10-Q

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2003

Commission File Number	Exact name of registrant as specified in its charter	IRS Employer Identification No.
1-12869	CONSTELLATION ENERGY GROUP, INC.	52-1964611
1-1910	BALTIMORE GAS AND ELECTRIC COMPANY	52-0280210

MARYLAND
(State of Incorporation of both registrants)

750 E. PRATT STREET,                BALTIMORE, MARYLAND                21202
                                         (Address of principal executive offices)                (Zip Code)

410-234-5000

(Registrants' telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

         Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) have been subject to such filing requirements for the past 90 days. Yes ý        No o

         Indicate by check mark whether Constellation Energy Group, Inc. is an accelerated filer    Yes ý        No o

         Indicate by check mark whether Baltimore Gas and Electric Company is an accelerated filer    Yes o        No ý

COMMON STOCK, WITHOUT PAR VALUE 166,892,883 SHARES OUTSTANDING OF
CONSTELLATION ENERGY GROUP, INC. ON JULY 31, 2003.

         Baltimore Gas and Electric Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form in the reduced disclosure format.

TABLE OF CONTENTS

Part I—Financial Information
	Item 1—Financial Statements
		Constellation Energy Group, Inc. and Subsidiaries
		Consolidated Statements of Income
		Consolidated Statements of Comprehensive Income
		Consolidated Balance Sheets
		Consolidated Statements of Cash Flows
		Baltimore Gas and Electric Company and Subsidiaries
		Consolidated Statements of Income
		Consolidated Statements of Comprehensive Income
		Consolidated Balance Sheets
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
	Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations
		Introduction
		Critical Accounting Policies
		Events of 2003
		Strategy
		Business Environment
		Results of Operations
		Financial Condition
		Capital Resources
		Other Matters
	Item 3—Quantitative and Qualitative Disclosures About Market Risk
	Item 4—Controls and Procedures
Part II—Other Information
	Item 1—Legal Proceedings
	Item 4—Submission of Matters to a Vote of Security Holders
	Item 5—Other Information
	Item 6—Exhibits and Reports on Form 8-K
	Signature

2

PART 1—FINANCIAL INFORMATION

Item 1—Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

		Three Months Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions, except per share amounts)
Revenues
	Nonregulated revenues	$	1,696.7		$	460.4		$	3,242.2		$	831.6
	Regulated electric revenues		436.9			480.4			923.2			940.7
	Regulated gas revenues		137.5			90.6			435.7			311.4
	Total revenues		2,271.1			1,031.4			4,601.1			2,083.7
Expenses
	Operating expenses		1,844.0			649.6			3,817.7			1,331.8
	Workforce reduction costs		0.7			13.3			1.4			39.2
	Depreciation and amortization		116.9			117.2			227.9			234.3
	Accretion of asset retirement obligations		10.7			—			21.3			—
	Taxes other than income taxes		70.2			63.6			142.3			129.2
	Total expenses		2,042.5			843.7			4,210.6			1,734.5
Net Gain (Loss) on Sale of Investments and Other Assets			0.5			(2.8	)		14.2			254.3
Income from Operations			229.1			184.9			404.7			603.5
Other Income			6.0			8.3			14.9			12.8
Fixed Charges
	Interest expense		83.5			82.7			165.8			150.5
	Interest capitalized and allowance for borrowed funds used during construction		(2.8	)		(20.1	)		(7.2	)		(31.9	)
	BGE preference stock dividends		3.3			3.3			6.6			6.6
	Total fixed charges		84.0			65.9			165.2			125.2
Income Before Income Taxes			151.1			127.3			254.4			491.1
Income Taxes			54.3			46.0			90.6			181.1
Income Before Cumulative Effects of Changes in Accounting Principles			96.8			81.3			163.8			310.0
Cumulative Effects of Changes in Accounting Principles, Net of Income Taxes of $119.5			—			—			(198.4	)		—
Net Income (Loss)		$	96.8		$	81.3		$	(34.6	)	$	310.0
Earnings (Loss) Applicable to Common Stock		$	96.8		$	81.3		$	(34.6	)	$	310.0
Average Shares of Common Stock Outstanding			165.8			164.0			165.4			163.9
Earnings Per Common Share and Earnings Per Common Share Assuming Dilution Before Cumulative Effects of Changes in Accounting Principles		$	0.58		$	0.50		$	0.99		$	1.89
Cumulative Effects of Changes in Accounting Principles			—			—			(1.20	)		—
Earnings (Loss) Per Common Share and Earnings (Loss) Per Common Share—Assuming Dilution		$	0.58		$	0.50		$	(0.21	)	$	1.89
Dividends Declared Per Common Share		$	0.26		$	0.24		$	0.52		$	0.48

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

			Three Months Ended June 30,						Six Months Ended June 30,
			2003			2002			2003			2002
			(In millions)
Net Income (Loss)			$	96.8		$	81.3		$	(34.6	)	$	310.0
	Other comprehensive income (OCI)
		Reclassification of net losses (gains) on sales of securities from OCI to net income, net of taxes		2.3			2.2			(0.3	)		(154.7	)
		Reclassification of net gains on hedging instruments from OCI to net income, net of taxes		(3.7	)		(2.8	)		(9.7	)		(6.5	)
		Net unrealized gain on hedging instruments, net of taxes		13.5			37.2			7.5			0.1
		Net unrealized gain (loss) on securities, net of taxes		26.5			(6.0	)		14.8			(10.9	)
Comprehensive Income (Loss)			$	135.4		$	111.9		$	(22.3	)	$	138.0

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

3

CONSOLIDATED BALANCE SHEETS

Constellation Energy Group, Inc. and Subsidiaries

			June 30, 2003*			December 31, 2002
			(In millions)
Assets
	Current Assets
		Cash and cash equivalents	$	751.0		$	615.0
		Accounts receivable (net of allowance for uncollectibles of $53.9 and $41.9, respectively)		1,578.8			1,244.1
		Trading securities		3.4			77.1
		Mark-to-market energy assets		742.4			759.4
		Risk management assets		278.5			72.3
		Fuel stocks		135.3			126.5
		Materials and supplies		202.2			208.6
		Prepaid taxes other than income taxes		7.4			57.1
		Other		271.1			157.1
		Total current assets		3,970.1			3,317.2
	Investments and Other Assets
		Real estate projects and investments		70.8			86.1
		Investments in qualifying facilities and power projects		433.3			439.2
		Nuclear decommissioning trust funds		686.6			645.4
		Mark-to-market energy assets		397.4			926.8
		Risk management assets		95.7			88.8
		Goodwill		120.1			115.9
		Other		245.8			204.7
		Total investments and other assets		2,049.7			2,506.9
	Property, Plant and Equipment
		Regulated property, plant and equipment		5,145.2			5,075.2
		Nonregulated generation property, plant and equipment		7,542.6			6,811.9
		Other nonregulated property, plant and equipment		288.9			242.0
		Nuclear fuel (net of amortization)		230.5			224.8
		Accumulated depreciation		(3,814.3	)		(4,396.8	)
		Net property, plant and equipment		9,392.9			7,957.1
	Deferred Charges
		Regulatory assets (net)		256.7			405.7
		Other		149.9			136.0
		Total deferred charges		406.6			541.7
	Total Assets		$	15,819.3		$	14,322.9

* Unaudited

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

4

CONSOLIDATED BALANCE SHEETS

Constellation Energy Group, Inc. and Subsidiaries

			June 30, 2003*			December 31, 2002
			(In millions)
Liabilities and Equity
	Current Liabilities
		Short-term borrowings	$	11.4		$	10.5
		Current portion of long-term debt		570.2			426.2
		Accounts payable		1,152.8			943.4
		Customer deposits and collateral		272.4			102.8
		Mark-to-market energy liabilities		801.4			709.6
		Risk management liabilities		278.3			20.1
		Accrued interest		92.3			95.5
		Dividends declared		46.3			42.8
		Other		351.0			337.1
		Total current liabilities		3,576.1			2,688.0
	Deferred Credits and Other Liabilities
		Deferred income taxes		1,244.4			1,330.7
		Mark-to-market energy liabilities		342.4			460.0
		Risk management liabilities		89.2			149.5
		Asset retirement obligations		572.6			—
		Net pension liability		238.4			334.6
		Postretirement and postemployment benefits		360.8			352.8
		Deferred investment tax credits		82.1			85.7
		Other		136.8			150.1
		Total deferred credits and other liabilities		3,066.7			2,863.4
	Long-term Debt
		Long-term debt of Constellation Energy		3,350.0			2,800.0
		Long-term debt of nonregulated businesses		346.8			349.8
		First refunding mortgage bonds of BGE		780.1			904.9
		Other long-term debt of BGE		919.6			745.1
		Company obligated mandatorily redeemable trust preferred securities of subsidiary trust holding solely 7.16% debentures of BGE due June 30, 2038		250.0			250.0
		Unamortized discount and premium		(12.5	)		(9.7	)
		Current portion of long-term debt		(570.2	)		(426.2	)
		Total long-term debt		5,063.8			4,613.9
	Minority Interests			108.9			105.3
	BGE Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholders' Equity
		Common stock		2,138.9			2,078.9
		Retained earnings		1,856.8			1,977.6
		Accumulated other comprehensive loss		(181.9	)		(194.2	)
		Total common shareholders' equity		3,813.8			3,862.3
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	15,819.3		$	14,322.9

* Unaudited

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

Six Months Ended June 30,				2003			2002
				(In millions)
Cash Flows From Operating Activities
	Net (loss) income			$	(34.6	)	$	310.0
	Adjustments to reconcile to net cash provided by operating activities
		Cumulative effects of changes in accounting principles			198.4			—
		Depreciation and amortization			293.4			251.4
		Accretion of asset retirement obligations			21.3			—
		Deferred income taxes			33.6			17.4
		Investment tax credit adjustments			(3.7	)		(4.0	)
		Deferred fuel costs			(4.0	)		24.6
		Pension and postemployment benefits			(86.7	)		(105.6	)
		Net gain on sales of investments and other assets			(14.2	)		(254.3	)
		Workforce reduction costs			1.4			39.2
		Equity in earnings of affiliates less than dividends received			20.1			43.2
		Changes in
			Accounts receivable		(332.4	)		(19.0	)
			Mark-to-market energy assets and liabilities		101.9			(90.6	)
			Risk management assets and liabilities		(56.7	)		(6.7	)
			Materials, supplies, and fuel stocks		(9.5	)		(18.3	)
			Other current assets		(32.8	)		130.7
			Accounts payable		238.5			93.1
			Other current liabilities		123.5			9.7
			Other		(66.8	)		(87.3	)
	Net cash provided by operating activities				390.7			333.5
Cash Flows From Investing Activities
	Investments in property, plant and equipment				(327.5	)		(426.3	)
	Contributions to nuclear decommissioning trust funds				(8.8	)		(8.8	)
	Acquisitions, net of cash acquired				(517.3	)		—
	Sales of investments and other assets				102.8			723.1
	Other investments				(60.2	)		7.5
	Net cash (used in) provided by investing activities				(811.0	)		295.5
Cash Flows From Financing Activities
	Net issuance (maturity) of short-term borrowings				0.9			(959.5	)
	Proceeds from issuance of
		Long-term debt			740.6			1,823.0
		Common stock			49.6			10.7
	Repayment of long-term debt				(150.5	)		(1,255.6	)
	Common stock dividends paid				(82.4	)		(59.0	)
	Other				(1.9	)		(10.0	)
	Net cash provided by (used in) financing activities				556.3			(450.4	)
Net Increase in Cash and Cash Equivalents					136.0			178.6
Cash and Cash Equivalents at Beginning of Period					615.0			72.4
Cash and Cash Equivalents at End of Period				$	751.0		$	251.0

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

6

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

			Three Months Ended June 30,						Six Months Ended June 30,
			2003			2002			2003			2002
			(In millions)
Revenues
	Electric revenues		$	437.0		$	480.4		$	923.3		$	940.8
	Gas revenues			140.0			92.5			443.6			315.9
	Total revenues			577.0			572.9			1,366.9			1,256.7
Expenses
	Operating expenses
		Electricity purchased for resale		237.2			273.8			480.8			514.3
		Gas purchased for resale		86.3			38.7			289.4			163.0
		Operations and maintenance		86.1			81.6			163.3			166.2
		Workforce reduction costs		0.2			7.9			0.5			28.8
	Depreciation and amortization			56.0			55.8			111.9			112.3
	Taxes other than income taxes			42.0			42.0			87.2			86.1
	Total expenses			507.8			499.8			1,133.1			1,070.7
Income from Operations				69.2			73.1			233.8			186.0
Other Income				0.7			3.8			1.1			5.0
Fixed Charges
	Interest expense			29.1			38.0			59.1			74.3
	Allowance for borrowed funds used during construction			(0.5	)		(0.4	)		(1.0	)		(0.8	)
	Total fixed charges			28.6			37.6			58.1			73.5
Income Before Income Taxes				41.3			39.3			176.8			117.5
Income Taxes				16.3			15.7			70.0			46.7
Net Income				25.0			23.6			106.8			70.8
Preference Stock Dividends				3.3			3.3			6.6			6.6
Earnings Applicable to Common Stock			$	21.7		$	20.3		$	100.2		$	64.2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

			Three Months Ended June 30,				Six Months Ended June 30,
			2003		2002		2003		2002
			(In millions)
Net Income			$	21.7	$	20.3	$	100.2	$	64.2
	Other comprehensive income
		Unrealized gain on hedging instruments, net of taxes		0.8		—		0.8		—
Comprehensive Income			$	22.5	$	20.3	$	101.0	$	64.2

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

7

CONSOLIDATED BALANCE SHEETS

Baltimore Gas and Electric Company and Subsidiaries

				June 30, 2003*			December 31, 2002
				(In millions)
Assets
	Current Assets
		Cash and cash equivalents		$	7.5		$	10.2
		Accounts receivable (net of allowance for uncollectibles of $11.5 and $11.5, respectively)			322.9			357.5
		Investment in cash pool, affiliated company			574.8			338.1
		Accounts receivable, affiliated companies			24.2			131.2
		Fuel stocks			55.2			40.6
		Materials and supplies			31.7			31.8
		Prepaid taxes other than income taxes			0.2			42.0
		Other			20.5			10.3
		Total current assets			1,037.0			961.7
	Other Assets
		Receivable, affiliated company			137.8			63.3
		Other			84.9			85.9
		Total other assets			222.7			149.2
	Utility Plant
		Plant in service
			Electric		3,494.2			3,422.3
			Gas		1,052.2			1,041.0
			Common		485.5			489.1
			Total plant in service		5,031.9			4,952.4
		Accumulated depreciation			(1,789.8	)		(1,851.4	)
		Net plant in service			3,242.1			3,101.0
		Construction work in progress			108.8			118.3
		Plant held for future use			4.5			4.5
		Net utility plant			3,355.4			3,223.8
	Deferred Charges
		Regulatory assets (net)			256.7			405.7
		Other			42.5			39.5
		Total deferred charges			299.2			445.2
	Total Assets			$	4,914.3		$	4,779.9

* Unaudited

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

8

CONSOLIDATED BALANCE SHEETS

Baltimore Gas and Electric Company and Subsidiaries

			June 30, 2003*			December 31, 2002
			(In millions)
Liabilities and Equity
	Current Liabilities
		Current portion of long-term debt	$	565.8		$	420.7
		Accounts payable		82.5			103.2
		Accounts payable, affiliated companies		121.3			85.6
		Customer deposits		57.5			54.2
		Accrued taxes		5.8			9.0
		Accrued interest		28.1			31.4
		Other		39.4			49.7
		Total current liabilities		900.4			753.8
	Deferred Credits and Other Liabilities
		Deferred income taxes		548.1			528.9
		Postretirement and postemployment benefits		281.2			278.0
		Deferred investment tax credits		19.6			20.5
		Decommissioning of federal uranium enrichment facilities		14.6			14.6
		Other		13.7			13.9
		Total deferred credits and other liabilities		877.2			855.9
	Long-term Debt
		First refunding mortgage bonds of BGE		780.1			904.9
		Other long-term debt of BGE		919.6			745.1
		Company obligated mandatorily redeemable trust preferred securities of subsidiary trust holding solely 7.16% debentures of BGE due June 30, 2038		250.0			250.0
		Long-term debt of nonregulated businesses		25.0			25.0
		Unamortized discount and premium		(6.0	)		(5.2	)
		Current portion of long-term debt		(565.8	)		(420.7	)
		Total long-term debt		1,402.9			1,499.1
	Minority Interest			19.1			19.4
	Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholder's Equity
		Common stock		912.2			912.2
		Retained earnings		611.7			549.5
		Accumulated other comprehensive income		0.8			—
		Total common shareholder's equity		1,524.7			1,461.7
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	4,914.3		$	4,779.9

