Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information

(5) SEGMENT INFORMATION

Pepco Holdings’ management has identified its operating segments at September 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 nine months ended September 30, 2014 and 2013 are as follows:

	Three Months Ended September 30, 2014
	Power Delivery		Pepco Energy Services			Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	1,242	$	73		$	(2	)	$	1,313
Operating Expenses (b)		1,021		126	(c)		—			1,147
Operating Income (Loss)		221		(53	)		(2	)		166
Interest Expense		58		1			9			68
Other Income		14		1			—			15
Income Tax Expense (Benefit)		65		(26	)		(5	)		34
Net Income (Loss) from Continuing Operations		112		(27	)		(6	)		79
Total Assets		13,697		255			1,346			15,298
Construction Expenditures	$	272	$	1		$	20		$	293

(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, $(1) million for Operating Expenses, $(2) million for Interest Expense and $(2) million for Interest Income.

(b) Includes depreciation and amortization expense of $145 million, consisting of $135 million for Power Delivery, $2 million for Pepco Energy Services and $8 million for Corporate and Other.

(c) Includes an impairment loss of $53 million ($32 million after-tax) at Pepco Energy Services associated with its combined heat and power thermal generating plant and operation in Atlantic City.

	Three Months Ended September 30, 2013
	Power Delivery		Pepco Energy Services			Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	1,298	$	48		$	(2	)	$	1,344
Operating Expenses (b)		1,067		50			(8	)		1,109
Operating Income (Loss)		231		(2	)		6			235
Interest Expense		58		1			9			68
Other Income (Loss)		8		1			(1	)		8
Income Tax Expense (Benefit)		67		(1	)		(1	)		65
Net Income (Loss) from Continuing Operations		114		(1	)		(3	)		110
Total Assets (excluding Assets Held for Disposition)		12,790		341			1,779			14,910
Construction Expenditures	$	293	$	1		$	33		$	327

(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, $(1) million for Operating Expenses, $(2) million for Interest Expense and $(2) million for Interest Income.

(b) Includes depreciation and amortization expense of $124 million, consisting of $116 million for Power Delivery and $8 million for Corporate and Other.

	Nine Months Ended September 30, 2014
	Power Delivery		Pepco Energy Services			Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	3,554	$	212		$	(6	)	$	3,760
Operating Expenses (b)		3,005		263	(c)		2			3,270
Operating Income (Loss)		549		(51	)		(8	)		490
Interest Expense		169		1			30			200
Other Income		39		2			1			42
Income Tax Expense (Benefit)		157		(25	)		(7	)		125
Net Income (Loss) from Continuing Operations		262		(25	)		(30	)		207
Total Assets		13,697		255			1,346			15,298
Construction Expenditures	$	789	$	2		$	55		$	846

(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 $(6) million for Operating Revenue, $(5) million for Operating Expenses, $(2) million for Interest Expense and $(3) million for Interest Income.

(b) Includes depreciation and amortization expense of $410 million, consisting of $381 million for Power Delivery, $6 million for Pepco Energy Services and $23 million for Corporate and Other.

(c) Includes an impairment loss of $53 million ($32 million after-tax) at Pepco Energy Services associated with its combined heat and power thermal generating plant and operation in Atlantic City.

	Nine Months Ended September 30, 2013
	Power Delivery		Pepco Energy Services		Corporate and Other (a)			PHI Consolidated
	(millions of dollars)
Operating Revenue	$	3,428	$	154	$	(7	)	$	3,575
Operating Expenses (b)		2,934		151		(23	)		3,062
Operating Income		494		3		16			513
Interest Expense		172		1		32			205
Other Income		21		2		1			24
Income Tax Expense (c)		115		1		164	(d)		280
Net Income (Loss) from Continuing Operations		228		3		(179	)		52
Total Assets (excluding Assets Held for Disposition)		12,790		341		1,779			14,910
Construction Expenditures	$	856	$	2	$	85		$	943

(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 $(8) million for Operating Revenue, $(7) million for Operating Expenses, $(6) million for Interest Expense and $(7) million for Interest Income.

(b) Includes depreciation and amortization expense of $352 million, consisting of $327 million for Power Delivery, $4 million for Pepco Energy Services and $21 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.