mortgage Bonds		4.95	%(a)(b)		2013	$	—		$	200
		4.65	%(a)(b)		2014		175			175
		3.05	%		2022		200			200
		6.20	%(c)(d)		2022		110			110
		5.75	%(a)(b)		2034		100			100
		5.40	%(a)(b)		2035		175			175
		6.50	%(a)(c)		2037		500			500
		7.90	%		2038		250			250
		4.15	%		2043		250			—
		4.95	%		2043		150			—
Total long-term debt							1,910			1,710
Net unamortized discount							(11	)		(9	)
Current portion of long-term debt							(175	)		(200	)
Total net long-term debt						$	1,724		$	1,501

(a) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by Pepco.

(b) Represents a series of Collateral First Mortgage Bonds (as defined herein) which must be cancelled and released as security for Pepco’s obligations under the corresponding series of senior notes or tax-exempt bonds, at such time as Pepco does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds).

(c) Represents a series of Collateral First Mortgage Bonds which must be cancelled and released as security for Pepco’s obligations under the corresponding series of senior notes or tax-exempt bonds, at such time as Pepco does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds), except that Pepco may not permit such release of collateral unless Pepco substitutes comparable obligations for such collateral.

(d) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by Pepco, which in turn secures a series of tax-exempt bonds issued for the benefit of Pepco.

The outstanding first mortgage bonds are issued under a mortgage and deed of trust and are secured by a first lien on substantially all of Pepco’s property, plant and equipment, except for certain property excluded from the lien of the mortgage.

Maturities of Pepco’s long-term debt outstanding at December 31, 2013, are $175 million in 2014, zero in 2015 through 2018 and $1,735 million thereafter.

Pepco’s long-term debt is subject to certain covenants. As of December 31, 2013, Pepco is in compliance with all such covenants.

The table above does not separately identify $1,060 million in aggregate principal amount of senior notes issued by Pepco and $110 million in aggregate principal amount of tax-exempt bonds issued for the benefit of Pepco. These senior notes are secured by a like amount of first mortgage bonds (Collateral First Mortgage Bonds) of Pepco. In addition, these tax-exempt bonds are secured by a like amount of Collateral First Mortgage Bonds issued by Pepco. The principal terms of each such series of senior notes, or Pepco’s obligations in respect of each such series of tax-exempt bonds, are identical to the same terms of the corresponding series of Collateral First Mortgage Bonds. Payments of principal and interest made on a series of such senior notes, or the satisfaction of Pepco’s obligations in respect of a series of such tax-exempt bonds, satisfy the corresponding obligations on the related series of Collateral First Mortgage Bonds. For these reasons, each such series of Collateral First Mortgage Bonds and the corresponding senior notes and/or tax-exempt bonds together effectively represent a single financial obligation and are not identified in the table above separately.

Bond Issuances

During 2013, Pepco issued $250 million of 4.15% first mortgage bonds due March 15, 2043 and $150 million of 4.95% first mortgage bonds due November 15, 2043. Net proceeds from the issuance of the 4.15% bonds were used to repay Pepco’s outstanding commercial paper and for general corporate purposes. The net proceeds from the 4.95% bonds were used to repay outstanding commercial paper, including commercial paper issued to repay in full at maturity $200 million of 4.95% senior notes due November 15, 2013, plus accrued but unpaid interest thereon. The senior notes were secured by a like principal amount of first mortgage bonds, which under the mortgage and deed of trust were deemed to be satisfied with the repayment of the senior notes.

Bond Redemptions

During 2013, Pepco repaid at maturity $200 million of its 4.95% senior notes, which were secured by a like principal amount of its first mortgage bonds.

Short-Term Debt

Pepco has traditionally used a number of sources to fulfill short-term funding needs, such as commercial paper, short-term notes, and bank lines of credit. Proceeds from short-term borrowings are used primarily to meet working capital needs, but may also be used to temporarily fund long-term capital requirements.