* Unaudited

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

9

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

Six Months Ended June 30,				2003			2002
				(In millions)
Cash Flows From Operating Activities
	Net income			$	106.8		$	70.8
	Adjustments to reconcile to net cash provided by operating activities
		Depreciation and amortization			113.4			113.8
		Deferred income taxes			19.4			(18.3	)
		Investment tax credit adjustments			0.9			(1.0	)
		Deferred fuel costs			(4.0	)		24.6
		Pension and postemployment benefits			(69.7	)		(32.5	)
		Workforce reduction costs			0.5			28.8
		Allowance for equity funds used during construction			(1.7	)		(1.4	)
		Changes in
			Accounts receivable		34.6			(32.3	)
			Receivables, affiliated companies		32.5			99.4
			Materials, supplies, and fuel stocks		(14.5	)		15.0
			Other current assets		31.6			74.6
			Accounts payable		(20.7	)		(2.6	)
			Accounts payable, affiliated companies		35.7			44.1
			Other current liabilities		(13.5	)		16.9
			Other		86.1			9.6
	Net cash provided by operating activities				337.4			409.5
Cash Flows From Investing Activities
	Utility construction expenditures (excluding AFC)				(106.8	)		(91.3	)
	Investment in cash pool at parent				(236.7	)		(297.0	)
	Other				0.4			(8.5	)
	Net cash used in investing activities				(343.1	)		(396.8	)
Cash Flows From Financing Activities
	Proceeds from issuance of long-term debt				196.8			2.0
	Repayment of long-term debt				(150.3	)		(225.7	)
	Distribution (to) from parent				(38.1	)		200.0
	Preference stock dividends paid				(6.6	)		(6.6	)
	Other				1.2			—
	Net cash provided by (used in) financing activities				3.0			(30.3	)
Net Decrease in Cash and Cash Equivalents					(2.7	)		(17.6	)
Cash and Cash Equivalents at Beginning of Period					10.2			37.4
Cash and Cash Equivalents at End of Period				$	7.5		$	19.8

See Notes to Consolidated Financial Statements.
Certain prior-period amounts have been reclassified to conform with the current period's presentation.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Various factors can have a significant impact on our results for interim periods. This means that the results for this quarter are not necessarily indicative of future quarters or full year results given the seasonality of our business.

        Our interim financial statements on the previous pages reflect all adjustments that management believes are necessary for the fair presentation of the financial position and results of operations for the interim periods presented. These adjustments are of a normal recurring nature.

Basis of Presentation

This Quarterly Report on Form 10-Q is a combined report of Constellation Energy and Baltimore Gas and Electric Company (BGE). References in this report to "we" and "our" are to Constellation Energy and its subsidiaries, collectively. References in this report to the "utility business" are to BGE.

Earnings Per Share

Basic earnings per common share (EPS) is computed by dividing earnings applicable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Our dilutive common stock equivalent shares consist of stock options.

        Stock options to purchase approximately 1.2 million shares during the quarter ended June 30, 2003 and approximately 2.0 million shares during the quarter ended June 30, 2002 were not dilutive and were excluded from the computation of diluted EPS for those periods.

        Stock options to purchase approximately 2.7 million shares during the six months ended June 30, 2003 and approximately 1.8 million shares during the six months ended June 30, 2002 were not dilutive and were excluded from the computation of diluted EPS for those periods.

Stock-Based Compensation

Under our long-term incentive plans, we granted stock options, performance and service-based restricted stock, and equity to officers, key employees, and members of the Board of Directors. As permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, we measure our stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations. We discuss these plans and accounting further in Note 13 of our 2002 Annual Report on Form 10-K.

        The following table illustrates the effect on net income and earnings per share had we applied the fair value recognition provision of SFAS No. 123 to all outstanding stock options and stock awards in each period.

		Quarter Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions, except per share amounts)
Net income (loss), as reported		$	96.8		$	81.3		$	(34.6	)	$	310.0
Add: Stock-based compensation expense determined under intrinsic value method and included in reported net income (loss), net of related tax effects			3.1			1.9			4.1			2.3
Deduct: Stock-based compensation expense determined under fair value based method for all awards, net of related tax effects			(5.4	)		(3.8	)		(8.5	)		(5.5	)
Pro-forma net income (loss)		$	94.5		$	79.4		$	(39.0	)	$	306.8
Earnings (loss) per share:
	Basic – as reported	$	0.58		$	0.50		$	(0.21	)	$	1.89
	Basic – pro forma	$	0.57		$	0.48		$	(0.24	)	$	1.87
	Diluted – as reported	$	0.58		$	0.50		$	(0.21	)	$	1.89
	Diluted – pro forma	$	0.57		$	0.48		$	(0.24	)	$	1.87

Workforce Reduction Costs

We incurred costs related to workforce reduction efforts initiated in previous years. We discuss these costs in more detail below and in Note 2 of our 2002 Annual Report on Form 10-K.

2003

During the quarter ended June 30, 2003, we recorded $0.7 million in expense, of which BGE recorded $0.2 million, associated with deferred payments to employees eligible for the 2001 Voluntary Special Early Retirement Program.

        During the six months ended June 30, 2003, we recorded $1.4 million in expense, of which BGE recorded $0.5 million, associated with deferred payments to employees eligible for the 2001 Voluntary Special Early Retirement Program.

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2002

In the first quarter of 2002, we recorded $35.1 million of net workforce reduction costs associated with our 2001 workforce reduction initiatives. The $35.1 million of net workforce reduction costs recorded during the first quarter of 2002 consisted of $25.9 million recognized as expense, of which BGE recognized $20.9 million. The remaining $9.2 million was recognized by BGE as a regulatory asset related to its gas business.

        In the second quarter of 2002, we recorded $16.3 million of net workforce reduction costs. The $16.3 million of net workforce reduction costs recorded in the second quarter of 2002, consisted of $13.3 million recognized as expense, of which BGE recognized $7.9 million of this amount. The remaining $3.0 million was recognized by BGE as a regulatory asset related to its gas business.

        In 2002, we completed involuntary severances under our 2001 workforce reduction programs. Accordingly, no involuntary severance liability recorded under Emerging Issues Task Force (EITF) 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), remained at December 31, 2002.

        In the third quarter of 2002, we recorded $14.9 million of expenses for anticipated involuntary severance costs in accordance with EITF 94-3 associated with new workforce reduction initiatives in 2002. The following table summarizes the status of the involuntary severance liability recorded under EITF 94-3.

	(In millions)
Severance liability balance at December 31, 2002	$	14.9
Cash severance payments in first quarter		(10.5	)
Cash severance payments in second quarter		(1.3	)
Severance costs recorded as postretirement benefit liability		(0.7	)
Severance liability balance at June 30, 2003	$	2.4

Net Gain on Sales of Investments and Other Assets

2003

During the six months ended June 30, 2003, our other nonregulated businesses recognized $14.2 million pre-tax, or $8.6 million after-tax, gains on the sale of non-core assets as follows:

•

a $7.2 million pre-tax gain in the first quarter of 2003 on the sale of an oil tanker to the U.S. Navy,

•

a $5.3 million pre-tax gain in the first quarter of 2003 on the favorable settlement of a contingent obligation we had previously reserved relating to the sale of our Guatemalan power plant operation in the fourth quarter of 2001,

•

a $1.2 million pre-tax gain in the first quarter of 2003 on an installment sale of a parcel of real estate, and

•

a $0.5 million pre-tax gain in the second quarter of 2003 on the sale of financial investments as we continued to liquidate this operation.

2002

During the six months ended June 30, 2002, our nonregulated businesses recognized $254.3 million net pre-tax gains on the sale of financial investments and other non-core assets, including the gain on the sale of our investment in Orion Power Holdings, Inc. (Orion).

        In February 2002, Reliant Resources, Inc. acquired all of the outstanding shares of Orion for $26.80 per share, including the shares of Orion we owned. We received cash proceeds of $454.1 million and recognized a gain of $255.5 million pre-tax, or $163.3 million after-tax, on the sale of our investment.

        During the second quarter of 2002 our merchant energy business sold a turbine-generator set for $6.0 million below its book value.

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Information by Operating Segment

Our reportable operating segments are—Merchant Energy, Regulated Electric, and Regulated Gas:

•

Our nonregulated merchant energy business in North America includes:

–

fossil, nuclear, and hydroelectric generating facilities and interests in qualifying facilities and power projects in the United States,

–

origination of structured transactions (such as load-serving and power purchase agreements), and risk management services to various customers (including hedging of output from generating facilities and fuel costs),

–

electric and gas retail energy services to commercial and industrial customers, and

–

generation and consulting services.

•

Our regulated electric business purchases, transmits, distributes, and sells electricity in Maryland.

•

Our regulated gas business purchases, transports, and sells natural gas in Maryland.

        Our remaining nonregulated businesses:

•

design, construct, and operate single-site heating, cooling, and cogeneration facilities for commercial and industrial customers throughout North America,

•

provide home improvements, service gas and electric appliances, service heating, air conditioning, plumbing, electrical, and indoor air quality systems, and provide electric and natural gas retail marketing in central Maryland, and

•

own and operate a district cooling system for commercial customers in the City of Baltimore, Maryland.

        In addition, we own several investments that we do not consider to be core operations. These include financial investments, real estate projects, and interests in a Latin American power distribution project and in a fund that holds interests in two South American energy projects.

        These reportable segments are strategic businesses based principally upon regulations, products, and services that require different technology and marketing strategies. We evaluate the performance of these segments based on net income. We account for intersegment revenues using market prices. A summary of information by operating segment is shown in the table on the next page.

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	Merchant Energy Business			Regulated Electric Business		Regulated Gas Business		Other Nonregulated Businesses			Unallocated Corporate Items and Eliminations			Consolidated
For the three months ended June 30,	(In millions)
2003
Unaffiliated revenues	$	1,553.6		$	436.9	$	137.5	$	143.1		$	—		$	2,271.1
Intersegment revenues		273.5			0.1		2.5		—			(276.1	)		—
Total revenues		1,827.1			437.0		140.0		143.1			(276.1	)		2,271.1
Income from operations		152.0			59.7		9.5		7.9			—			229.1
Net income (loss)		75.2			20.8		0.9		(0.1	)		—			96.8
2002
Unaffiliated revenues	$	328.7		$	480.4	$	90.6	$	131.7		$	—		$	1,031.4
Intersegment revenues		278.0			—		1.9		0.1			(280.0	)		—
Total revenues		606.7			480.4		92.5		131.8			(280.0	)		1,031.4
Income from operations		99.1			61.0		12.1		12.7			—			184.9
Net income		56.4			17.4		2.9		4.6			—			81.3
For the six months ended June 30,
2003
Unaffiliated revenues	$	2,943.5		$	923.2	$	435.7	$	298.7		$	—		$	4,601.1
Intersegment revenues		560.7			0.1		7.9		—			(568.7	)		—
Total revenues		3,504.2			923.3		443.6		298.7			(568.7	)		4,601.1
Income from operations		142.1			168.7		65.1		28.8			—			404.7
Cumulative effects of changes in accounting principles		(198.4	)		—		—		—			—			(198.4	)
Net (loss) income		(143.7	)		71.0		29.5		8.6			—			(34.6	)
2002
Unaffiliated revenues	$	579.5		$	940.7	$	311.4	$	252.1		$	—		$	2,083.7
Intersegment revenues		517.2			0.1		4.5		—			(521.8	)		—
Total revenues		1,096.7			940.8		315.9		252.1			(521.8	)		2,083.7
Income from operations		148.6			120.7		65.3		268.9			—			603.5
Net income		83.4			33.8		30.7		162.1			—			310.0

Certain prior-period amounts have been reclassified to conform with the current period's presentation.

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Financing Activity

Constellation Energy

Constellation Energy issued the following notes during the period from January 1, 2003 through the date of this report:

	Principal		Date Issued	Maturity and Repayment Date	Net Proceeds
	(In millions)
4.55% Fixed Rate Notes; semi-annual interest payments	$	550.0	6/03	6/15	$	543.8

         We used the net proceeds from this issuance to refinance the debt associated with the High Desert Power Project that we acquired and consolidated at June 30, 2003. We discuss the acquisition of the High Desert Power Project in more detail in the Acquisitions section on page 20.

        In June 2003, Constellation Energy arranged a $447.5 million 364-day revolving credit facility and a $447.5 million three-year revolving credit facility replacing a $640 million 364-day revolving credit facility and a $188.5 million three-year revolving credit facility. Both of the facilities that were replaced expired in the second quarter of 2003. Constellation Energy also has an existing $640 million revolving credit facility that expires in June 2005.

        We use these three facilities to ensure adequate liquidity to support our operations. We can borrow directly from the banks or use the facilities to allow the issuance of commercial paper. Additionally, we use the multi-year facility to support letters of credit primarily for our merchant energy business.

        These revolving credit facilities allow the issuance of letters of credit up to approximately $1.1 billion. At June 30, 2003, letters of credit that totaled $426.1 million were issued under all of our facilities.

        Additionally, under our continuous offering program, employee savings plans, dividend reinvestment plans, and shareholder investment plans we issued $49.6 million of common stock during the six months ended June 30, 2003.

BGE

BGE issued the following notes during the period from January 1, 2003 through the date of this report:

	Principal		Date Issued	Maturity and Repayment Date	Net Proceeds
	(In millions)
5.20% Fixed Rate Notes; semi-annual interest payments	$	200.0	6/03	6/33	$	196.8

        In June 2003, BGE announced that it would redeem prior to maturity approximately $98.0 million principal amount outstanding of its 7¹/2% Series due March 1, 2023 First Refunding Mortgage Bonds, which were redeemed on July 21, 2003 at the regular redemption price of 103.32% of principal plus accrued interest from March 1, 2003 to July 20, 2003. BGE also announced that it would redeem prior to maturity approximately $72.3 million principal amount outstanding of its 7¹/2% Series due April 15, 2023 First Refunding Mortgage Bonds, which were redeemed on July 21, 2003 at the regular redemption price of 103.53% of principal plus accrued interest from April 15, 2003 to July 20, 2003.

        During the second quarter of 2003, certain credit facilities expired and BGE renewed those facilities. BGE continues to maintain $200 million in committed credit facilities, expiring August 2003 through June 2004. We can borrow directly from the banks or use the facilities to allow the issuance of commercial paper. As of June 30, 2003, BGE had no outstanding commercial paper, which results in $200.0 million in unused credit facilities.

        In the future, BGE may purchase some of its long-term debt or preference stock in the market depending on market conditions and BGE's capital structure.

Income Taxes

We have certain investments in facilities that manufacture solid synthetic fuel produced from coal as defined under Section 29 of the Internal Revenue Code for which we claim tax credits on our Federal income tax return. The synthetic fuel process involves combining coal material with a chemical change agent to create a significant chemical change. To qualify for the Section 29 tax credits, the synthetic fuel must meet three primary conditions:

•

there must be a significant chemical change in the coal,

•

the product must be sold to an unaffiliated entity, and

•

the production facility must have been originally placed in service before July 1, 1998.

        As of June 30, 2003, we have recognized cumulative tax benefits associated with Section 29 credits of $60.9 million, of which $9.5 million was recognized during the quarter ended June 30, 2003 and $17.9 million was recognized during the six months ended June 30, 2003.

15

        On June 27, 2003, the Internal Revenue Service (IRS) issued Announcement 2003-46, which affects all companies that have recognized tax benefits associated with Section 29 credits for synthetic fuel produced from coal, indicating that it questioned the scientific validity of certain test procedures and results previously presented as evidence to prove the required significant chemical change had occurred. According to the Announcement, the IRS National Office is currently reviewing information regarding these tests and procedures. The IRS is suspending the issuance of private letter rulings regarding the question of chemical change for Section 29 tax credit purposes until this review is complete. The Announcement indicated that if the IRS determines that these test procedures and results do not demonstrate that a significant chemical change has occurred, the IRS will take appropriate action, including revoking letter rulings relying on such procedures and results.

