Schedule I, Condensed Financial Information of Parent Company is submitted below.

PEPCO HOLDINGS, INC. (Parent Company)

STATEMENTS OF INCOME (LOSS)


	For the Year Ended December 31,
	2015			2014			2013
	*(millions of dollars, except share data)*

Operating Revenue	$	—		$	—		$	—

Operating Expenses
Other operation and maintenance		20			31			1

Total operating expenses		20			31			1

Operating Loss		(20	)		(31	)		(1	)
Other Income (Expenses)
Interest expense		(47	)		(43	)		(42	)
Income from equity investments		312			291			204
Other income		15			—			—

Total other income		280			248			162

Income from Continuing Operations Before Income Tax		260			217			161
Income Tax (Benefit) Expense Related to Continuing Operations		(58	)		(25	)		51

Net Income from Continuing Operations		318			242			110
Income (Loss) from Discontinued Operations, net of Income Taxes		9			—			(322	)

Net Income (Loss)	$	327		$	242		$	(212	)


Comprehensive Income (Loss)	$	337		$	230		$	(198	)


Earnings Per Share
Basic earnings per share of common stock from Continuing Operations	$	1.25		$	0.96		$	0.45
Basic earnings (loss) per share of common stock from Discontinued Operations		0.04			—			(1.31	)

Basic earnings (loss) per share of common stock	$	1.29		$	0.96		$	(0.86	)

Diluted earnings per share of common stock from Continuing Operations	$	1.25		$	0.96		$	0.45
Diluted earnings (loss) per share of common stock from Discontinued Operations		0.04			—			(1.31	)

Diluted earnings (loss) per share of common stock	$	1.29		$	0.96		$	(0.86	)

The accompanying Notes are an integral part of these Financial Statements.

PEPCO HOLDINGS, INC. (Parent Company)

BALANCE SHEETS


	As of December 31,
	2015			2014
	*(millions of dollars, except share data)*
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—		$	65
Prepayments of income taxes		171			152
Accounts receivable and other		18			9

Total Current Assets		189			226


INVESTMENTS AND OTHER ASSETS
Goodwill		1,398			1,398
Investment in consolidated companies		4,636			4,256
Other		127			82

Total Investments and Other Assets		6,161			5,736

TOTAL ASSETS	$	6,350		$	5,962


LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term debt	$	784		$	287
Current portion of long-term debt		190			250
Interest and taxes accrued		10			9
Accounts payable due to associated companies		8			13

Total Current Liabilities		992			559


DEFERRED CREDITS

Notes payable due to subsidiary companies		498			494
Liabilities and accrued interest related to uncertain tax positions		—			4

Total Deferred Credits		498			498

LONG-TERM DEBT		264			454


COMMITMENTS AND CONTINGENCIES (NOTE 4)

PREFERRED STOCK
Series A preferred stock, $.01 par value – 18,000 shares authorized, 18,000 and 12,600 shares outstanding, respectively		183			129


EQUITY
Common stock, $.01 par value – 400,000,000 shares authorized, 254,289,261 and 252,728,684 shares outstanding, respectively		3			3
Premium on stock and other capital contributions		3,829			3,800
Accumulated other comprehensive loss		(36	)		(46	)
Retained earnings		617			565

Total Equity		4,413			4,322

TOTAL LIABILITIES AND EQUITY	$	6,350		$	5,962

The accompanying Notes are an integral part of these Financial Statements.