The components of Pepco’s short-term debt at December 31, 2013 and 2012 are as follows:

	2013		2012
	(millions of dollars)
Commercial paper	$	151	$	231
Total	$	151	$	231

Commercial Paper

Pepco maintains an ongoing commercial paper program to address its short-term liquidity needs. As of December 31, 2013, the maximum capacity available under the program was $500 million, subject to available borrowing capacity under the credit facility.

Pepco had $151 million and $231 million of commercial paper outstanding at December 31, 2013 and 2012, respectively. The weighted average interest rates for commercial paper issued by Pepco during 2013 and 2012 were 0.34% and 0.43%, respectively. The weighted average maturity of all commercial paper issued by Pepco during each of 2013 and 2012 was five days.

Credit Facility

PHI, Pepco, DPL and ACE maintain an unsecured syndicated credit facility to provide for their respective liquidity needs, including obtaining letters of credit, borrowing for general corporate purposes and supporting their commercial paper programs. On August 1, 2011, PHI, Pepco, DPL and ACE entered into an amended and restated credit agreement which, on August 2, 2012, was amended to extend the term of the credit facility to August 1, 2017 and to amend the pricing schedule to decrease certain fees and interest rates payable to the lenders under the facility. On August 1, 2013, as permitted under the existing terms of the credit agreement, a request by PHI, Pepco, DPL and ACE to extend the credit facility termination date to August 1, 2018 was approved. All of the terms and conditions as well as pricing remained the same.

The aggregate borrowing limit under the amended and restated credit facility is $1.5 billion, all or any portion of which may be used to obtain loans and up to $500 million of which may be used to obtain letters of credit. The facility also includes a swingline loan sub-facility, pursuant to which each company may make same day borrowings in an aggregate amount not to exceed 10% of the total amount of the facility. Any swingline loan must be repaid by the borrower within fourteen days of receipt. The credit sublimit is $750 million for PHI and $250 million for each of Pepco, DPL and ACE. The sublimits may be increased or decreased by the individual borrower during the term of the facility, except that (i) the sum of all of the borrower sublimits following any such increase or decrease must equal the total amount of the facility and (ii) the aggregate amount of credit used at any given time by (a) PHI may not exceed $1.25 billion and (b) each of Pepco, DPL or ACE may not exceed the lesser of $500 million and the maximum amount of short-term debt the company is permitted to have outstanding by its regulatory authorities. The total number of the sublimit reallocations may not exceed eight per year during the term of the facility.

The interest rate payable by each company on utilized funds is, at the borrowing company’s election, (i) the greater of the prevailing prime rate, the federal funds effective rate plus 0.5% and the one month London Interbank Offered Rate plus 1.0%, or (ii) the prevailing Eurodollar rate, plus a margin that varies according to the credit rating of the borrower.

In order for a borrower to use the facility, certain representations and warranties must be true and correct, and the borrower must be in compliance with specified financial and other covenants, including (i) the requirement that each borrowing company maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the credit agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) with certain exceptions, a restriction on sales or other dispositions of assets, and (iii) a restriction on the incurrence of liens on the assets of a borrower or any of its significant subsidiaries other than permitted liens. The credit agreement contains certain covenants and other customary agreements and requirements that, if not complied with, could result in an event of default and the acceleration of repayment obligations of one or more of the borrowers thereunder. Each of the borrowers was in compliance with all covenants under this facility as of December 31, 2013.

The absence of a material adverse change in PHI’s business, property, results of operations or financial condition is not a condition to the availability of credit under the credit agreement. The credit agreement does not include any rating triggers.

As of December 31, 2013 and 2012, the amount of cash plus borrowing capacity under the credit facility available to meet the liquidity needs of PHI’s utility subsidiaries in the aggregate was $332 million and $477 million, respectively. Pepco’s borrowing capacity under the credit facility at any given time depends on the amount of the subsidiary borrowing capacity being utilized by DPL and ACE and the portion of the total capacity being used by PHI.