        Certain facilities in which we have an investment received private letter rulings from the IRS stating that the synthetic fuel produced undergoes a significant chemical change and thus qualifies for Section 29 credits. These private letter rulings were based, in part, on tests performed by independent scientific laboratories. The partnership that owns these facilities is currently under examination by the IRS. As part of their examination, the IRS engaged a third party to perform chemical tests of the synthetic fuel. The third party has questioned the testing procedures and chemical change results of the independent scientific laboratories that were submitted to the IRS as part of the private letter ruling process.

        IRS rules specify that a private letter ruling will not be revoked on a retroactive basis, provided that there has been no misstatement or omission of material facts presented in the ruling request. We believe that the chemical testing procedures and results presented by the independent scientific laboratories in the ruling requests were properly disclosed to the IRS.

        While we believe the production and sale of synthetic fuel from all of our synthetic fuel facilities meet the conditions to qualify for tax credits under Section 29 of the IRS Code, we cannot predict the timing or outcome of the review by the IRS or its ultimate impact on the Section 29 credits that we have claimed to date or expect to claim in the future, but the impact could be material to our financial results.

Commitments, Guarantees, and Contingencies

Our merchant energy business enters into long-term contracts for:

•

the purchase of electric generating capacity and energy,

•

the procurement and delivery of fuels to supply our generating plant requirements,

•

the capacity and transmission and transportation rights for the physical delivery of energy to meet our obligations to our customers, and

•

other capital requirements.

        Our regulated gas business enters into various long-term contracts for the procurement, transportation, and storage of gas.

        BGE Home Products & Services also has gas and electric purchase commitments related to sales programs. The electric commitments expire in 2004 and the gas commitments expire in 2005.

        At June 30, 2003, the total amount of commitments was $3,743.4 million, which are primarily related to our merchant energy business.

Long-Term Power Sales Contracts

We enter into long-term power sales contracts in connection with our load-serving activities. We also enter into long-term power sales contracts associated with certain of our power plants. Our load-serving power sales contracts extend for terms through 2012 and provide for the sale of full requirements energy to electricity distribution utilities and certain retail customers. Our power sales contracts associated with our power plants extend for terms into 2011 and provide for the sale of all or a portion of the actual output of certain of our power plants. All long-term contracts were executed at pricing that approximated market rates, including profit margin, at the time of execution.

Guarantees

The terms of our guarantees are as follows:

	Payments/Expiration
	2003		2004- 2005		2006- 2007		Thereafter		Total
	(In millions)
Competitive Supply	$	2,209.9	$	794.9	$	50.8	$	220.8	$	3,276.4
Other		6.7		6.6		2.9		521.5		537.7
Total	$	2,216.6	$	801.5	$	53.7	$	742.3	$	3,814.1

        At June 30, 2003, Constellation Energy had a total of $3,814.1 million in guarantees outstanding related to loans, credit facilities, and contractual performance of certain of our subsidiaries as described below. These guarantees do not represent incremental consolidated Constellation Energy obligations; rather, they primarily represent parental guarantees of certain subsidiary obligations. We do not expect to fund the full amount under these guarantees.

16

•

Constellation Energy guaranteed $3,276.4 million on behalf of our subsidiaries for competitive supply activities. These guarantees are put into place in order to allow the subsidiaries the flexibility needed to conduct business with counterparties without having to post substantial cash collateral. While the face amount of these guarantees is $3,276.4 million, we do not expect to fund the full amount as our calculated fair value of obligations covered by these guarantees was $787.1 million at June 30, 2003. The recorded fair value of obligations in our Consolidated Balance Sheets for these guarantees was $572.1 million at June 30, 2003.

•

Constellation Energy guaranteed $209.6 million primarily on behalf of Nine Mile Point related to nuclear decommissioning.

•

Constellation Energy guaranteed $57.5 million on behalf of our other nonregulated businesses primarily for loans and performance bonds of which $25.6 million was recorded in our Consolidated Balance Sheets at June 30, 2003.

•

Our merchant energy business guaranteed $7.3 million for loans related to certain power projects in which we have an investment.

•

BGE guaranteed two-thirds of certain debt of Safe Harbor Water Power Corporation. At June 30, 2003, Safe Harbor Water Power Corporation had outstanding debt of $20.0 million. The maximum amount of BGE's guarantee is $13.3 million.

•

BGE guaranteed the Trust Originated Preferred Securities (TOPrS) of $250.0 million. We discuss TOPrS in more detail in Note 8 of our 2002 Annual Report on Form 10-K.

        As discussed in Note 11 of our 2002 Annual Report on Form 10-K, Constellation Energy guaranteed up to $600.0 million relating to obligations of the High Desert Power Project. This guarantee ended with the termination of the High Desert lease on June 27, 2003 as discussed in the Acquisition section on page 20. Constellation Energy still has a guarantee in place to cover any indemnification to the previous financiers of the High Desert Power Trust for legal matters that may arise in the future. However, no amount has been recorded as there is no litigation currently pending that this guarantee would cover.

        The total fair value of the obligations for our guarantees recorded in our Consolidated Balance Sheets was $847.7 million and not the $3,814.1 million of total guarantees. We assess the risk of loss from these guarantees to be minimal.

Environmental Matters

We are subject to regulation by various federal, state and local authorities with regard to:

•

air quality,

•

water quality, and

•

disposal of hazardous substances.

        As new laws or regulations are promulgated, we assess their applicability and implement the necessary modifications to our facilities or their operation, as required.

        We discuss the significant matters below.

Clean Air

The Clean Air Act affects both existing generating facilities and new projects. The Clean Air Act and many state laws impose significant requirements relating to emissions of SO₂ (sulfur dioxide), NOx (nitrogen oxide), particulate matter, and other pollutants that result from burning fossil fuels. The Clean Air Act also contains other provisions that could materially affect some of our projects. Various provisions may require permits, inspections, or installation of additional pollution control technology or may require the purchase of emission allowances. Certain of these provisions are described in more detail below.

        On October 27, 1998, the Environmental Protection Agency (EPA) issued a rule requiring 22 Eastern states and the District of Columbia to reduce emissions of NOx. The EPA rule requires states to implement controls sufficient to meet their NOx budget by May 30, 2004. However, the Northeast states decided to require compliance in 2003. Coal-fired power plants are a principal target of NOx reductions under this initiative.

        Many of our generation facilities are subject to NOx reduction requirements under the EPA rule, including those located in Maryland and Pennsylvania. At the Brandon Shores and Wagner facilities, we installed emission reduction equipment to meet Maryland regulations issued pursuant to EPA's rule. The owners of the Keystone plant in Pennsylvania completed the installation of emissions reduction equipment by July 2003 to meet Pennsylvania regulations issued pursuant to EPA's rule. The total cost of the emissions reduction equipment was approximately $37 million.

        The EPA established new National Ambient Air Quality Standards for very fine particulates and revised standards for ozone attainment that were upheld after various court appeals. While these standards may require increased controls at some of our fossil generating plants in the future, implementation could be delayed for several years. We cannot estimate the cost of these increased controls at this time because the states, including Maryland, Pennsylvania, and California, still need to determine what reductions in pollutants will be necessary to meet the EPA standards.

17

        The EPA and several states filed suits against a number of coal-fired power plants in Mid-Western and Southern states alleging violations of the Prevention of Significant Deterioration and non-attainment provisions of the Clean Air Act's new source review requirements. The EPA requested information relating to modifications made to our Brandon Shores, Crane, and Wagner plants in Baltimore, Maryland. The EPA also sent similar, but narrower, information requests to two of our newer Pennsylvania waste-coal burning plants. We have responded to the EPA, and as of the date of this report the EPA has taken no further action.

        Based on the levels of emissions control that the EPA and states are seeking in these new source review enforcement actions, we believe that material additional costs and penalties could be incurred, and planned capital expenditures could be accelerated, if the EPA was successful in any future actions regarding our facilities.

        The Clean Air Act requires the EPA to evaluate the public health impacts of emissions of mercury, a hazardous air pollutant, from coal-fired plants. The EPA decided to control mercury emissions from coal-fired plants. Compliance could be required by approximately 2007. We believe final regulations could be issued in 2004 and could affect all oil-fired and coal-fired boilers. The cost of compliance with the final regulations could be material.

        Future initiatives regarding greenhouse gas emissions and global warming continue to be the subject of much debate. As a result of our diverse fuel portfolio, our contribution to greenhouse gases varies by plant type. Fossil fuel-fired power plants are significant sources of carbon dioxide emissions, a principal greenhouse gas. Our compliance costs with any mandated federal greenhouse gas reductions in the future could be material.

Clean Water Act

Our facilities are subject to a variety of federal and state regulations governing existing and potential water/wastewater and stormwater discharges.

        In April 2002, the EPA proposed rules under the Clean Water Act that require that cooling water intake structures reflect the best technology available for minimizing adverse environmental impacts. A final action on the proposed rules is expected by February 2004. The proposed rule may require the installation of additional intake screens or other protective measures, as well as extensive site-specific study and monitoring requirements. There is also the possibility that the proposed rules may lead to the installation of cooling towers on four of our fossil and both of our nuclear facilities. Our compliance costs associated with the final rules could be material.

Waste Disposal

The EPA and several state agencies have notified us that we are considered a potentially responsible party with respect to the cleanup of certain environmentally contaminated sites owned and operated by others. We cannot estimate the cleanup costs for all of these sites.

        However, based on a Record of Decision issued by the EPA in 1997, we can estimate that BGE's current 15.47% share of the reasonably possible cleanup costs at one of these sites, Metal Bank of America, a metal reclaimer in Philadelphia, could be as much as $1.3 million higher than amounts we believe are probable and have recorded as a liability in our Consolidated Balance Sheets. There has been no significant activity with respect to this site since the EPA's Record of Decision in 1997.

        In 1999, the EPA proposed to add the 68^th Street Dump in Baltimore, Maryland to the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund") National Priorities List ("NPL") and sent a general notice letter to BGE and 19 other parties identifying them as potentially liable parties at the 68^th Street Dump site. In April 2003, EPA re-proposed the 68^th Street site to the NPL, EPA's list of sites targeted for cleanup and enforcement. At this stage, it is not possible to predict the cleanup cost of the site or BGE's share of the liability, but the costs could be material.

        In late December 1996, BGE signed a consent order with the Maryland Department of the Environment that required it to implement remedial action plans for contamination at and around the Spring Gardens site, located in Baltimore, Maryland. The Spring Gardens site was once used to manufacture gas from coal and oil. Based on the remedial action plans, the costs BGE considers to be probable to remedy the contamination are estimated to total $47 million. BGE recorded these costs as a liability on its Consolidated Balance Sheets and deferred these costs, net of accumulated amortization and amounts it recovered from insurance companies, as a regulatory asset. Because of the results of studies at this site, it is reasonably possible that additional costs could exceed the amount BGE recognized by approximately $14 million. Through June 30, 2003, BGE spent approximately $39 million for remediation at this site. BGE also investigated other small sites where gas was manufactured in the past. We do not expect the cleanup costs of the remaining smaller sites to have a material effect on our financial results.

Nuclear Insurance

We maintain nuclear insurance coverage for Calvert Cliffs and Nine Mile Point in four program areas: liability, worker radiation, property, and accidental outage. These policies contain certain industry standard exclusions, including, but not limited to, ordinary wear and tear, and war. We discuss our insurance programs in Note 11 of our 2002 Annual Report on Form 10-K.

18

Nuclear Liability Insurance

Pursuant to the Price-Anderson Act, we are required to insure against public liability claims resulting from nuclear incidents to the full limit of public liability. This limit of liability consists of the maximum available commercial insurance of $300 million and mandatory participation in an industry-wide retrospective premium assessment program. Effective August 20, 2003, the retrospective premium assessment will be increased to $100.6 million per reactor, increasing the total amount of insurance for public liability to approximately $10.8 billion. Under the retrospective assessment program, we can be assessed up to $402.3 million per incident at any commercial reactor in the country, payable at no more than $40 million per incident per year. This assessment also applies in excess of our worker radiation claims insurance and is subject to inflation and state premium taxes. In addition, the U.S. Congress could impose additional revenue-raising measures to pay claims.

Worker Radiation Claims Insurance

We participate in the American Nuclear Insurers Master Worker Program that provides coverage for worker tort claims filed for radiation injuries. Effective January 1, 1998, this program was modified to provide coverage to all workers whose nuclear-related employment began on or after the commencement date of reactor operations. Waiving the right to make additional claims under the old policy was a condition for coverage under the new policy. We describe the old and new policies below:

•

Nuclear worker claims reported on or after January 1, 1998 are covered by a new insurance policy with an annual industry aggregate limit of $300 million for radiation injury claims against all those insured by this policy.

•

All nuclear worker claims reported prior to January 1, 1998 are still covered by the old policy. Insureds under the old policies, with no current operations, are not required to purchase the new policy described above, and may still make claims against the old policies through 2007. If radiation injury claims under these old policies exceed the policy reserves, all policyholders could be retroactively assessed, with our share being up to $6.3 million.

        The sellers of Nine Mile Point retain the liabilities for existing and potential claims that occurred prior to November 7, 2001. In addition, the Long Island Power Authority, which continues to own 18% of Unit 2 at Nine Mile Point, is obligated to assume its pro rata share of any liabilities for retrospective premiums and other premiums assessments. If claims under these policies exceed the coverage limits, the provisions of the Price-Anderson Act would apply.

Nuclear Property Insurance

Our policies provide $500 million in primary and an additional $2.25 billion in excess coverage for property damage, decontamination, and premature decommissioning liability for Calvert Cliffs or Nine Mile Point. This coverage currently is purchased through an industry mutual insurance company. If accidents at plants insured by the mutual insurance company cause a shortfall of funds, all policyholders could be assessed, with our share being up to $68.6 million.

Non-nuclear Insurance

Our conventional property insurance provides coverage of $1.0 billion per occurrence for Certified acts of terrorism as defined under the Terrorism Risk Insurance Act of 2002. Certified acts of terrorism are determined by the Secretary of State and Attorney General of the United States and primarily are based upon the occurrence of significant acts of international terrorism. Effective July 1, 2003, our conventional property insurance program also provides coverage of $250.0 million per occurrence (subject to a $250.0 million annual aggregate) for losses resulting from non-certified acts of terrorism. If a terrorist act occurs at any of our facilities, it could have a significant adverse impact on our financial results.

California Power Agreements

Our merchant energy business has $248.6 million invested in operating power projects of which our ownership percentage represents 140 megawatts of electricity that are sold to Pacific Gas & Electric (PGE) and to Southern California Edison (SCE) in California under power purchase agreements.

        As a result of ongoing litigation before the FERC regarding sales into the spot markets of the California Independent System Operator (ISO) and Power Exchange (PX), we currently estimate that we may be required to pay refunds of between $2 and $6 million for transactions that we entered into with these entities for the period between October 2000 and June 2001. However, we cannot determine the actual amount we could pay because litigation is ongoing and new events could occur that may cause the actual amount, if any, to be materially different from our estimate.

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SFAS No. 133 Hedging Activities

We are exposed to market risk, including changes in interest rates and the impact of market fluctuations in the price and transportation costs of electricity, natural gas, and other commodities. We discuss our market risk in more detail in our 2002 Annual Report on Form 10-K.

Interest Rates

We use interest rate swaps to manage our interest rate exposures associated with new debt issuances. These swaps are designated as cash-flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, with gains and losses, net of associated deferred income tax effects, recorded in "Accumulated other comprehensive income" in our Consolidated Balance Sheets, in anticipation of planned financing transactions. We reclassify gains and losses on the hedges from "Accumulated other comprehensive income" into "Interest expense" during the periods in which the interest payments being hedged occur.

        During the second quarter of 2003, we entered into various forward starting interest rate swaps to manage our interest rate exposure for the issuances of $550.0 million of Constellation Energy debt and $200.0 million of BGE debt. All of these swap contracts expired in the second quarter of 2003 resulting in a pre-tax loss of $8.7 million that was recorded in "Accumulated other comprehensive income" in our Consolidated Balance Sheets. Of this amount, BGE recorded a pre-tax gain of $1.2 million in "Accumulated other comprehensive income" in its Consolidated Balance Sheets.

        At June 30, 2003, we recorded net unrealized pre-tax gains of $22.7 million on hedges, net of associated deferred income tax effects, in "Accumulated other comprehensive income." We expect to reclassify $2.9 million of pre-tax net gains on these cash flow hedges from "Accumulated other comprehensive income" into "Interest expense" during the next twelve months.