PEPCO HOLDINGS, INC. (Parent Company)

STATEMENTS OF CASH FLOWS


	For the Year Ended December 31,
	2015			2014			2013
	*(millions of dollars)*
OPERATING ACTIVITIES
Net income (loss)	$	327		$	242		$	(212	)
(Income) loss from discontinued operations, net of income taxes		(9	)		—			322
Adjustments to reconcile net income to net cash from operating activities:
Distributions from related parties less than earnings		(74	)		(149	)		(127	)
Deferred income taxes		(33	)		(5	)		(7	)
Increase in fair value of preferred stock derivative		(15	)		—			—
Other		13			18			—
Changes in:
Prepaid and other		6			13			2
Accounts payable		(1	)		1			6
Interest and taxes		(23	)		—			(141	)
Other assets and liabilities		(22	)		1			3

Net Cash From (Used By) Operating Activities		169			121			(154	)


FINANCING ACTIVITIES
Dividends paid on common stock		(275	)		(272	)		(270	)
Common stock issued for the Direct Stock Purchase and Dividend Reinvestment Plan and employee-related compensation		18			34			50
Issuances of common stock		—			—			324
Issuances of Series A preferred stock		54			126			—
Capital contributions to subsidiaries, net		(282	)		(210	)		(250	)
Increase in notes payable due to associated companies		4			3			491
Reacquisitions of long-term debt		(250	)		—			—
Issuances (repayments) of short-term debt, net		197			263			(240	)
Borrowings under term loans		300			—			250
Repayments of term loans		—			—			(450	)
Costs of issuances		—			—			(13	)

Net Cash Used By Financing Activities		(234	)		(56	)		(108	)

Net (Decrease) Increase In Cash and Cash Equivalents		(65	)		65			(262	)
Cash and Cash Equivalents at Beginning of Year		65			—			262

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	—		$	65		$	—

The accompanying Notes are an integral part of these Financial Statements.

NOTES TO FINANCIAL INFORMATION

(1)

BASIS OF PRESENTATION

Pepco Holdings, Inc. (Pepco Holdings or PHI) is a holding company and conducts substantially all of its business operations through its subsidiaries. These condensed financial statements and related footnotes have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X. These statements should be read in conjunction with the consolidated financial statements and notes thereto of Pepco Holdings included in Part II, Item 8 of this Form 10-K.

Pepco Holdings owns 100% of the common stock of all its significant subsidiaries.

(2)

NEWLY ADOPTED ACCOUNTING STANDARDS

Presentation of Debt Issuance Costs (Accounting Standards Codification (ASC) 835)

In April 2015, the Financial Accounting Standards Board issued new guidance for the presentation of debt issuance costs on the balance sheet. Debt issuance costs are currently required to be presented on the balance sheet as assets. However, under the new requirements, these debt issuance costs will be offset against the debt to which the costs relate. The new requirements are effective for PHI beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. PHI has elected to early adopt the new guidance in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in PHI’s balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	(millions of dollars)

Other (within investments and other assets)	$	84	$	(2	)	$	82
Long-term debt		456		(2	)		454

(3)

DEBT

For information concerning Pepco Holdings’ long-term debt obligations, see Note (10), “Debt,” to the consolidated financial statements of Pepco Holdings.

(4)

COMMITMENTS AND CONTINGENCIES

For information concerning Pepco Holdings’ material contingencies and guarantees, see Note (16), “Commitments and Contingencies” to the consolidated financial statements of Pepco Holdings.

Pepco Holdings guarantees the obligations of its wholly owned subsidiary, Pepco Energy Services, Inc. and its subsidiaries (Pepco Energy Services), under certain contracts in its energy savings performance contracting businesses and underground transmission and distribution construction business. At December 31, 2015, Pepco Holdings’ guarantees of Pepco Energy Services’ obligations under these contracts totaled $269 million. PHI also guarantees the obligations of Pepco Energy Services under surety bonds obtained by Pepco Energy Services for construction projects in these businesses. These guarantees totaled $177 million at December 31, 2015.

In addition, Pepco Holdings guarantees certain obligations of Potomac Electric Power Company (Pepco), Delmarva Power & Light Company (DPL), and Atlantic City Electric Company (ACE) under surety bonds obtained by these subsidiaries, for construction projects and self-insured workers compensation matters. These guarantees totaled $56 million at December 31, 2015.

Pepco Holdings, pursuant to an intercompany guarantee agreement with Potomac Capital Investment Corporation (PCI), guarantees certain intercompany obligations of PCI to its subsidiaries. This guarantee totaled $725 million at December 31, 2015.