Delmarva Power & Light Co/De [Member]

Debt

(10) DEBT

Long-Term Debt

The components of long-term debt are shown in the table below:

Type of Debt	Interest Rate	Maturity		2013			2012
				(millions of dollars)
First Mortgage Bonds
	6.40%		2013	$	—		$	250
	5.22%(a)		2016		100			100
	3.50%		2023		300			—
	4.00%		2042		250			250
					650			600
Unsecured Tax-Exempt Bonds
	5.40%		2031		78			78
					78			78
Medium-Term Notes (unsecured)
	7.56%-7.58%		2017		14			14
	6.81%		2018		4			4
	7.61%		2019		12			12
	7.72%		2027		10			10
					40			40
Notes (unsecured)
	5.00%		2014		100			100
	5.00%		2015		100			100
					200			200
Total long-term debt					968			918
Net unamortized discount					(1	)		(1	)
Current portion of long-term debt					(100	)		(250	)
Total net long-term debt				$	867		$	667

(a) Represents a series of Collateral First Mortgage Bonds securing a series of debt securities issued by DPL.

The outstanding first mortgage bonds issued by DPL are issued under a Mortgage and Deed of Trust and are secured by a first lien on substantially all of DPL’s property, plant and equipment, except for certain property excluded from the lien of the mortgage.

Maturities of DPL’s long-term debt outstanding at December 31, 2013 are $100 million for each year 2014 through 2016, $14 million in 2017, $4 million in 2018 and $650 million thereafter.

DPL’s long-term debt is subject to certain covenants. As of December 31, 2013, DPL is in compliance with all such covenants.

The table above does not separately identify $100 million in aggregate principal amount of debt securities issued by DPL. These debt securities are secured by a like amount of first mortgage bonds (Collateral First Mortgage Bonds) of DPL. The principal terms of each such series of debt securities, are identical to the same terms of the corresponding series of Collateral First Mortgage Bonds. Payments of principal and interest made on a series of such debt securities, satisfy the corresponding obligations on the related series of Collateral First Mortgage Bonds. For these reasons, each such series of Collateral First Mortgage Bonds and the corresponding debt securities together effectively represent a single financial obligation and are not identified in the table above separately.

Bond Issuances

During 2013, DPL issued $300 million of 3.50% first mortgage bonds due November 15, 2023. The net proceeds from the issuance of the long-term debt were used to repay at maturity $250 million of 6.40% first mortgage bonds, plus accrued but unpaid interest thereon, to repay outstanding commercial paper and for general corporate purposes.

Bond Redemptions

During 2013, DPL repaid at maturity $250 million of its 6.40% first mortgage bonds.

Short-Term Debt

DPL has traditionally used a number of sources to fulfill short-term funding needs, such as commercial paper, short-term notes, and bank lines of credit. Proceeds from short-term borrowings are used primarily to meet working capital needs, but may also be used to temporarily fund long-term capital requirements. The components of DPL’s short-term debt at December 31, 2013 and 2012 are as follows:

	2013		2012
	(millions of dollars)
Variable rate demand bonds	$	105	$	105
Commercial paper		147		32
	$	252	$	137

Commercial Paper

DPL maintains an ongoing commercial paper program to address its short-term liquidity needs. As of December 31, 2013, the maximum capacity available under the program was $500 million, subject to available borrowing capacity under the credit facility.

DPL had $147 million and $32 million of commercial paper outstanding at December 31, 2013 and 2012, respectively. The weighted average interest rates for commercial paper issued by DPL during 2013 and 2012 were 0.29% and 0.43%, respectively. The weighted average maturity of all commercial paper issued by DPL during 2013 and 2012 was three days and four days, respectively.