Commodity Prices

At June 30, 2003, our merchant energy business had designated certain fixed-price forward purchase and sale contracts as cash-flow hedges of forecasted transactions for the years 2003 through 2011 under SFAS No. 133.

        Under the provisions of SFAS No. 133, we record gains and losses on energy derivative contracts designated as cash-flow hedges of forecasted transactions in "Accumulated other comprehensive income" in our Consolidated Balance Sheets prior to the settlement of the anticipated hedged transaction. We reclassify these gains or losses into earnings upon settlement of the underlying hedged transaction. We record derivatives used for hedging activities from our merchant energy business in "Risk management assets and liabilities" in our Consolidated Balance Sheets.

        At June 30, 2003, our merchant energy business recorded net unrealized pre-tax losses of $36.6 million on these hedges, net of associated deferred income tax effects, in "Accumulated other comprehensive income." We expect to reclassify $47.7 million of net pre-tax gains on cash-flow hedges from "Accumulated other comprehensive income" into earnings during the next twelve months based on the market prices at June 30, 2003. However, the actual amount reclassified into earnings could vary from the amounts recorded at June 30, 2003 due to future changes in market prices. We recognized into earnings a pre-tax net gain of $9.5 million for the quarter ended June 30, 2003 and a pre-tax net gain of $9.3 million for the six months ended June 30, 2003 related to the ineffective portion of our hedges.

Acquisition

In April 2003, our High Desert Power Project in Victorville, CA, an 830 megawatt (MW) gas-fired combined cycle facility, commenced operations. The project has a long-term power sales agreement with the California Department of Water Resources (CDWR). The contract is a "tolling" structure, under which the CDWR pays a fixed amount of $12.1 million per month and provides CDWR the right, but not the obligation, to purchase power from the project at a price linked to the variable cost of production. During the term of the contract, which runs for seven years and nine months from the April 2003 commercial operation date of the plant, the project will provide energy exclusively to the CDWR.

        Prior to June 2003, we accounted for this project as an operating lease. In June 2003, we elected to refinance the lease to extend the tenor of the financing at attractive interest rates. Accordingly, we exercised our option under the lease associated with the High Desert Power Project and paid off the lease and acquired the assets from the lessor. At June 30, 2003 the assets and liabilities associated with the High Desert Power Project are included in our Consolidated Balance Sheets.

        Our preliminary purchase price allocation for the net assets acquired is as follows:

At June 27, 2003	(In millions)
Cash	$	4.3
Other Current Assets		1.6
Other Noncurrent Assets		1.7
Net Property, Plant and Equipment		528.3
Total Assets Acquired		535.9
Accounts Payable		(17.5	)
Net Assets Acquired	$	518.4

        Currently we have not finalized the valuation of any potential intangible assets that could impact our purchase price allocation.

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Accounting Standards Issued

SFAS No. 150

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for interim periods beginning after June 15, 2003, for financial instruments entered into or modified after May 31, 2003. The adoption of this standard is not expected to have a material impact on our financial results.

SFAS No. 149

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The statement amends and clarifies SFAS No. 133 for certain interpretive guidance issued by the Derivatives Implementation Group. SFAS No. 149 is effective after June 30, 2003, for contracts entered into or modified and for hedges designated after the effective date. While we are still evaluating the provisions of this statement, the adoption of this standard is not expected to have a material impact on our financial results.

SFAS No. 133—DIG No. C20

In June 2003, the FASB cleared Derivatives Implementation Group Statement 133 Implementation Issue No. C20, Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature (DIG C20). The scope of DIG C20 includes power and gas contracts that meet the definition of a derivative under SFAS No. 133. The provisions of DIG C20 provide guidance on determining whether any such contracts that include a price adjustment mechanism are eligible for accrual accounting under the normal purchase and normal sale exception to SFAS No. 133.

        DIG C20 requires all entities to evaluate any derivatives previously designated as normal purchases or normal sales under this exception to determine whether they previously should have been marked-to-market, and to record the fair value of any such contracts as a cumulative effect adjustment to earnings at the time of adoption. The provisions of DIG C20 must be adopted no later than October 1, 2003. We have not evaluated whether we have any contracts that are subject to DIG C20, but the effect of applying its provisions could be material to our financial results.

EITF 01-8

In May 2003, the EITF reached a consensus on Issue 01-8, Determining Whether an Arrangement Contains a Lease. EITF 01-8 provides guidance on how to determine when a contract contains a lease that is within the scope of SFAS No. 13, Accounting for Leases, and provides that any contract that conveys the right to control the use of property, plant, or equipment must be accounted for as a lease. EITF 01-8 applies to new contracts entered into after June 30, 2003. It also applies to any existing arrangements for which the contractual terms are modified or the underlying property, plant, or equipment undergoes a substantial physical change. We have not evaluated whether we have any existing contracts that are subject to EITF 01-8, but we do not expect the impact of applying its provisions to be material to our financial results.

FIN 46

In January 2003, the FASB issued Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, that addresses conditions when an entity should be consolidated based upon variable interests rather than voting interests. Variable interests are ownership interests or contractual relationships that enable the holder to share in the financial risks and rewards resulting from the activities of a Variable Interest Entity (VIE). A VIE can be a corporation, partnership, trust, or any other legal structure used for business purposes. An entity is considered a VIE under FIN 46 if it does not have an equity investment sufficient for it to finance its activities without assistance from variable interests or if its equity investors do not have voting rights.

        FIN 46 requires us to consolidate VIEs for which we are the primary beneficiary and to disclose certain information about significant variable interests we hold. The primary beneficiary of a VIE is the entity that receives the majority of the entity's expected losses, residual returns, or both. FIN 46 applied immediately to all VIEs created after January 31, 2003 and was effective July 1, 2003 for all VIEs created before February 1, 2003.

        The VIEs for which we are the primary beneficiary include a geothermal power project, the Safe Harbor Water Power Corporation, and an office building in Annapolis, Maryland, that we partially occupy. The other VIEs in which we have a significant interest include certain other power projects and fuel processing facilities. We will not be required to consolidate these entities because we are not the primary beneficiary.

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        The High Desert Power Project, a gas-fired generation project located in California, was previously disclosed as a VIE for which we are the primary beneficiary. In June 2003, we refinanced our lease and exercised our option to purchase the project from the High Desert Power Trust and consolidated the assets and liabilities of the Trust at June 30, 2003. As a result of consolidating the High Desert Power Project, the implementation of FIN 46 no longer applies to the project.

        On July 1, 2003, we consolidated those VIEs for which we are the primary beneficiary. We removed from our Consolidated Balance Sheets our previously recorded investment and recorded in our Consolidated Balance Sheets the total assets, liabilities and other ownership interests as reflected in the financial statements of those entities. The net amount we added to our Consolidated Balance Sheets was equal to our recorded investment. As a result, we do not expect to record a cumulative effect of change in accounting principle upon adoption of FIN 46 in the third quarter of 2003. Beginning July 1, 2003, we discontinued applying the equity method of accounting and recorded in our Consolidated Statements of Income the revenues and expenses of those VIEs for which we are the primary beneficiary. This change will not affect our earnings.

        The variable interests in entities in which we are involved generally consist of equity investments and, in some instances, guarantees of the entities' debt. The following is summary information about these entities as of June 30, 2003:

	Primary Beneficiary		Significant Interest		Total
	(In millions)
Total assets	$	322	$	470	$	792
Total liabilities		151		407		558
Our ownership interest		132		20		152
Other ownership interests		39		43		82
Our maximum exposure to loss		158		67		225

        The maximum exposure to loss represents the loss that we would incur in the unlikely event our investment in all of these entities were to become worthless and we were required to fund the full amount of all guarantees associated with these entities. Our maximum exposure to loss as of June 30, 2003 consists of the following:

•

our recorded investment in these VIEs totaling $198 million, and

•

guarantees of $27 million of the debt of these VIEs.

        We assess the risk of a loss equal to our maximum exposure to be remote.

Accounting Standards Adopted

SFAS No. 143

In 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 provides the accounting requirements for recognizing an estimated liability for legal obligations associated with the retirement of tangible long-lived assets. We measure the liability at fair value when incurred and capitalize a corresponding amount as part of the book value of the related long-lived assets. The increase in the capitalized cost is included in determining depreciation expense over the estimated useful life of these assets. Since the fair value of the asset retirement obligations is determined using a present value approach, accretion of the liability due to the passage of time is recognized each period to "Accretion of asset retirement obligations" in our Consolidated Statements of Income until the settlement of the liability. We record a gain or loss when the liability is settled after retirement.

        In the first quarter of 2003, we adopted this statement and recognized a $112.1 million pre-tax, or $67.7 million after-tax, gain as a cumulative effect of change in accounting principle.

        Substantially all of this net gain relates to the impact of adopting SFAS No. 143 on the measurement of the liability for the decommissioning of our Calvert Cliffs nuclear power plant. Losses on the adoption of SFAS No. 143 in other areas of our business are offset by a gain relating to the liability for the decommissioning of our Nine Mile Point nuclear power plant. The Calvert Cliffs' gain is primarily due to using a longer discount period as a result of license extension. The previous liability for the decommissioning of Calvert Cliffs was determined in accordance with ratemaking treatment established by the Maryland Public Service Commission (Maryland PSC) based on a prior decommissioning cost estimate that contemplated decommissioning being completed at a point in time much closer to the expiration of the plant's original operating license.

        As discussed in Note 1 of our 2002 Annual Report on Form 10-K, we use the composite depreciation method for certain generating facilities and for our utility business. This method is an acceptable method of accounting under generally accepted accounting principles and is widely used in the energy, transportation, and telecommunication industries.

        Historically, under the composite depreciation method, the anticipated costs of removing assets upon retirement are provided for over the life of those assets as a component of depreciation expense. However, SFAS No. 143 precludes the recognition of expected net future costs of removal as a component of depreciation expense or accumulated depreciation unless they are legal obligations under SFAS No. 143. Instead, we must recognize these costs as incurred, unless the entity is rate regulated under SFAS No. 71, Accounting for the Effects of Certain Types of Regulation.

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        For our merchant energy business, the elimination of net cost of removal from accumulated depreciation did not have a material impact on our financial results. However, we expect depreciation expense for 2003 and future years to be lower than prior years since depreciation expense will no longer include a component for anticipated cost of removal in excess of salvage. Also, effective January 1, 2003, we only record those asset removal costs that represent legal obligations under SFAS No. 143 prior to their being incurred.

        The adoption of SFAS No. 143 did not have a material impact on BGE's financial results. BGE is required by the Maryland PSC to use the composite depreciation method under regulatory accounting. As a result, BGE reclassified $108.4 million of net cost of removal from accumulated depreciation to a regulatory liability in the first quarter of 2003. In accordance with SFAS No. 71, BGE continues to accrue for the future cost of removal for its rate regulated gas and electric utility assets.

        The change in our "Asset retirement obligations" liability during the first six months of 2003 was as follows:

	(In millions)
Liability at January 1, 2003	$	570.6
Liabilities incurred in current period		1.3
Liabilities settled in current period		(20.6	)
Accretion expense		21.3
Revisions to cash flows		—
Liability at June 30, 2003	$	572.6

        The pro-forma asset retirement obligation we would have recognized as of January 1, 2002, had we implemented SFAS No. 143 as of that date, was approximately $530 million based on the information, assumptions, and interest rates as of January 1, 2003 used to determine the $570.6 million liability recognized upon the adoption of SFAS No. 143.

        The fair value of our nuclear decommissioning trust funds for Calvert Cliffs and Nine Mile Point are reported in "Nuclear decommissioning trust funds" in our Consolidated Balance Sheets. These amounts are legally restricted for funding the costs of nuclear decommissioning.

FIN 45

In November 2002, the FASB issued FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation provides the disclosures to be made by a guarantor in interim and annual financial statements about obligations under certain guarantees. The Interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation. The adoption of this standard did not have a material impact on our financial results.

EITF 02-3

On October 25, 2002, the EITF reached a consensus on Issue 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities, that changed the accounting for certain energy contracts. EITF 02-3 prohibits the use of mark-to-market accounting for any energy-related contracts that are not derivatives. Any non-derivative contracts must be accounted for on the accrual basis and recorded in the income statement gross rather than net upon application of EITF 02-3. This change applied immediately to new contracts executed after October 25, 2002 and applied to existing non-derivative energy-related contracts beginning January 1, 2003.

        In the first quarter of 2003, we adopted EITF 02-3 and recognized a $430.0 million pre-tax, or $266.1 million after-tax, charge as a cumulative effect of change in accounting principle.

        The primary contracts that were subject to the requirements of EITF 02-3 were our full requirements load-serving contracts and unit-contingent power purchase contracts, which are not derivatives. The majority of these contracts are in Texas and New England and were entered into prior to our shift to accrual accounting earlier in 2002. We discuss our shift to accrual accounting in more detail in our 2002 Annual Report on Form 10-K.

        Additionally, we reviewed derivatives we use as supply sources and hedges of contracts that are subject to EITF 02-3. To the extent permitted by SFAS No. 133, we designated derivative contracts used to fulfill our load-serving contracts as either normal purchases or cash flow hedges under SFAS No. 133 effective January 1, 2003.

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        We summarize the impact on our Consolidated Balance Sheets of applying EITF 02-3 on January 1, 2003 as follows:

		Assets		Liabilities		Net
		(In millions)
Mark-to-market energy contracts
	Current	$	759.4	$	709.6	$	49.8
	Noncurrent		926.8		460.0		466.8
	Total		1,686.2		1,169.6		516.6
Other
	Current		85.7		56.8		28.9
	Noncurrent		24.2		2.5		21.7
	Total		109.9		59.3		50.6
Balance at December 31, 2002		$	1,796.1	$	1,228.9	$	567.2

Impact of EITF 02-3 Adoption:
Non-derivative net asset reversed as cumulative effect of change in accounting principle
	Mark-to-market energy contracts	$	(379.4	)
	Other		(50.6	)
Total non-derivative net asset reversed as cumulative effect of change in accounting principle			(430.0	)
Derivatives designated as hedges (net)			6.1
Derivatives designated as normal purchases and sales (net)			(64.3	)
Net mark-to-market derivatives remaining after adoption of EITF 02-3 on January 1, 2003		$	79.0

        On January 1, 2003, we recorded the $430.0 million non-derivative net asset removed from our Consolidated Balance Sheets as a cumulative effect of change in accounting principle, which reduced our 2003 net income by $266.1 million as previously discussed. The $430.0 million represents $379.4 million of non-derivative contracts recorded as "Mark-to-market energy assets and liabilities" and $50.6 million of "Other assets and liabilities" primarily from the re-designation of Texas contracts to accrual accounting in 2002, as discussed in more detail in our 2002 Annual Report on Form 10-K. The fair value of these contracts will be recognized in earnings as power is delivered.

        Additionally, on January 1, 2003, we reclassified the fair value of derivatives designated as hedges as "Risk management assets and liabilities" in the balance sheet and will account for these hedges in accordance with the provisions of SFAS No. 133. At that time, we also reclassified the fair value of derivatives designated as normal purchases and normal sales as "Other assets and liabilities" in the balance sheet and will account for these contracts on the accrual basis, with the fair value amortized into earnings over the lives of the underlying contracts.

        After the adoption of EITF 02-3 on January 1, 2003, net mark-to-market derivatives of $79.0 million, which consisted of $1,099.8 million in assets and $1,020.8 million in liabilities, remained in our Consolidated Balance Sheets. Applying EITF 02-3 does not affect our cash flows or our accounting for new load-serving contracts for which we used accrual accounting since early 2002.

Related Party Transactions—BGE

Income Statement

Under the Restructuring Order issued by the Maryland PSC in November 1999, BGE is providing standard offer service to customers at fixed rates over various time periods during the transition period from July 1, 2000 to June 30, 2006, for those customers that do not choose an alternate supplier. Constellation Power Source provided BGE with 100% of the energy and capacity required to meet its standard offer service obligations for the first three years of the transition period.

        In August 2001, BGE entered into contracts with our origination and risk management operation to supply 90% and Allegheny Energy Supply Company, LLC (Allegheny) to supply the remaining 10% of BGE's standard offer service for the final three years (July 1, 2003 to June 30, 2006) of the transition period. During the second quarter of 2003, after a competitive bid process, our origination and risk management operation assumed the obligation from Allegheny to serve the remaining 10% of BGE's standard offer service for the remainder of the transition period.