(5)

INVESTMENT IN CONSOLIDATED COMPANIES

Pepco Holdings’ majority owned subsidiaries are recorded using the equity method of accounting. A breakout of the balance in Investment in consolidated companies is as follows:


	2015		2014
	*(millions of dollars)*
Conectiv, LLC (a)	$	2,198	$	1,984
Potomac Electric Power Company		2,240		2,087
Potomac Capital Investment Corporation		40		30
Pepco Energy Services, Inc.		155		153
PHI Service Company		3		2

Total investment in consolidated companies	$	4,636	$	4,256

(a)	Conectiv LLC, is the parent company of Delmarva Power & Light Company and Atlantic City Electric Company.

(6)

DISCONTINUED OPERATIONS

During 2015, the income from discontinued operations, net of income taxes, resulted from the Global Tax Settlement reached with the Internal Revenue Service which resolves tax matters related to PHI’s cross-border energy lease investments and is discussed further in Note (11), “Income Taxes” to the consolidated financial statements of Pepco Holdings.

During 2014, there was no activity related to PHI’s discontinued operations.

During 2013, PHI completed the termination of its interest in its cross-border energy lease investments and, as a result, these investments have been accounted for as discontinued operations.

In December 2009, PHI announced the wind-down of the retail energy supply component of the Pepco Energy Services business which was comprised of the retail electric and natural gas supply businesses. In 2013, Pepco Energy Services completed the wind-down and, accordingly, the operations of Pepco Energy Services’ retail electric and natural gas supply businesses have been classified as discontinued operations.

(7)

RELATED PARTY TRANSACTIONS

As of December 31, 2015 and 2014, PHI had the following balances on its balance sheets due (to) from related parties:


	2015			2014
	*(millions of dollars)*
(Payable to) Receivable from Related Party (current) (a)
Conectiv Communications, Inc.	$	(4	)	$	(4	)
PHI Service Company		(4	)		(10	)
Other		—			1

Total	$	(8	)	$	(13	)

Payable to Related Party (non-current) (b)
Potomac Capital Investment Corporation	$	(498	)	$	(494	)

Money Pool Balance (included in cash and cash equivalents)	$	—		$	65

(a)	Included in Accounts payable due to associated companies.

(b)	Included in Notes payable due to subsidiary companies.

(8)

DIVIDEND RESTRICTIONS

PHI, on a stand-alone basis, generates no operating income of its own. Accordingly, its ability to pay dividends to its shareholders depends on dividends received from its subsidiaries. In addition to their future financial performance, the ability of PHI’s direct and indirect subsidiaries to pay dividends is subject to limits imposed by: (i) state corporate laws, which impose limitations on the funds that can be used to pay dividends and, in the case of ACE, the regulatory requirement that it obtain the prior approval of the New Jersey Board of Public Utilities before dividends can be paid if its equity as a percent of its total capitalization, excluding securitization debt, falls below 30%; (ii) the prior rights of holders of mortgage bonds and other long-term debt issued by the subsidiaries, and any other restrictions imposed in connection with the incurrence of liabilities; and (iii) certain provisions of ACE’s charter that impose restrictions on payment of common stock dividends for the benefit of preferred stockholders. Pepco, DPL and ACE have no shares of preferred stock outstanding at December 31, 2015. Currently, the capitalization ratio limitation to which ACE is subject and the restriction in the ACE charter do not limit ACE’s ability to pay common stock dividends. As further described in Note (10), “Debt,” to the consolidated financial statements of Pepco Holdings, PHI, Pepco, DPL and ACE have restrictions on total indebtedness in relation to total capitalization under the credit facility.

PHI had approximately $617 million and $565 million of retained earnings free of restrictions at December 31, 2015 and 2014, respectively. These amounts represent the total retained earnings balances at those dates. The amount of restricted net assets for PHI’s consolidated subsidiaries at December 31, 2015 is $2,633 million.