Variable Rate Demand Bonds

Variable Rate Demand Bonds (VRDBs) are subject to repayment on the demand of the holders and, for this reason, are accounted for as short-term debt in accordance with GAAP. However, bonds submitted for purchase are remarketed by a remarketing agent on a best efforts basis. DPL expects that any bonds submitted for purchase will continue to be remarketed successfully due to the creditworthiness of the company and because the remarketing agent resets the interest rate to the then-current market rate. The bonds may be converted to a fixed rate, fixed term option to establish a maturity which corresponds to the date of final maturity of the bonds. On this basis, DPL views VRDBs as a source of long-term financing. The VRDBs outstanding in 2013 mature as follows: 2017 ($26 million), 2024 ($33 million), 2028 ($16 million), and 2029 ($30 million). The weighted average interest rate for VRDBs was 0.26% during 2013 and 0.38% during 2012. As of December 31, 2013, $105 million in VRDBs issued on behalf of DPL were outstanding (of which $72 million were secured by Collateral First Mortgage Bonds issued by DPL).

Credit Facility

PHI, Pepco, DPL and ACE maintain an unsecured syndicated credit facility to provide for their respective liquidity needs, including obtaining letters of credit, borrowing for general corporate purposes and supporting their commercial paper programs. On August 1, 2011, PHI, Pepco, DPL and ACE entered into an amended and restated credit agreement which, on August 2, 2012, was amended to extend the term of the credit facility to August 1, 2017 and to amend the pricing schedule to decrease certain fees and interest rates payable to the lenders under the facility. On August 1, 2013, as permitted under the existing terms of the credit agreement, a request by PHI, Pepco, DPL and ACE to extend the credit facility termination date to August 1, 2018 was approved. All of the terms and conditions as well as pricing remained the same.

The aggregate borrowing limit under the amended and restated credit facility is $1.5 billion, all or any portion of which may be used to obtain loans and up to $500 million of which may be used to obtain letters of credit. The facility also includes a swingline loan sub-facility, pursuant to which each company may make same day borrowings in an aggregate amount not to exceed 10% of the total amount of the facility. Any swingline loan must be repaid by the borrower within fourteen days of receipt. The credit sublimit is $750 million for PHI and $250 million for each of Pepco, DPL and ACE. The sublimits may be increased or decreased by the individual borrower during the term of the facility, except that (i) the sum of all of the borrower sublimits following any such increase or decrease must equal the total amount of the facility, and (ii) the aggregate amount of credit used at any given time by (a) PHI may not exceed $1.25 billion, and (b) each of Pepco, DPL or ACE may not exceed the lesser of $500 million or the maximum amount of short-term debt the company is permitted to have outstanding by its regulatory authorities. The total number of the sublimit reallocations may not exceed eight per year during the term of the facility.

The interest rate payable by each company on utilized funds is, at the borrowing company’s election, (i) the greater of the prevailing prime rate, the federal funds effective rate plus 0.5% and the one month London Interbank Offered Rate plus 1.0%, or (ii) the prevailing Eurodollar rate, plus a margin that varies according to the credit rating of the borrower.

In order for a borrower to use the facility, certain representations and warranties must be true and correct, and the borrower must be in compliance with specified financial and other covenants, including (i) the requirement that each borrowing company maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the credit agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) with certain exceptions, a restriction on sales or other dispositions of assets, and (iii) a restriction on the incurrence of liens on the assets of a borrower or any of its significant subsidiaries other than permitted liens. The credit agreement contains certain covenants and other customary agreements and requirements that, if not complied with, could result in an event of default and the acceleration of repayment obligations of one or more of the borrowers thereunder. Each of the borrowers was in compliance with all covenants under this facility as of December 31, 2013.

The absence of a material adverse change in PHI’s business, property, results of operations or financial condition is not a condition to the availability of credit under the credit agreement. The credit agreement does not include any rating triggers.