        The cost of BGE's purchased energy from nonregulated affiliates of Constellation Energy to meet its standard offer service obligation was as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
	(In millions)
Purchased energy	$	237.2	$	273.8	$	480.8	$	514.3

         In addition, BGE is charged by Constellation Energy for certain corporate functions. Certain costs are directly assigned to BGE. We allocate other corporate function costs based on a total percentage of expected use by BGE. Management believes this method of allocation is reasonable and approximates the cost BGE would have incurred as an unaffiliated entity. These costs were approximately $12.4 million for the quarter ended June 30, 2003 compared to $6.4 million for the same period in 2002 and $21.3 million for the six months ended June 30, 2003 compared to $14.9 million for the same period in 2002.

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Balance Sheet

BGE participates in a cash pool under a Master Demand Note agreement with Constellation Energy. Under this arrangement, participating subsidiaries may invest in or borrow from the pool at market interest rates. Constellation Energy administers the pool and invests excess cash in short-term investments or issues commercial paper to manage consolidated cash requirements. BGE had invested $574.8 million at June 30, 2003 and $338.1 million at December 31, 2002 under this arrangement.

        Amounts related to corporate functions performed at the Constellation Energy holding company, BGE's purchases to meet its standard offer service obligation, and BGE's charges to Constellation Energy and its nonregulated affiliates for certain services it provides them result in intercompany balances on BGE's Consolidated Balance Sheets.

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Item 2. Management's Discussion

Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Constellation Energy Group, Inc. (Constellation Energy) is a North American energy company that conducts its business through various subsidiaries including a merchant energy business and Baltimore Gas and Electric Company (BGE). We describe our operating segments in the Notes to Consolidated Financial Statements on page 13.

        This Quarterly Report on Form 10-Q is a combined report of Constellation Energy and BGE. References in this report to "we" and "our" are to Constellation Energy and its subsidiaries, collectively. References in this report to the "utility business" are to BGE.

        Our merchant energy business is a competitive provider of energy solutions for large customers in North America. It has electric generation assets located in various regions of the United States and provides energy solutions to meet customers' needs. Our merchant energy business focuses on serving the full energy and capacity requirements (load-serving activities) of, and providing other risk management activities for various customers, such as utilities, municipalities, cooperatives, retail aggregators, and commercial and industrial customers. These load-serving activities occur in regional markets in which end use customer electricity rates have been deregulated and thereby separated from the cost of generation supply.

        BGE is a regulated electric and gas public transmission and distribution utility company with a service territory that covers the City of Baltimore and all or part of ten counties in central Maryland.

        Our other nonregulated businesses:

•

design, construct, and operate single-site heating, cooling, and cogeneration facilities for commercial and industrial customers throughout North America,

•

provide home improvements, service gas and electric appliances, service heating, air conditioning, plumbing, electrical, and indoor air quality systems, and provide electric and natural gas retail marketing in central Maryland, and

•

own and operate a district cooling system for commercial customers in the City of Baltimore, Maryland.

        In addition, we own several investments that we do not consider to be core operations. These include financial investments, real estate projects, and interests in a Latin American distribution project and in a fund that holds interests in two South American energy projects.

        In this discussion and analysis, we explain the general financial condition and the results of operations for Constellation Energy and BGE including:

•

factors which affect our businesses,

•

our earnings and costs in the periods presented,

•

changes in earnings and costs between periods,

•

sources of earnings,

•

impact of these factors on our overall financial condition,

•

expected future expenditures for capital projects, and

•

expected sources of cash for future capital expenditures.

        As you read this discussion and analysis, refer to our Consolidated Statements of Income on page 3, which present the results of our operations for the quarter and six months ended June 30, 2003 and 2002. We analyze and explain the differences between periods in the specific line items of the Consolidated Statements of Income.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements that were prepared in accordance with accounting principles generally accepted in the United States of America. Management makes estimates and assumptions when preparing financial statements. These estimates and assumptions affect various matters, including:

•

our reported amounts of assets and liabilities in our Consolidated Balance Sheets at the dates of the financial statements,

•

our disclosure of contingent assets and liabilities at the dates of the financial statements, and

•

our reported amounts of revenues and expenses in our Consolidated Statements of Income during the reporting periods.

        These estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict and are beyond management's control. As a result, actual amounts could materially differ from these estimates.

        The Securities and Exchange Commission (SEC) issued disclosure guidance for accounting policies that management believes are most "critical." The SEC defines these critical accounting policies as those that are both most important to the portrayal of a company's financial condition and results and require management's most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

        Management believes the following accounting policies represent critical accounting policies as defined by the SEC. We discuss our significant accounting policies, including those that do not require management to make difficult, subjective, or complex judgments or estimates, in Note 1 of our 2002 Annual Report on Form 10-K.

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Revenue Recognition—Mark-to-Market Method of Accounting

Our merchant energy business engages in origination and risk management activities using contracts for energy, other energy-related commodities, and related derivative contracts. We record merchant energy business revenues using two methods of accounting: accrual accounting and mark-to-market accounting. We describe our use of accrual accounting in more detail in Note 1 of our 2002 Annual Report on Form 10-K.

        On October 25, 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities. This consensus affects the accounting for certain contracts and the application of the mark-to-market method of accounting. We describe our current application of the mark-to-market method of accounting based on the impact of the consensus on EITF 02-3 below. The main provisions of EITF 02-3 are as follows:

•

The EITF rescinded Issue 98-10. As a result, this consensus prohibits mark-to-market accounting for energy-related contracts that do not meet the definition of a derivative under Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. Any contracts subject to the consensus must be accounted for on the accrual basis.

•

The EITF indicated that an entity should not record unrealized gains or losses at the inception of derivative contracts unless the fair value of each contract in its entirety is evidenced by quoted market prices or other current market transactions for contracts with similar terms and counterparties.

•

The EITF required gains and losses on derivative energy trading contracts (whether realized or unrealized) to be reported as revenue on a net basis in the income statement.

        We use mark-to-market accounting for energy trading activities and for derivatives and other contracts for which we are not permitted to use accrual accounting or hedge accounting. These mark-to-market activities include derivative contracts for energy and other energy-related commodities. Under the mark-to-market method of accounting, we record the fair value of energy contracts as mark-to-market energy assets and liabilities at the time of contract execution. We record the changes in mark-to-market energy assets and liabilities on a net basis in "Nonregulated revenues" in our Consolidated Statements of Income.

        Mark-to-market energy assets and liabilities consist of a combination of energy and energy-related derivative contracts. While some of these contracts represent commodities or instruments for which prices are available from external sources, other commodities and certain contracts are not actively traded and are valued using modeling techniques to determine expected future market prices, contract quantities, or both. The market prices and quantities used to determine fair value reflect management's best estimate considering various factors. However, future market prices and actual quantities will vary from those used in recording mark-to-market energy assets and liabilities, and it is possible that such variations could be material.

        We record reserves to reflect uncertainties associated with certain estimates inherent in the determination of fair value that are not incorporated in market price information or other market-based estimates used to determine fair value of our mark-to-market energy contracts. To the extent possible, we utilize market-based data together with quantitative methods for both measuring the risks for which we record reserves and determining the level of such reserves and changes in those levels.

        We describe below the main types of reserves we record and the process for establishing each. Generally, increases in reserves reduce our earnings, and decreases in reserves increase our earnings. However, all or a portion of the effect on earnings of changes in reserves may be offset by changes in the value of the underlying positions.

•

Close-out reserve—this reserve represents the estimated cost to close out or sell to a third-party open mark-to-market positions. This reserve has the effect of valuing "long" positions at the bid price and "short" positions at the offer price. We compute this reserve using a market-based estimate of the bid/offer spread for each commodity and option price and the absolute quantity of our open positions for each year. To the extent that we are not able to obtain market information for similar contracts, the close-out reserve is equivalent to the initial contract margin, thereby resulting in no gain or loss at inception. The level of total close-out reserves increases as we have larger unhedged positions, bid-offer spreads increase, or market information is not available, and it decreases as we reduce our unhedged positions, bid-offer spreads decrease, or market information becomes available.

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•

Credit-spread adjustment—for risk management purposes, we compute the value of our mark-to-market energy assets and liabilities using a risk-free discount rate. In order to compute fair value for financial reporting purposes, we adjust the value of our mark-to-market energy assets to reflect the credit-worthiness of each individual counterparty based upon published credit ratings, where available, or equivalent internal credit ratings and associated default probability percentages. We compute this reserve by applying the appropriate default probability percentage to our outstanding credit exposure, net of collateral, for each counterparty. The level of this reserve increases as our credit exposure to counterparties increases, the maturity terms of our transactions increase, or the credit ratings of our counterparties deteriorate, and it decreases when our credit exposure to counterparties decreases, the maturity terms of our transactions decrease, or the credit ratings of our counterparties improve.

        Market prices for energy and energy-related commodities vary based upon a number of factors. Changes in market prices will affect both the recorded fair value of our mark-to-market energy contracts and the level of future revenues and costs associated with accrual-basis activities. Changes in the value of our mark-to-market energy contracts will affect our earnings in the period of the change, while changes in forward market prices related to accrual-basis revenues and costs will affect our earnings in future periods to the extent those prices are realized. We cannot predict whether, or to what extent, the factors affecting market prices may change, but those changes could be material and could affect us either favorably or unfavorably. We discuss our market risk in more detail in the Market Risk section of our 2002 Annual Report on Form 10-K.

        EITF 02-3 affects the timing of recognizing earnings on new non-derivative transactions. In general, earnings on new transactions subject to EITF 02-3 are no longer recognized at the inception of the transactions as they were under mark-to-market accounting because they are subject to accrual accounting and are recognized over the term of the transaction. As a result, while total earnings over the term of a transaction will be unchanged, we expect that our reported earnings for contracts subject to EITF 02-3 will generally match the cash flows from those contracts more closely. In addition, our reported earnings may be less volatile under accrual accounting than under mark-to-market accounting, which reflects changes in the fair value of contracts when they occur rather than when products are delivered and costs are incurred.

        Alternatively, other comprehensive income may have greater fluctuations because of a larger number of derivative contracts that we designate for hedge accounting under SFAS No. 133, but these fluctuations will not affect current period earnings or cash flows. Additionally, because we record revenues and costs on a gross basis under accrual accounting, our revenues and costs could increase, but our earnings will not be affected by gross versus net reporting.

        The impact of EITF 02-3 will be affected by many factors, including:

•

our ability to designate and qualify derivative contracts for normal purchase and sale accounting or hedge accounting under SFAS No. 133,

•

potential volatility in earnings from derivative contracts that serve as economic hedges but do not meet the accounting requirements to qualify for normal purchase and sale accounting or hedge accounting,

•

our ability to enter into new mark-to-market derivative origination transactions, and

•

sufficient liquidity and transparency in the energy markets to permit us to record gains at inception of new derivative contracts because fair value is evidenced by quoted market prices or current market transactions.

        We discuss the impact of mark-to-market accounting on our financial results in the Results of Operations—Merchant Energy Business section on page 42.

Evaluation of Assets for Impairment and Other Than Temporary Decline in Value

We are required to evaluate certain assets that have long lives (for example, generating property and equipment and real estate) to determine if they are impaired when certain conditions exist. SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, provides the accounting for impairments of long-lived assets. We are required to test our long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Examples of such events or changes would be as follows:

•

a significant decrease in the market price of a long-lived asset,

•

a significant adverse change in the manner an asset is being used or its physical condition,

•

an adverse action by a regulator or in the business climate,

•

an accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an asset,

•

a current-period loss combined with a history of losses or the projection of future losses, or

•

a change in our intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold or disposed of before the end of its previously estimated useful life.

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        For long-lived assets that are expected to be held and used, SFAS No. 144 requires that an impairment loss shall only be recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. The carrying amount of an asset is not recoverable under SFAS No. 144 if the carrying amount exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Therefore, when we believe an impairment condition may have occurred, we are required to estimate the undiscounted future cash flows associated with a long-lived asset or group of long-lived assets. This necessarily involves judgment surrounding the inherent uncertainty of future cash flows.

        In order to estimate an asset's future cash flows, we will consider historical cash flows, as well as reflect our understanding of the extent to which future cash flows will be either similar to or different from past experience based on all available evidence. To the extent applicable, the assumptions we use are consistent with forecasts that we are otherwise required to make (for example, in preparing our other earnings forecasts). If we are considering alternative courses of action to recover the carrying amount of a long-lived asset (such as the potential sale of an asset), we probability-weight the alternative courses of action to establish the cash flows.

        We use our best estimates in making these evaluations and consider various factors, including forward price curves for energy, fuel costs, and operating costs. However, actual future market prices and project costs could vary from the assumptions used in our estimates, and the impact of such variations could be material.

        For long-lived assets that can be classified as assets to be disposed of by sale under SFAS No. 144, an impairment loss shall be recognized to the extent their carrying amount exceeds their fair value, including costs to sell.

        The estimation of fair value under SFAS No. 144, whether in conjunction with an asset to be held and used or with an asset to be disposed of by sale, also involves estimation and judgment. We consider quoted market prices in active markets to the extent they are available. In the absence of such information, we may consider prices of similar assets, consult with brokers, or employ other valuation techniques. Often, we will discount the estimated future cash flows associated with the asset using a single interest rate that is commensurate with the risk involved with such an investment or employ an expected present value method that probability-weights a range of possible outcomes. The use of these methods involves the same inherent uncertainty of future cash flows as discussed above with respect to undiscounted cash flows and actual future market prices and project costs could vary from those used in our estimates, and the impact of such variations could be material.

        We are also required to evaluate our equity-method and cost-method investments (for example, in partnerships that own power projects) to determine whether or not they are impaired. Accounting Principles Board Opinion (APB) No. 18, The Equity Method of Accounting for Investments in Common Stock, provides the accounting for these investments. The standard for determining whether an impairment must be recorded under APB No. 18 is whether the investment has experienced a loss in value that is considered an "other than a temporary" decline in value.

        The evaluation and measurement of impairments under the APB No. 18 standard involves the same uncertainties as described above for long-lived assets that we own directly and account for in accordance with SFAS No. 144. Similarly, the estimates that we make with respect to our equity and cost-method investments are subject to variation, and the impact of such variations could be material. Additionally, if the projects in which we hold these investments recognize an impairment under the provisions of SFAS No. 144, we would record our proportionate share of that impairment loss and would evaluate our investment for an other than temporary decline in value under APB No. 18.

Asset Retirement Obligations

We incur legal obligations associated with the retirement of certain long-lived assets. SFAS No. 143, Accounting for Asset Retirement Obligations, provides the accounting for legal obligations associated with the retirement of long-lived assets. We incur such legal obligations as a result of environmental and other government regulations, contractual agreements, and other factors. The application of this standard requires significant judgment due to the large number and diverse nature of the assets in our various businesses and the estimation of future cash flows required to measure legal obligations associated with the retirement of specific assets.

        SFAS No. 143 requires the use of an expected present value methodology in measuring asset retirement obligations that involves judgment surrounding the inherent uncertainty of the probability, amount and timing of payments to settle these obligations, and the appropriate interest rates to discount future cash flows. We use our best estimates in identifying and measuring our asset retirement obligations in accordance with SFAS No. 143.

        Specifically, our nuclear decommissioning costs represent our largest asset retirement obligation. This obligation primarily results from the requirement to decommission and decontaminate the Calvert Cliffs and

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Nine Mile Point plants in connection with their future retirement. We revised our site-specific decommissioning cost estimates as part of the process to determine our nuclear asset retirement obligations. However, given the magnitude of the amounts involved, complicated and ever-changing technical/regulatory requirements, and the very long time horizons involved, the actual obligation could vary from the assumptions used in our estimates, and the impact of such variations could be material.

Events of 2003

Workforce Reduction Costs

During the quarter ended June 30, 2003, we recorded $0.7 million in expense, of which BGE recorded $0.2 million, associated with deferred payments to employees eligible for the 2001 Voluntary Special Early Retirement Program.

        During the six months ended June 30, 2003, we recorded $1.4 million in expense, of which BGE recorded $0.5 million, associated with deferred payments to employees eligible for the 2001 Voluntary Special Early Retirement Program.

