Segment Information

6 Months Ended

Jun. 30, 2014

Segment Information

(5) SEGMENT INFORMATION

Pepco Holdings’ management has identified its operating segments at June 30, 2014 as Power Delivery and Pepco Energy Services. 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. Through its subsidiary PCI, PHI maintained a portfolio of cross-border energy lease investments. PHI completed the termination of its interests in its cross-border energy lease investments during 2013. As a result, the cross-border energy lease investments, which comprised substantially all of the operations of the former Other Non-Regulated segment, are being accounted for as discontinued operations.

The remaining operations of the former Other Non-Regulated segment, which no longer meet the definition of a separate segment for financial reporting purposes, are now included in Corporate and Other. Segment financial information for continuing operations for the three and six months ended June 30, 2014 and 2013 are as follows:

	Three Months Ended June 30, 2014
	Power Delivery		Pepco Energy Services		Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	1,040	$	79	$	(2	)	$	1,117
Operating Expenses (b)		881		77		8			966
Operating Income (Loss)		159		2		(10	)		151
Interest and Dividend Income		—		—		1			1
Interest Expense		56		—		11			67
Other Income (Expense)		13		1		(1	)		13
Income Tax Expense (Benefit)		45		1		(1	)		45
Net Income (Loss) from Continuing Operations		71		2		(20	)		53
Total Assets		13,471		297		1,302			15,070
Construction Expenditures	$	253	$	1	$	17		$	271

(a) Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(2) million for Operating Revenue, $(3) million for Operating Expenses, $1 million for Interest Expense and $(1) million for Interest and Dividend Income.

(b) Includes depreciation and amortization expense of $132 million, consisting of $122 million for Power Delivery, $2 million for Pepco Energy Services and $8 million for Corporate and Other.

	Three Months Ended June 30, 2013
	Power Delivery		Pepco Energy Services		Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	1,006	$	49	$	(4	)	$	1,051
Operating Expenses (b)		866		47		(7	)		906
Operating Income		140		2		3			145
Interest Expense		58		—		12			70
Other Income		7		—		1			8
Income Tax Expense (Benefit)		33		1		(4	)		30
Net Income (Loss) from Continuing Operations		56		1		(4	)		53
Total Assets (excluding Assets Held for Disposition)		12,535		350		1,923			14,808
Construction Expenditures	$	281	$	—	$	39		$	320

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

(b) Includes depreciation and amortization expense of $116 million, consisting of $107 million for Power Delivery, $2 million for Pepco Energy Services and $7 million for Corporate and Other.

	Six Months Ended June 30, 2014
	Power Delivery		Pepco Energy Services		Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	2,312	$	139	$	(4	)	$	2,447
Operating Expenses (b)		1,984		137		2			2,123
Operating Income (Loss)		328		2		(6	)		324
Interest and Dividend Income		—		—		1			1
Interest Expense		111		—		21			132
Other Income		25		1		—			26
Income Tax Expense (Benefit)		92		1		(2	)		91
Net Income (Loss) from Continuing Operations		150		2		(24	)		128
Total Assets		13,471		297		1,302			15,070
Construction Expenditures	$	517	$	1	$	35		$	553

(a) Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(4) million for Operating Revenue, $(4) million for Operating Expenses and $(1) million for Interest and Dividend Income.

(b) Includes depreciation and amortization expense of $265 million, consisting of $246 million for Power Delivery, $4 million for Pepco Energy Services and $15 million for Corporate and Other.

	Six Months Ended June 30, 2013
	Power Delivery		Pepco Energy Services		Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	2,130	$	106	$	(5	)	$	2,231
Operating Expenses (b)		1,867		101		(15	)		1,953
Operating Income		263		5		10			278
Interest Expense		114		—		23			137
Other Income		13		1		2			16
Income Tax Expense (c)		48		2		165	(d)		215
Net Income (Loss) from Continuing Operations		114		4		(176	)		(58	)
Total Assets (excluding Assets Held for Disposition)		12,535		350		1,923			14,808
Construction Expenditures	$	563	$	1	$	52		$	616

(a) Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(5) million for Operating Revenue, $(6) million for Operating Expenses and $(4) million for Interest Expense.

(b) Includes depreciation and amortization expense of $228 million, consisting of $211 million for Power Delivery, $4 million for Pepco Energy Services and $13 million for Corporate and Other.

(c) Includes after-tax interest associated with uncertain and effectively settled tax positions allocated to each member of the consolidated group, including a $12 million interest benefit for Power Delivery and interest expense of $66 million for Corporate and Other.

(d) Includes non-cash charges of $101 million representing the establishment of valuation allowances against certain deferred tax assets of PCI included in Corporate and Other.

Potomac Electric Power Co [Member]

Segment Information

(5) SEGMENT INFORMATION

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

Delmarva Power & Light Co/De [Member]

Segment Information

(5) SEGMENT INFORMATION

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

Atlantic City Electric Co [Member]

Segment Information

(5) SEGMENT INFORMATION

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