As of December 31, 2013 and 2012, the amount of cash plus borrowing capacity under the credit facility available to meet the liquidity needs of PHI’s utility subsidiaries in the aggregate was $332 million and $477 million, respectively. DPL’s borrowing capacity under the credit facility at any given time depends on the amount of the subsidiary borrowing capacity being utilized by Pepco and ACE and the portion of the total capacity being used by PHI.

Atlantic City Electric Co [Member]

Debt

(9) DEBT

Long-Term Debt

The components of long-term debt are shown in the table below:

Type of Debt	Interest Rate			Maturity	2013			2012
					(millions of dollars)
First Mortgage Bonds
		6.63	%	2013	$	—		$	69
		7.63	% (a)	2014		7			7
		7.68	% (a)	2015-2016		17			17
		7.75	%	2018		250			250
		6.80	% (b)(c)	2021		39			39
		4.35	%	2021		200			200
		4.875	% (d)(c)	2029		23			23
		5.80	% (b)(e)	2034		120			120
		5.80	% (b)(e)	2036		105			105
						761			830
Variable Rate Term Loan						100			—
Total long-term debt						861			830
Net unamortized discount						(1	)		(1	)
Current portion of long-term debt						(107	)		(69	)
Total net long-term debt					$	753		$	760

(a) Represents a series of Collateral First Mortgage Bonds securing a series of medium term notes issued by ACE.

(b) Represents a series of Collateral First Mortgage Bonds (as defined herein) which must be cancelled and released as security for ACE’s obligations under the corresponding series of issuer notes (as defined herein) or tax-exempt bonds, at such time as ACE does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds).

(c) Represents a series of Collateral First Mortgage Bonds securing a series of tax-exempt bonds issued for the benefit of ACE.

(d) Represents a series of Collateral First Mortgage Bonds which must be cancelled and released as security for ACE’s obligations under the corresponding series of issuer notes or tax-exempt bonds, at such time as ACE does not have any first mortgage bonds outstanding (other than its Collateral First Mortgage Bonds), except that ACE may not permit such release of collateral unless ACE substitutes comparable obligations for such collateral.

(e) Represents a series of Collateral First Mortgage Bonds securing a series of senior notes issued by ACE.

The outstanding first mortgage bonds issued by ACE are issued under a mortgage and deed of trust and are secured by a first lien on substantially all of ACE’s property, plant and equipment, except for certain property excluded from the lien of the mortgage.

Maturities of ACE’s long-term debt outstanding at December 31, 2013 are $107 million in 2014, $15 million in 2015, $2 million in 2016, zero in 2017, $250 million in 2018 and $487 million thereafter.

ACE’s long-term debt is subject to certain covenants. As of December 31, 2013, ACE was in compliance with all such covenants.

The table above which does not separately identify $249 million in aggregate principal amount of senior notes and medium term notes (issuer notes) issued by ACE and $62 million in aggregate principal amount of tax-exempt bonds issued for the benefit of ACE. These issuer notes and tax-exempt bonds are secured by a like amount of first mortgage bonds (Collateral First Mortgage Bonds) of ACE. The principal terms of each such series of issuer notes, or ACE’s obligations in respect of each such series of tax-exempt bonds, are identical to the same terms of the corresponding series of Collateral First Mortgage Bonds. Payments of principal and interest made on a series of such issuer notes, or the satisfaction of ACE obligations in respect of a series of such tax-exempt bonds, satisfy the corresponding obligations on the related series of Collateral First Mortgage Bonds. For these reasons, each such series of Collateral First Mortgage Bonds and the corresponding issuer notes or tax-exempt bonds together effectively represent a single financial obligation and are not identified in the table above separately.

Bond Redemptions

During 2013, ACE repaid at maturity $69 million of its 6.63% non-callable first mortgage bonds. ACE also funded the redemption, prior to maturity, of $4 million of outstanding weekly variable rate pollution control revenue refunding bonds due 2017, issued by the Pollution Control Financing Authority of Salem County, New Jersey for ACE’s benefit.