Sale of Non-Core Assets

During the six months ended June 2003, our other nonregulated businesses recognized $14.2 million of pre-tax, or $8.6 million after-tax, gains on the sales of non-core assets as follows:

•

a $7.2 million pre-tax gain in the first quarter of 2003 on the sale of an oil tanker to the U.S. Navy,

•

a $5.3 million pre-tax gain in the first quarter of 2003 on the favorable settlement of a contingent obligation we had previously reserved relating to the sale of our Guatemalan power plant operation in the fourth quarter of 2001,

•

a $1.2 million pre-tax installment sale gain in the first quarter of 2003 on a parcel of real estate, and

•

a $0.5 million pre-tax gain in the second quarter of 2003 on the sale of financial investments as we continued to liquidate this operation.

Generating Facility Commenced Operations

In April 2003, our High Desert Power Project in Victorville, CA, an 830 megawatt (MW) gas-fired combined cycle facility, commenced operations. The project has a long-term power sales agreement with the California Department of Water Resources (CDWR). The contract is a "tolling" structure, under which the CDWR pays a fixed amount of $12.1 million per month and provides CDWR the right, but not the obligation, to purchase power from the project at a price linked to the variable cost of production. During the term of the contract, which runs for seven years and nine months from the April 2003 commercial operation date of the plant, the project will provide energy exclusively to the CDWR.

        In June 2003, we exercised our option under the lease associated with the High Desert Power Project and paid off the lease and acquired the assets from the lessor. At June 30, 2003 the assets and liabilities associated with the High Desert Power Project are included in our Consolidated Balance Sheets.

Calvert Cliffs Extended Outage

In April 2003, our merchant energy business completed the Unit 2 steam generator replacement and refueling outage at Calvert Cliffs. This outage was completed in 66 days, 58 fewer days than a similar outage completed at Calvert Cliff's Unit 1 in June 2002.

Acquisitions

During 2003, we acquired the following portfolios:

•

customer load-serving contracts representing 940 MW and corresponding supply portfolio from a subsidiary of CMS Energy Corp,

•

certain competitive energy supply contracts with commercial and industrial customers, including 300 MW of electricity and certain natural gas customers, from Nicor Energy L.L.C. in Michigan, Illinois, and Indiana,

•

a portfolio of competitive energy supply contracts with commercial and industrial customers, representing 125 MW, from Dynegy Inc., in Alberta, Canada, and

•

the load-serving contract and related hedges from Allegheny Energy Supply Company, LLC (Allegheny) to provide 10% of the standard offer service to BGE.

        As discussed above, in June 2003, we exercised our option to purchase the project from the High Desert Power Trust and consolidated the assets and liabilities of the Trust at June 30, 2003.

Synthetic Fuel Facilities

We have certain investments in facilities that manufacture solid synthetic fuel produced from coal as defined under Section 29 of the Internal Revenue Code for which we claim tax credits on our Federal income tax return. The synthetic fuel process involves combining coal material with a chemical change agent to create a significant chemical change. To qualify for the Section 29 tax credits, the synthetic fuel must meet three primary conditions:

•

there must be a significant chemical change in the coal,

30

•

the product must be sold to an unaffiliated entity, and

•

the production facility must have been originally placed in service before July 1, 1998.

        As of June 30, 2003, we have recognized cumulative tax benefits associated with Section 29 credits of $60.9 million, of which $9.5 million was recognized during the quarter ended June 30, 2003 and $17.9 million was recognized during the six months ended June 30, 2003.

        On June 27, 2003, the Internal Revenue Service (IRS) issued Announcement 2003-46, which affects all companies that have recognized tax benefits associated with Section 29 credits for synthetic fuel produced from coal, indicating that it questioned the scientific validity of certain test procedures and results previously presented as evidence to prove the required significant chemical change had occurred. According to the Announcement, the IRS National Office is currently reviewing information regarding these tests and procedures. The IRS is suspending the issuance of private letter rulings regarding the question of chemical change for Section 29 tax credit purposes until this review is complete. The Announcement indicated that if the IRS determines that these test procedures and results do not demonstrate that a significant chemical change has occurred, the IRS will take appropriate action, including revoking letter rulings relying on such procedures and results.

        Certain facilities in which we have an investment received private letter rulings from the IRS stating that the synthetic fuel produced undergoes a significant chemical change and thus qualifies for Section 29 credits. These private letter rulings were based, in part, on tests performed by independent scientific laboratories. The partnership that owns these facilities is currently under examination by the IRS. As part of their examination, the IRS engaged a third party to perform chemical tests of the synthetic fuel. The third party has questioned the testing procedures and chemical change results of the independent scientific laboratories that were submitted to the IRS as part of the private letter ruling process.

        IRS rules specify that a private letter ruling will not be revoked on a retroactive basis, provided that there has been no misstatement or omission of material facts presented in the ruling request. We believe that the chemical testing procedures and results presented by the independent scientific laboratories in the ruling requests were properly disclosed to the IRS.

        While we believe the production and sale of synthetic fuel from all of our synthetic fuel facilities meet the conditions to qualify for tax credits under Section 29 of the IRS Code, we cannot predict the timing or outcome of the review by the IRS or its ultimate impact on the Section 29 credits that we have claimed to date or expect to claim in the future, but the impact could be material to our financial results.

Pension Plan Assets

Our actual return on pension plan assets was approximately 10% through June 30, 2003. In addition, we contributed $111 million, or approximately $70 million after-tax, to our pension plans in 2003.

        However, due to declines in interest rate levels through July 31, 2003, we expect to record an after-tax charge to equity of approximately $35 million at December 31, 2003 as a result of increasing our additional minimum pension liability. This amount assumes interest rates remain unchanged through the end of 2003 and a return of zero percent on pension plan assets during the second half of 2003. The amount ultimately recorded will be determined by the actual return on pension plan assets, which depends on the performance of the financial markets during 2003, and our discount rate assumption, which depends on year-end interest rates. As a result, the charge to equity could be materially different than our current estimate.

Dividend Increase

In January 2003, we announced an increase in our quarterly dividend to 26 cents per share on our common stock payable April 1, 2003 to holders of record on March 10, 2003. This is equivalent to an annual rate of $1.04 per share. Previously, our quarterly dividend on our common stock was 24 cents per share, equivalent to an annual rate of 96 cents per share.

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Strategy

We are pursuing a balanced strategy to generate power through our national fleet of plants and to distribute power through our regulated Maryland utility, BGE, and through our national competitive supply activities. Our generation fleet is strategically located in deregulated markets across the country and is diversified by fuel type, including nuclear, coal, gas, and renewable sources. We intend to remain diversified between owned generation, contractual generation, and regulated distribution and competitive supply.

        We expect this focus to provide growth opportunities along with more stable and predictable earnings, cash flows and dividends. The strategy for our merchant energy business is to be a leading competitive supplier of energy solutions for large customers in North America.

        The integration of electric generation assets with origination and risk management of energy and energy-related commodities allows our merchant energy business to manage energy price risk over geographic regions and over time. Our focus is on providing solutions to customers' energy needs, and our origination and risk management operation adds value to our generation assets by providing national market access, market infrastructure, real-time market intelligence, risk management and arbitrage opportunities, and transmission and transportation expertise. Generation capacity supports our origination and risk management operation by providing a source of reliable power supply that provides a physical hedge for some of our load-serving activities.

        To achieve our strategic objectives, we expect to continue to pursue opportunities that expand our access to customers and to support our origination and risk management operation with generation assets that have diversified geographic, fuel, and dispatch characteristics. We also expect to use a disciplined growth strategy through originating transactions with large customers and by acquiring and developing additional generating facilities when desirable to support our merchant energy business.

        Our merchant energy business will focus on long-term, high-value sales of energy, capacity, commodities, and related products to large customers, including distribution utilities, industrial customers, and commercial customers primarily in the regional markets in which end-use customer electricity rates have been deregulated and thereby separated from the cost of generation supply. These markets include the New England region, the New York region, the Mid-Atlantic region, the Mid-West region, Texas, California, and certain areas in Canada.

        The growth of BGE and our other retail energy services businesses is expected through focused and disciplined expansion primarily from new customers.

        Customer choice, regulatory change, and energy market conditions significantly impact our business. In response, we regularly evaluate our strategies with these goals in mind: to improve our competitive position, to anticipate and adapt to business environment and regulatory changes, and to maintain a strong balance sheet and investment-grade credit quality.

        We also might consider one or more of the following strategies:

•

the complete or partial separation of BGE's transmission function from its distribution function,

•

mergers or acquisitions of utility or non-utility businesses or assets, and

•

sale of assets or one or more businesses.

Business Environment

With the shift toward customer choice, competition, and the growth of our merchant energy business, various factors affect our financial results. We discuss these various factors in the Forward Looking Statements section on page 62.

        In this section, we discuss in more detail several issues that affect our businesses.

General Industry

Over the past several years, the utility industry and energy markets experienced significant changes as a result of less liquid and more volatile wholesale markets, credit quality deterioration of various industry participants, and the slowing of the U.S. economy.

        The energy markets also were affected by other significant events, including expanded investigations by state and federal authorities into business practices of energy companies in the deregulated power and gas markets relating to "wash trading" to inflate revenues and volumes, and other trading practices designed to manipulate market prices. In addition, several merchant energy businesses significantly reduced their energy trading activities due to deteriorating credit quality.

        During the first half of 2003, the energy markets continued to be highly volatile with significant increases in natural gas and power prices as well as the continuation of reduced liquidity in the marketplace. During the second quarter of 2003, Constellation Power Source's average value at risk was $6.2 million using a 95% confidence level. We discuss the value-at-risk calculation in more detail in the Market Risk section of our 2002 Annual Report on Form 10-K.

        We continue to actively manage our wholesale credit portfolio to attempt to reduce the impact of a potential counterparty default. As of June 30, 2003, approximately 83% of our credit portfolio was rated at least investment

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grade by the major rating agencies, with 3% rated below investment grade and 14% not rated. Of the 14% not rated, 89% primarily represents governmental entities, municipalities, cooperatives, or other customers that we assess are equivalent to investment grade based on internal credit ratings.

        We continue to examine plans to achieve our strategies and to further strengthen our balance sheet and enhance our liquidity. We discuss our strategies in the Strategy section on page 32. We discuss our liquidity in the Financial Condition section on page 54.

Electric Competition

We are facing competition in the sale of electricity in wholesale power markets and to retail customers.

Maryland

As a result of the deregulation of electric generation in Maryland, the following occurred effective July 1, 2000:

•

All customers can choose their electric energy supplier. BGE provides fixed price standard offer service over various time periods for different classes of customers that do not select an alternative supplier until June 30, 2006.

•

While BGE does not sell electric commodity to all customers in its service territory, BGE does deliver electricity to all customers and provides meter reading, billing, emergency response, regular maintenance, and balancing services.

•

BGE provides a market rate standard offer service for those commercial and industrial customers who are no longer eligible for fixed price standard offer service until June 30, 2006.

•

BGE residential base rates will not change before July 2006. While total residential base rates remain unchanged over the transition period (July 1, 2000 through June 30, 2006), annual standard offer service rate increases are offset by corresponding decreases in the competitive transition charge (CTC) that BGE receives from its customers.

•

Commercial and industrial customers have several service options that will fix electric energy rates through June 30, 2004 and transition charges through June 30, 2006.

•

BGE transferred, at book value, its generating assets and related liabilities to the merchant energy business.

        Our origination and risk management operation provided BGE with 100% of the energy and capacity required to meet its standard offer service obligations through June 30, 2003. Our origination and risk management operation obtains the energy and capacity to supply BGE's standard offer service obligations from our merchant energy generating plants in the PJM Interconnection (PJM) region, supplemented with energy and capacity purchased from the wholesale market, as necessary.

        In August 2001, BGE entered into contracts with our origination and risk management operation to supply 90% and Allegheny to supply the remaining 10% of BGE's standard offer service for the final three years (July 1, 2003 to June 30, 2006) of the transition period. During the second quarter of 2003, after a competitive bid process, our origination and risk management operation assumed the obligation to serve the remaining 10% of BGE's standard offer service for the remainder of the transition period. As a result, Allegheny is no longer obligated to serve 10% of BGE's standard offer service from July 1, 2003 through June 30, 2006.

        In April 2003, the Maryland Public Service Commission (Maryland PSC) approved a settlement agreement reached by BGE and parties representing customers, industry, utilities, suppliers, the Maryland Energy Administration, the Maryland PSC's Staff, and the Office of People's Counsel which, among other things, extends BGE's obligation to supply standard offer service. Under the settlement agreement, BGE is obligated to provide market-based standard offer service to residential customers until June 30, 2010, and for commercial and industrial customers for a one, two or four year period beyond June 30, 2004, depending on customer load. The rates charged during this time will recover BGE's wholesale power supply costs and include an administrative fee.

        In July 2003, a second settlement agreement was filed with the Maryland PSC that addressed various details remaining from the first settlement. Issues addressed in the second settlement included, but were not limited to, a model request for proposals, a model power supply contract, and numerous ancillary agreements and exhibits. Maryland PSC approval of the second settlement is still pending.

Other States

Several states, other than Maryland, have supported deregulation of the electric industry. The pace of deregulation in other states varies based on historical moves to competition and responses to recent market events. Certain states that were considering deregulation have slowed their plans or postponed consideration. In addition, other states are reconsidering deregulation.

        In response to regional market differences and to promote competitive markets, the FERC proposed initiatives promoting the formation of Regional Transmission Organizations and a standard market design.

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If approved, these market changes could provide additional opportunities for our merchant energy business. We discuss these initiatives in the FERC Regulation—Regional Transmission Organizations and Standard Market Design section below.

        As a result of ongoing litigation before the FERC regarding sales into the spot markets of the California Independent System Operator (ISO) and Power Exchange (PX), we currently estimate that we may be required to pay refunds of between $2 and $6 million for transactions that we entered into with these entities for the period between October 2000 and June 2001. However, we cannot determine the actual amount we could pay because litigation is ongoing and new events could occur that could cause the actual amount, if any, to be materially different from our estimate.

Gas Competition

Currently, no regulation exists for the wholesale price of natural gas as a commodity, and the regulation of interstate transmission at the federal level has been reduced. All BGE gas customers have the option to purchase gas from other suppliers.

Regulation by the Maryland PSC

In addition to electric restructuring which was discussed earlier, regulation by the Maryland PSC influences BGE's businesses. The Maryland PSC determines the rates that BGE can charge customers for the electric distribution and gas businesses. The Maryland PSC incorporates into BGE's electric rates the transmission rates determined by FERC. BGE's electric rates are unbundled to show separate components for delivery service, competitive transition charges, standard offer services (generation), transmission, universal service, and certain taxes. The rates for BGE's regulated gas business continue to consist of a "base rate" and a "fuel rate."

Base Rate

The base rate is the rate the Maryland PSC allows BGE to charge its customers for the cost of providing them service, plus a profit. BGE has both an electric base rate and a gas base rate. Higher electric base rates apply during the summer when the demand for electricity is higher. Gas base rates are not affected by seasonal changes.

        BGE may ask the Maryland PSC to increase base rates from time to time. The Maryland PSC historically has allowed BGE to increase base rates to recover increased utility plant asset costs and higher operating costs, plus a profit, beginning at the time of replacement. Generally, rate increases improve our utility earnings because they allow us to collect more revenue. However, rate increases are normally granted based on historical data and those increases may not always keep pace with increasing costs. Other parties may petition the Maryland PSC to decrease base rates.

        As a result of the deregulation of electric generation in Maryland, BGE's residential electric base rates are frozen until 2006. Electric delivery service rates are frozen until 2004 for commercial and industrial customers. The generation and transmission components of rates are frozen for different time periods depending on the service options selected by those customers.

Gas Fuel Rate

We charge our gas customers separately for the natural gas they purchase from us. The price we charge for the natural gas is based on a market-based rates incentive mechanism approved by the Maryland PSC. We discuss market-based rates and a current proceeding with the Maryland PSC in more detail in the Gas Cost Adjustments section on page 51 and in Note 1 of our 2002 Annual Report on Form 10-K.

FERC Regulation

Regional Transmission Organizations and Standard Market Design

In December 1999, FERC issued Order 2000, amending its regulations under the Federal Power Act to advance the formation of Regional Transmission Organizations (RTOs) that would allow easier access to transmission.

        On July 31, 2002, the FERC issued a proposed rulemaking regarding implementation of a standard market design (SMD) for wholesale electric markets. The SMD rulemaking is intended to complement FERC's RTO order, and would require RTOs to substantially comply with its provisions. The SMD proposals also required transmission providers to turn over the operation of their facilities to an independent operator that will operate them consistent with a revised market structure proposed by the FERC. According to the FERC, the revised market structure will reduce inefficiencies caused by inconsistent market rules and barriers to transmission access. The FERC proposed that its rule be implemented in stages by October 1, 2004. Comments on the SMD proposal were submitted in February 2003.

        In April 2003, the FERC issued a report that indicated its position with respect to the proposed rulemaking and announced that it intends to leave relatively unmodified existing RTO practices, to allow flexibility among regional approaches, to allow phased-in implementation of the final rule, and to provide an increased deference to states' concerns. Concurrently, proposed federal legislation has been introduced that would remand the rulemaking process to FERC, require the issuance of a new notice of proposed rulemaking, and

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delay the issuance of a final rule until at least July 1, 2005.

        We believe that, while the original SMD proposal would have led to uniform rules that would have been largely favorable to Constellation Energy and BGE, the revised regional approach should result in improved market operations across various regions. Overall, the trend continues to be toward increased competition in the regions. The region where BGE operates is expected to be relatively unaffected by this proceeding.

        In 1997, BGE turned over the operation of its transmission facilities to PJM, a FERC approved RTO, which generally conducts its operations in accordance with FERC standard market design principles.

Weather

Merchant Energy Business

Weather conditions in the different regions of North America influence the financial results of our merchant energy business. Weather conditions can affect the supply of and demand for electricity and fuels, and changes in energy supply and demand may impact the price of these energy commodities in both the spot market and the forward market. Typically, demand for electricity and its price are higher in the summer and the winter, when weather is more extreme. Similarly, the demand for and price of natural gas and oil are higher in the winter. However, all regions of North America typically do not experience extreme weather conditions at the same time.

BGE

Weather affects the demand for electricity and gas for our regulated businesses. Very hot summers and very cold winters increase demand. Mild weather reduces demand. Residential sales for our regulated businesses are impacted more by weather than commercial and industrial sales, which are mostly affected by business needs for electricity and gas.

        However, the Maryland PSC allows us to record a monthly adjustment to our regulated gas business revenues to eliminate the effect of abnormal weather patterns. We discuss this further in the Weather Normalization section on page 51.

        We measure the weather's effect using "degree-days." The measure of degree-days for a given day is the difference between the average daily actual temperature and a baseline temperature of 65 degrees. Cooling degree-days result when the average daily actual temperature exceeds the 65 degree baseline. Heating degree-days result when the average daily actual temperature is less than the baseline.

        During the cooling season, hotter weather is measured by more cooling degree-days and results in greater demand for electricity to operate cooling systems. During the heating season, colder weather is measured by more heating degree-days and results in greater demand for electricity and gas to operate heating systems.

        We show the number of heating and cooling degree-days in the quarters and six months ended June 30, 2003 and 2002, and the percentage change in the number of degree-days between these periods in the following table:

	Quarter Ended June 30,		Six Months Ended June 30,
	2003	2002	2003	2002
Heating degree days	667	493	3,425	2,616
Percent change from prior period	35.3%		30.9%
Cooling degree days	153	295	153	298
Percent change from prior period	(48.1)%		(48.7)%

Other Factors

A number of other factors significantly influence the level and volatility of prices for energy commodities and related derivative products for our merchant energy business. These factors include:

•

seasonal daily and hourly changes in demand,

•

number of market participants,

•

extreme peak demands,

•

available supply resources,

•

transportation availability and reliability within and between regions,

•

implementation of new market rules governing the operations of regional power pools,

•

procedures used to maintain the integrity of the physical electricity system during extreme conditions, and

•

changes in the nature and extent of federal and state regulations.

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        These other factors can affect energy commodity and derivative prices in different ways and to different degrees. These effects may vary throughout the country as a result of regional differences in:

•

weather conditions,

•

market liquidity,

•

capability and reliability of the physical electricity and gas systems, and

•

the nature and extent of electricity deregulation.

        Other factors, aside from weather, also impact the demand for electricity and gas in our regulated businesses. These factors include the "number of customers" and "usage per customer" during a given period. We use these terms later in our discussions of regulated electric and gas operations. In those sections, we discuss how these and other factors affected electric and gas sales during the periods presented.

        The number of customers in a given period is affected by new home and apartment construction and by the number of businesses in our service territory.

        Usage per customer refers to all other items impacting customer sales that cannot be measured separately. These factors include the strength of the economy in our service territory. When the economy is healthy and expanding, customers tend to consume more electricity and gas. Conversely, during an economic downtrend, our customers tend to consume less electricity and gas.

Accounting Standards Adopted and Issued

We discuss recently adopted and issued accounting standards in the Notes to Consolidated Financial Statements on page 21.

36

Results of Operations for the Quarter and Six Months Ended June 30, 2003 Compared with the Same Periods of 2002

In this section, we discuss our earnings and the factors affecting them. We begin with a general overview, then separately discuss earnings for our operating segments. Changes in other income, fixed charges, and income taxes are discussed, as necessary, in the aggregate for all segments in the Consolidated Nonoperating Income and Expenses section on page 53.

Overview

Results

		Quarter Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions, after-tax)
Merchant energy		$	75.2		$	56.4		$	54.7		$	83.4
Regulated electric			20.8			17.4			71.0			33.8
Regulated gas			0.9			2.9			29.5			30.7
Other nonregulated			(0.1	)		4.6			8.6			162.1
Income Before Cumulative Effects of Changes in Accounting Principles			96.8			81.3			163.8			310.0
Cumulative Effects of Changes in Accounting Principles (see Notes)			—			—			(198.4	)		—
Net Income (Loss)		$	96.8		$	81.3		$	(34.6	)	$	310.0
Special Items Included in Operations
	Gains (losses) on sale of investments and other assets	$	0.3		$	(2.0	)	$	8.6		$	162.3
	Workforce reduction costs		(0.4	)		(8.0	)		(0.8	)		(23.6	)
Total Special Items		$	(0.1	)	$	(10.0	)	$	7.8		$	138.7

Quarter Ended June 30, 2003

Our total net income for the quarter ended June 30, 2003 increased $15.5 million, or $0.08 per share, compared to the same period of 2002 mostly because of the following:

•

We had higher earnings due to the High Desert Power Project that commenced operations in April 2003.

•

We had higher earnings from NewEnergy and Alliance, which were acquired in late 2002.

•

Our merchant energy business had higher earnings primarily due to our Calvert Cliffs facility completing a steam generator replacement in April 2003, 58 fewer days than a similar outage that was completed in late June 2002.



•

We had higher earnings from wholesale accrual origination transactions, including a gain on the assumption of the Allegheny agreement.

•

We had higher workforce reduction costs in 2002 that had a negative impact in that period.

        These increases were partially offset by the following:

•

We had lower mark-to-market earnings, primarily due to the restructuring of our agreement with the CDWR in the second quarter of 2002 that had a positive impact in that period.

•

We had lower earnings from our gas-fired plants which commenced operations in mid-2002 and at Nine Mile Point primarily due to the availability of the plant.

•

We had higher interest expense primarily due to lower capitalized interest because of the new generating facilities that commenced operations since mid-2002.

Six Months Ended June 30, 2003

Our total net income for the six months ended June 30, 2003 decreased $344.6 million, or $2.10 per share, compared to the same period of 2002 mostly because of the following:

•

We recorded a $266.1 million after-tax, or $1.61 per share, loss for the cumulative effect of adopting EITF 02-3. This was partially offset by a $67.7 million after-tax, or $.41 per share, gain for the cumulative effect of adopting SFAS No. 143. We discuss these cumulative effect items in more detail in the Notes to Consolidated Financial Statements on page 22.

•

We recognized a $163.3 million after-tax, or $1.00 per share, gain on the sale of our investment in Orion in 2002 that had a positive impact in that period.

•

We had lower earnings from our competitive supply activities mostly due to lower mark-to-market results, the unfavorable impact of volatile gas and power prices especially during the first quarter of 2003, cold northeastern weather, and outages at third-party plants.

•

We had higher fixed charges due to the issuance of $2.5 billion of long-term debt in 2002 that was primarily used to repay short-term borrowings, and due to lower capitalized interest.

•

Our merchant energy business had lower earnings from our investments in qualifying facilities and domestic power projects.

37

        These decreases were partially offset by the following:

•

We had higher earnings from our regulated electric business.

•

We had higher earnings from the addition of NewEnergy and Alliance, and from wholesale accrual origination activities.

•

Our merchant energy business had higher earnings from our nuclear generating assets primarily due to our Calvert Cliffs facility completing a steam generator replacement in April 2003, 58 fewer days than a similar outage that was completed in late June 2002.

•

We had higher workforce reduction costs in 2002 that had a negative impact in that period.

•

Our other nonregulated businesses recognized a gain of $8.6 million after-tax, or $.05 per share, in 2003 related to non-core asset sales.

        In the following sections, we discuss our net income by business segment in greater detail.

Merchant Energy Business

Background

Our merchant energy business is a competitive provider of energy solutions for large customers in North America. As discussed in the Business Environment—Electric Competition section on page 33, in connection with the July 1, 2000 implementation of customer choice in Maryland, BGE's generating assets became part of our nonregulated merchant energy business, and our origination and risk management operation began selling to BGE the energy and capacity required to meet its standard offer service obligations for the first three years (July 1, 2000 to June 30, 2003) of the transition period.

        In August 2001, BGE entered into a contract with our origination and risk management operation to provide 90% of the energy and capacity required for BGE to meet its standard offer service requirements for the final three years (July 1, 2003 to June 30, 2006) of the transition period. Our merchant energy business revenues also include 90% of the competitive transition charges (CTC revenues) BGE collects from its customers and the portion of BGE's revenues providing for nuclear decommissioning costs.

        During the second quarter of 2003, we terminated our relationship with Allegheny and they are no longer obligated to serve the remaining 10% of BGE's standard offer service for the final three years of the transition period. Our origination and risk management operation assumed the obligation to serve the remaining 10% of BGE's standard offer service for the remainder of the transition period. We discuss our relationship with Allegheny prior to the termination in more detail in the Business Environment—Electric Competition section on page 33.

        We record merchant energy revenues and expenses in our financial results in different periods depending upon which portion of our business they affect. We discuss our revenue recognition policies in the Critical Accounting Policies section on page 27 and in Note 1 of our 2002 Annual Report on Form 10-K. We summarize our policies as follows:

•

We record revenues as they are earned and fuel and purchased energy expenses as they are incurred for contracts and activities subject to accrual accounting, including load-serving activities, as discussed below.

•

Prior to the settlement of the forecasted transaction being hedged, we record changes in the fair value of contracts designated as cash-flow hedges in other comprehensive income to the extent that the hedges are effective. We record the effective portion of the changes in fair value of hedges in earnings in the period the settlement of the hedged transaction occurs. We record the ineffective portion of the changes in fair value of hedges, if any, in earnings in the period in which the change occurs.

•

We record changes in the fair value of contracts that are subject to mark-to-market accounting in revenues on a net basis in the period in which the change occurs.

        Mark-to-market accounting requires us to make estimates and assumptions using judgment in determining the fair value of our contracts and in recording revenues from those contracts. We discuss the effects of mark-to-market accounting on our revenues in the Competitive Supply—Mark-to-Market Revenues section on page 42.

        In the first quarter of 2003, we adopted EITF 02-3 that required certain contracts to be accounted for on the accrual basis and recorded gross rather than net upon application of EITF 02-3. The primary contracts affected were our full requirements load-serving contracts and unit-contingent power purchase contracts. The majority of these contracts were in Texas and New England and were entered into prior to our shift to accrual accounting earlier in 2002, as discussed in our 2002 Annual Report on Form 10-K. We discuss the adoption of EITF 02-3 in more detail in the Notes to Consolidated Financial Statements on page 23.

        After the re-designation of existing contracts to non-trading, we record revenues and expenses on a gross basis, but this does not have a material impact on earnings because the resulting increase in revenues is accompanied by a similar increase in fuel and purchased energy expenses.

38

        EITF 02-3 affects the timing of recognizing earnings on new non-derivative transactions. In general, earnings on new transactions subject to EITF 02-3 are no longer recognized at the inception of the transactions as they were under mark-to-market accounting because they are subject to accrual accounting and are recognized over the term of the transaction.

        Additionally, we expect lower earnings volatility for this portion of our business because unrealized changes in the fair value of load-serving contracts will no longer be recorded as revenue at the time of the change as they were under mark-to-market accounting.

        Our merchant energy business results were as follows:

Results

		Quarter Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions)
Revenues		$	1,827.1		$	606.7		$	3,504.2		$	1,096.7
Fuel and purchased energy expenses			(1,302.9	)		(229.0	)		(2,682.0	)		(381.0	)
Operations and maintenance expenses			(277.1	)		(189.6	)		(497.2	)		(395.9	)
Workforce reduction costs			(0.4	)		(5.3	)		(0.8	)		(10.3	)
Depreciation and amortization			(56.6	)		(57.2	)		(107.5	)		(113.9	)
Accretion of asset retirement obligations			(10.7	)		—			(21.3	)		—
Taxes other than income taxes			(27.4	)		(20.5	)		(53.3	)		(41.0	)
Loss on sale of investments and other assets			—			(6.0	)		—			(6.0	)
Income from Operations		$	152.0		$	99.1		$	142.1		$	148.6
Income Before Cumulative Effects of Changes in Accounting Principles (after-tax)		$	75.2		$	56.4		$	54.7		$	83.4
Cumulative Effects of Changes in Accounting Principles (after-tax)			—			—			(198.4	)		—
Net Income (Loss)		$	75.2		$	56.4		$	(143.7	)	$	83.4
Special Items Included in Operations (after-tax)
	Loss on sale of investments and other assets	$	—		$	(3.9	)	$	—		$	(3.9	)
	Workforce reduction costs		(0.3	)		(3.2	)		(0.5	)		(6.2	)
Total Special Items		$	(0.3	)	$	(7.1	)	$	(0.5	)	$	(10.1	)

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 14 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

Revenues and Fuel and Purchased Energy Expenses

Our origination and risk management operation manages our costs of procuring fuel and energy and revenues we realize from the sale of energy to our customers. The difference between revenues and fuel and purchased energy expenses is the primary driver of the profitability of our merchant energy business. Accordingly, we believe it is appropriate to discuss the operating results of our merchant energy business by analyzing the changes in the relationship between revenues and fuel and purchased energy expenses. We discuss non-fuel direct costs, such as ancillary services, transmission costs, financing, and legal costs in conjunction with other operations and maintenance expenses in the Operations and Maintenance Expenses section on page 48.

        We analyze our merchant energy revenues and fuel and purchased energy expenses in the following categories because of differences in the revenue sources, the nature of fuel and purchased energy expenses, and the risk profile of each category.

•

PJM Platform—our fossil, nuclear, and hydroelectric generating facilities and load-serving activities in the PJM region for which the output is primarily used to serve BGE.

•

Plants with Power Purchase Agreements—our generating facilities with long-term power purchase agreements, including Nine Mile Point, Oleander, University Park, and beginning in the second quarter of 2003, our High Desert Power Project.

•

Competitive Supply—our wholesale business that provides load-serving activities to distribution utilities (primarily in Texas and New England), other wholesale origination and risk management services, and electric and gas retail energy services to commercial and industrial customers. With the acquisition of the load-serving customers from CMS Energy Corp., as previously discussed on page 30, the results of our gas-fired facilities in the Mid-West region which were previously part of our "Other" category became part of our competitive supply activities beginning in the second quarter of 2003.

•

Other—our investments in qualifying facilities and domestic power projects and our generation and consulting services.