Term Loan Agreement

On May 10, 2013, ACE entered into a $100 million term loan agreement, pursuant to which ACE has borrowed (and may not re-borrow) $100 million at a rate of interest equal to the prevailing Eurodollar rate, which is determined by reference to the London Interbank Offered Rate (LIBOR) with respect to the relevant interest period, all as defined in the loan agreement, plus a margin of 0.75%. ACE’s Eurodollar borrowings under the loan agreement may be converted into floating rate loans under certain circumstances, and, in that event, for so long as any loan remains a floating rate loan, interest would accrue on that loan at a rate per year equal to (i) the highest of (a) the prevailing prime rate, (b) the federal funds effective rate plus 0.5%, or (c) the one-month Eurodollar rate plus 1%, plus (ii) a margin of 0.75%. As of December 31, 2013, outstanding borrowings under the loan agreement bore interest at an annual rate of 0.92%, which is subject to adjustment from time to time. All borrowings under the loan agreement are unsecured, and the aggregate principal amount of all loans, together with any accrued but unpaid interest due under the loan agreement, must be repaid in full on or before November 10, 2014.

Under the terms of the term loan agreement, ACE must maintain compliance with specified covenants, including (i) the requirement that ACE maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the loan agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) a restriction on sales or other dispositions of assets, other than certain permitted sales and dispositions, and (iii) a restriction on the incurrence of liens (other than liens permitted by the loan agreement) on the assets of ACE. The loan agreement does not include any rating triggers. ACE was in compliance with all covenants under this loan agreement as of December 31, 2013.

Transition Bonds Issued by ACE Funding

The components of transition bonds are shown in the table below:

Type of Debt	Interest Rate			Maturity		2013			2012
						(millions of dollars)
Transition Bonds
		4.46	%		2016	$	8		$	19
		4.91	%		2017		46			75
		5.05	%		2020		54			54
		5.55	%		2023		147			147
							255			295
Current portion of long-term debt							(41	)		(39	)
Total net long-term Transition Bonds						$	214		$	256

For a description of the Transition Bonds, see Note (16), “Variable Interest Entities – ACE Funding.” Maturities of ACE’s Transition Bonds outstanding at December 31, 2013 are $41 million in 2014, $44 million in 2015, $46 million in 2016, $35 million in 2017, $31 million in 2018 and $58 million thereafter.

Short-Term Debt

ACE has traditionally used a number of sources to fulfill short-term funding needs, such as commercial paper, short-term notes, and bank lines of credit. Proceeds from short-term borrowings are used primarily to meet working capital needs, but may also be used to temporarily fund long-term capital requirements. The components of ACE’s short-term debt at December 31, 2013 and 2012 are as follows:

	2013		2012
	(millions of dollars)
Commercial paper	$	120	$	110
Variable rate demand bonds		18		23
Total	$	138	$	133

Commercial Paper

ACE maintains an ongoing commercial paper program to address its short-term liquidity needs. As of December 31, 2013, the maximum capacity available under the program was $350 million, subject to available borrowing capacity under the credit facility.

ACE had $120 million and $110 million of commercial paper outstanding at December 31, 2013 and 2012, respectively. The weighted average interest rates for commercial paper issued by ACE during 2013 and 2012 were 0.31% and 0.41%, respectively. The weighted average maturity of all commercial paper issued by ACE during 2013 and 2012 was four days and three days, respectively.

Variable Rate Demand Bonds

Variable Rate Demand Bonds (VRDBs) are subject to repayment on the demand of the holders and, for this reason, are accounted for as short-term debt in accordance with GAAP. However, bonds submitted for purchase are remarketed by a remarketing agent on a best efforts basis. ACE expects that any bonds submitted for purchase will be remarketed successfully due to the creditworthiness of the company and because the remarketing resets the interest rate to the then-current market rate. The bonds may be converted to a fixed rate, fixed term option to establish a maturity which corresponds to the date of final maturity of the bonds. On this basis, ACE views VRDBs as a source of long-term financing. As of December 31, 2013, $18 million of VRDBs issued on behalf of ACE were outstanding. The outstanding VRDBs all mature in 2014. The weighted average interest rate for VRDBs was 0.11% and 0.18% during 2013 and 2012, respectively.

Credit Facility

PHI, Pepco, DPL and ACE maintain an unsecured syndicated credit facility to provide for their respective liquidity needs, including obtaining letters of credit, borrowing for general corporate purposes and supporting their commercial paper programs. On August 1, 2011, PHI, Pepco, DPL and ACE entered into an amended and restated credit agreement which, on August 2, 2012, was amended to extend the term of the credit facility to August 1, 2017 and to amend the pricing schedule to decrease certain fees and interest rates payable to the lenders under the facility. On August 1, 2013, as permitted under the existing terms of the credit agreement, a request by PHI, Pepco, DPL and ACE to extend the credit facility termination date to August 1, 2018 was approved. All of the terms and conditions as well as pricing remained the same.

The aggregate borrowing limit under the amended and restated credit facility is $1.5 billion, all or any portion of which may be used to obtain loans and up to $500 million of which may be used to obtain letters of credit. The facility also includes a swingline loan sub-facility, pursuant to which each company may make same day borrowings in an aggregate amount not to exceed 10% of the total amount of the facility. Any swingline loan must be repaid by the borrower within fourteen days of receipt. The credit sublimit is $750 million for PHI and $250 million for each of Pepco, DPL and ACE. The sublimits may be increased or decreased by the individual borrower during the term of the facility, except that (i) the sum of all of the borrower sublimits following any such increase or decrease must equal the total amount of the facility, and (ii) the aggregate amount of credit used at any given time by (a) PHI may not exceed $1.25 billion, and (b) each of Pepco, DPL or ACE may not exceed the lesser of $500 million or the maximum amount of short-term debt the company is permitted to have outstanding by its regulatory authorities. The total number of the sublimit reallocations may not exceed eight per year during the term of the facility.

The interest rate payable by each company on utilized funds is, at the borrowing company’s election, (i) the greater of the prevailing prime rate, the federal funds effective rate plus 0.5% and the one month LIBOR plus 1.0%, or (ii) the prevailing Eurodollar rate, plus a margin that varies according to the credit rating of the borrower.

In order for a borrower to use the facility, certain representations and warranties must be true and correct, and the borrower must be in compliance with specified financial and other covenants, including (i) the requirement that each borrowing company maintain a ratio of total indebtedness to total capitalization of 65% or less, computed in accordance with the terms of the credit agreement, which calculation excludes from the definition of total indebtedness certain trust preferred securities and deferrable interest subordinated debt (not to exceed 15% of total capitalization), (ii) with certain exceptions, a restriction on sales or other dispositions of assets, and (iii) a restriction on the incurrence of liens on the assets of a borrower or any of its significant subsidiaries other than permitted liens. The credit agreement contains certain covenants and other customary agreements and requirements that, if not complied with, could result in an event of default and the acceleration of repayment obligations of one or more of the borrowers thereunder. Each of the borrowers was in compliance with all covenants under this facility at December 31, 2013.

The absence of a material adverse change in PHI’s business, property, results of operations or financial condition is not a condition to the availability of credit under the credit agreement. The credit agreement does not include any rating triggers.

As of December 31, 2013 and 2012, the amount of cash plus borrowing capacity under the credit facility available to meet the liquidity needs of PHI’s utility subsidiaries in the aggregate was $332 million and $477 million, respectively. ACE’s borrowing capacity under the credit facility at any given time depends on the amount of the subsidiary borrowing capacity being utilized by Pepco and DPL and the portion of the total capacity being used by PHI.