39

        We provide a summary of our revenues and fuel and purchased energy expenses as follows:

		Quarter Ended June 30,										Six Months Ended June 30,
		2003					2002					2003					2002
		(Dollar amounts in millions)
Revenues:
	PJM Platform	$	465.3				$	323.6				$	841.0				$	610.0
	Plants with Power Purchase Agreements		156.8					107.4					266.0					199.9
	Competitive Supply		1,198.2					168.6					2,357.5					255.6
	Other		6.8					7.1					39.7					31.2
	Total	$	1,827.1				$	606.7				$	3,504.2				$	1,096.7
Fuel and purchased energy expenses:
	PJM Platform	$	(188.0	)			$	(130.2	)			$	(393.5	)			$	(248.9	)
	Plants with Power Purchase Agreements		(11.1	)				(9.6	)				(23.8	)				(18.3	)
	Competitive Supply		(1,099.4	)				(82.3	)				(2,244.3	)				(105.7	)
	Other		(4.4	)				(6.9	)				(20.4	)				(8.1	)
	Total	$	(1,302.9	)			$	(229.0	)			$	(2,682.0	)			$	(381.0	)
Revenues less fuel and purchased energy expenses:					% of Total					% of Total					% of Total					% of Total
	PJM Platform	$	277.3		53	%	$	193.4		51	%	$	447.5		54	%	$	361.1		51	%
	Plants with Power Purchase Agreements		145.7		28			97.8		26			242.2		30			181.6		25
	Competitive Supply		98.8		18			86.3		23			113.2		14			149.9		21
	Other		2.4		1			0.2		—			19.3		2			23.1		3
	Total	$	524.2		100	%	$	377.7		100	%	$	822.2		100	%	$	715.7		100	%

PJM Platform

	Quarter Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(In millions)
Revenues	$	465.3		$	323.6		$	841.0		$	610.0
Fuel and purchased energy expenses		(188.0	)		(130.2	)		(393.5	)		(248.9	)
Revenues less fuel and purchased energy	$	277.3		$	193.4		$	447.5		$	361.1

Revenues

BGE Standard Offer Service

The majority of PJM Platform revenues arise from supplying BGE's standard offer service requirements. Revenues from supplying BGE's standard offer service requirements, including CTC and decommissioning revenues, decreased $38.4 million during the quarter ended June 30, 2003 compared to the same period of 2002 and decreased $34.9 million during the six months ended June 30, 2003 compared to the same period of 2002. The decrease was primarily due to approximately 1,200 megawatts of large commercial and industrial customers leaving BGE's standard offer service in the second quarter of 2002 and electing other electric generation suppliers and milder weather in the central Maryland region during the second quarter of 2003.

        CTC revenues are impacted by the CTC rates our merchant energy business receives from BGE customers, as well as, the volumes delivered to BGE customers. The CTC rates decline over the transition period as previously discussed in the Electric Competition—Maryland section on page 33.

        Approximately one-third of the load for large commercial and industrial customers that left BGE's standard offer service elected BGE Home, a subsidiary of Constellation Energy, as their electric generation supplier. Our merchant energy business continues to provide the energy to BGE Home to meet the requirements of these customers under market-based rates. Revenues from BGE Home increased $16.8 million for the quarter ended June 30, 2003 and $36.3 million for the six months ended June 30, 2003 compared to the same periods of 2002. BGE Home is included in our other nonregulated businesses.

        Beginning in the second quarter of 2003, as contracts for large commercial and industrial customers being served by BGE Home expire, the renewal of any customer will be with NewEnergy, which is included in our Competitive Supply category.

40

Other PJM Revenues

Other merchant energy revenues in the PJM region increased $163.3 million for the quarter ended June 30, 2003 and $229.6 million for the six months ended June 30, 2003 compared to the same periods of 2002. The increase is primarily due to the following:

•

higher sales of energy and related services from our owned generation in excess of that used to serve BGE's standard offer service,

•

a gain on the assumption of the Allegheny load-serving contract for the remaining 10% of the BGE standard offer service load, and

•

increased sales to BGE Home related to their gas programs.

Fuel and Purchased Energy Expenses

Our merchant energy business had higher fuel and purchased energy expenses in the PJM region for the quarter and six months ended June 30, 2003 compared to the same periods of 2002 primarily due to higher generation at our plants and increased purchased energy and capacity expenses because of the following:

•

higher wholesale market prices to serve BGE's standard offer service, and

•

increased sales to BGE Home related to their gas programs.

Plants with Power Purchase Agreements

	Quarter Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(In millions)
Revenues	$	156.8		$	107.4		$	266.0		$	199.9
Fuel and purchased energy expenses		(11.1	)		(9.6	)		(23.8	)		(18.3	)
Revenues less fuel and purchased energy	$	145.7		$	97.8		$	242.2		$	181.6

        The increase in revenues during the quarter ended June 30, 2003 compared to the same period of 2002 primarily was due to the following:

•

revenues of $33.2 million from the High Desert Power Project that commenced operations in the second quarter of 2003,

•

higher revenues of $8.5 million from the Oleander generating facility that commenced operations in the second half of 2002, and

•

higher revenues of $1.9 million from Nine Mile Point due to higher power prices in the New York region compared to 2002.

        The increase in revenues during the six months ended June 30, 2003 compared to the same period of 2002 primarily was due to the following:

•

revenues of $33.2 million from the High Desert Power Project that commenced operations in the second quarter of 2003,

•

higher revenues of $18.8 million from the Oleander generating facility that commenced operations in the second half of 2002, and

•

higher revenues of $11.8 million from Nine Mile Point due to higher power prices in the New York region compared to 2002.

        Our merchant energy business had higher fuel and purchased energy expenses for the quarter and six months ended June 30, 2003 compared to the same periods of 2002 primarily due to the operation of the Oleander and High Desert generating facilities.

Competitive Supply

	Quarter Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(In millions)
Accrual revenues	$	1,192.2		$	78.3		$	2,354.7		$	101.5
Mark-to-market revenues		6.0			90.3			2.8			154.1
Fuel and purchased energy expenses		(1,099.4	)		(82.3	)		(2,244.3	)		(105.7	)
Revenues less fuel and purchased energy	$	98.8		$	86.3		$	113.2		$	149.9

We analyze our accrual and mark-to-market competitive supply activities separately below.

Accrual Revenues and Fuel and Purchased Energy Expenses

Our accrual revenues and fuel and purchased energy expenses increased for the quarter and six months ended June 30, 2003 compared to the same periods of 2002 mostly because of the re-designation of our load-serving activities to accrual, including the adoption of EITF 02-3,

41

combined with increased wholesale accrual origination activities, primarily in Texas and New England, and the acquisitions of NewEnergy and Alliance. We provide the changes in revenues and fuel and purchased energy expenses in 2003 compared to 2002 in the following table.

	Quarter Ended June 30, 2003 vs. 2002				Six Months Ended June 30, 2003 vs. 2002
	Increases in revenues		Increases in fuel and purchased energy expenses		Increases in revenues		Increases in fuel and purchased energy expenses
	(In millions)
Wholesale accrual activities	$	536.1	$	483.7	$	1,092.9	$	1,057.8
Acquired companies		577.8		533.4		1,160.3		1,080.8
Total increase	$	1,113.9	$	1,017.1	$	2,253.2	$	2,138.6

        We discuss the implications of EITF 02-3 in more detail in the Notes to Consolidated Financial Statements on page 23.

Mark-to-Market Revenues

Mark-to-market revenues include net gains and losses from origination and risk management activities for which we use the mark-to-market method of accounting. We discuss these activities and the mark-to-market method of accounting in more detail in the Critical Accounting Policies section on page 27. We also discuss the implications of EITF 02-3 on the mark-to-market method of accounting in the Notes to Consolidated Financial Statements on page 23.

        As a result of the nature of our operations and the use of mark-to-market accounting for certain activities, mark-to-market revenues and earnings will fluctuate. We cannot predict these fluctuations, but the impact on our revenues and earnings could be material. We discuss our market risk in more detail in the Market Risk section in our 2002 Annual Report on Form 10-K. The primary factors that cause fluctuations in our mark-to-market revenues and earnings are:

•

the number, size, and profitability of new transactions,

•

the number and size of our open derivative positions, and

•

changes in the level and volatility of forward commodity prices and interest rates.

        Mark-to-market revenues were as follows:

			Quarter Ended June 30,						Six Months Ended June 30,
			2003			2002			2003			2002
			(In millions)
Unrealized revenues
	Origination transactions		$	10.9		$	85.4		$	25.1		$	94.9
	Risk management
		Unrealized changes in fair value		(4.9	)		1.1			(22.3	)		54.9
		Changes in valuation techniques		—			3.8			—			4.3
		Reclassification of settled contracts to realized		(84.1	)		13.7			(69.9	)		(7.2	)
	Total risk management			(89.0	)		18.6			(92.2	)		52.0
Total unrealized revenues				(78.1	)		104.0			(67.1	)		146.9
Realized revenues				84.1			(13.7	)		69.9			7.2
Total mark-to-market revenues			$	6.0		$	90.3		$	2.8		$	154.1

        Revenues from origination transactions represent the initial unrealized fair value of new wholesale energy transactions (including restructurings) at the time of contract execution to the extent permitted by applicable accounting rules. Risk management revenues represent both realized and unrealized gains and losses from changes in the value of our entire portfolio. We discuss the changes in mark-to-market revenues below. We show the relationship between our revenues and the change in our net mark-to-market energy asset/liability later in this section.

        Our mark-to-market revenues were and continue to be affected by a decrease in the portion of our activities that is subject to mark-to-market accounting. As discussed in our 2002 Annual Report on Form 10-K, we re-designated our Texas load-serving business as accrual during 2002, and we began to account for new non-derivative origination transactions on the accrual basis rather than under mark-to-market accounting. Beginning January 1, 2003, under EITF 02-3, we no longer record existing non-derivative contracts at fair value.

        Mark-to-market revenues decreased $84.3 million during the quarter ended June 30, 2003 compared to 2002 because of net losses from risk management activities compared to net gains in the prior year and lower origination subject to mark-to-market accounting with the implementation of EITF 02-3. The decrease is primarily due to mark-to-market revenue associated with the restructuring of our High Desert contract with the

42

CDWR that had a positive impact in 2002, unfavorable changes in regional power prices, price volatility, and the impact of mark-to-market losses on hedges that did not qualify for hedge accounting treatment as discussed in more detail below.

        Mark-to-market revenues decreased $151.3 million during the six months ended June 30, 2003 compared to 2002 because of net losses from risk management activities compared to net gains in the prior year and lower origination subject to mark-to-market accounting with the implementation of EITF 02-3. The decrease in risk management revenues is primarily due to mark-to-market revenue associated with the restructuring of our High Desert contract with the CDWR that had a positive impact in 2002, unfavorable changes in regional power prices, price volatility, and the impact of mark-to-market losses on hedges that did not qualify for hedge accounting treatment as discussed in more detail below.

        Prior to EITF 02-3, we were required to record all New England load serving positions entered into before the second quarter of 2002 and our hedges against those positions on a mark-to-market basis. With the implementation of EITF 02-3 in the first quarter of 2003, all of the load-serving contracts were converted to accrual accounting. However, several economically effective hedges on these positions did not qualify for accrual hedge accounting treatment under SFAS No. 133 and remained in the mark-to-market portfolio.

        In the first half of 2003, increasing forward prices shifted value between accrual load-serving positions and associated mark-to-market hedges producing a timing difference in the recognition of earnings on related transactions. As a result, we recorded a $19.9 million pre-tax loss on the mark-to-market hedges during the second quarter of 2003 and a $39.7 million pre-tax loss during the six months ended June 30, 2003. We will realize gains on the accrual load-serving positions in cash over the balance of the year, offset by cash losses on the hedges, which we were required to mark-to-market.

Mark-to-Market Energy Assets and Liabilities

Our mark-to-market energy assets and liabilities are comprised of derivative contracts, and in 2002, prior to the implementation of EITF 02-3, were comprised of a combination of derivative and non-derivative (physical) contracts. The non-derivative assets and liabilities primarily relate to load-serving activities originated prior to the shift to accrual accounting in 2002. While some of these contracts represent commodities or instruments for which prices are available from external sources, other commodities and certain contracts are not actively traded and are valued using other pricing sources and modeling techniques to determine expected future market prices, contract quantities, or both. We discuss our modeling techniques later in this section.

        Mark-to-market energy assets and liabilities consisted of the following:

	June 30, 2003			December 31, 2002
	(In millions)
Current Assets	$	742.4		$	759.4
Noncurrent Assets		397.4			926.8
Total Assets		1,139.8			1,686.2
Current Liabilities		801.4			709.6
Noncurrent Liabilities		342.4			460.0
Total Liabilities		1,143.8			1,169.6
Net mark-to-market energy (liability) asset	$	(4.0	)	$	516.6

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        The following are the primary sources of the change in net mark-to-market energy asset/liability during 2003:

Change in Net Mark-to-Market Energy Asset (Liability)

		Quarter Ended June 30, 2003		Six Months Ended June 30, 2003
		(In millions)
Fair value beginning of period		$ 83.6		$ 516.6
Changes in fair value recorded as revenues
	Origination transactions	$ 10.9		$ 25.1
	Unrealized changes in fair value	(4.9)		(22.3)
	Changes in valuation techniques	—		—
	Reclassification of settled contracts to realized	(84.1)		(69.9)
Total changes in fair value recorded as revenues		(78.1	)	(67.1	)
Cumulative effect impact of EITF 02-3		—		(379.4	)
Contracts designated as normal purchases/sales and hedges upon implementation of EITF 02-3		—		(58.2	)
Changes in value of exchange-listed futures and options		(4.9	)	(9.1	)
Net change in premiums on options		(10.2	)	(14.9	)
Other changes in fair value		5.6		8.1
Fair value at June 30, 2003		$  (4.0	)	$    (4.0	)

        Components of changes in the net mark-to-market energy asset or liability that affected revenues include:

•

Origination transactions represent the initial unrealized fair value at the time these contracts are executed to the extent permitted by accounting rules, including EITF 02-3.



•

Unrealized changes in fair value represent unrealized changes in commodity prices, the volatility of options on commodities, the time value of options, and other valuation adjustments.

•

Changes in valuation techniques represent improvements in estimation techniques, including modeling and other statistical enhancements used to value our portfolio to reflect more accurately the economic value of our contracts.

•

Reclassification of settled contracts to realized represents the portion of previously unrealized amounts settled during the period and recorded as realized revenues.

        The net mark-to-market energy asset or liability also changed due to the following items recorded in accounts other than revenue:

•

The cumulative effect impact of EITF 02-3 represents the non-derivative portion of the net asset that was reclassified to accrual accounting effective January 1, 2003 as required by EITF 02-3.

•

Contracts designated as normal purchases/sales and hedges upon adoption of EITF 02-3, represents the portion of the net asset reclassified to "Other assets or liabilities" under the normal purchases/normal sales provisions of SFAS No. 133 or "Risk management assets or liabilities" under the cash flow hedge provisions of SFAS No. 133 in connection with the implementation of EITF 02-3 effective January 1, 2003.

•

Changes in value of exchange-listed futures and options are adjustments to remove unrealized revenue from exchange-traded contracts that are included in risk management revenues. The fair value of these contracts is recorded in "Accounts receivable" rather than "Mark-to-market energy assets" in our Consolidated Balance Sheets because these amounts are settled through our margin account with a third-party broker.

•

Net changes in premiums on options reflects the accounting for premiums on options purchased as an increase in the net mark-to-market energy asset or a decrease to the net mark-to-market liability and premiums on options sold as a decrease in the net mark-to-market energy asset or an increase to the net mark-to-market liability.

44

        The settlement terms of the net mark-to-market energy asset or liability and sources of fair value as of June 30, 2003 are as follows:

	Settlement Term
	Fair Value
			2003			2004			2005			2006			2007		2008		Thereafter
	(In millions)
Prices provided by external sources (1)	$	(55.1	)	$	(18.5	)	$	(1.9	)	$	5.3		$	—	$	—	$	—	$	(70.2	)
Prices based on models		1.4			(0.1	)		(9.7	)		(0.3	)		26.9		16.9		31.1		66.2
Total net mark-to-market energy (liability) asset	$	(53.7	)	$	(18.6	)	$	(11.6	)	$	5.0		$	26.9	$	16.9	$	31.1	$	(4.0	)

(1)

Includes contracts actively quoted and contracts valued from other external sources.

        We manage our mark-to-market risk on a portfolio basis based upon the delivery period of our contracts and the individual components of the risks within each contract. Accordingly, we record and manage the energy purchase and sale obligations under our contracts in separate components based upon the commodity (e.g., electricity or gas), the product (e.g., electricity for delivery during peak or off-peak hours), the delivery location (e.g., by region), the risk profile (e.g., forward or option), and the delivery period (e.g., by month and year).

        Consistent with our risk management practices, we have presented the information in the tables above based upon the ability to obtain reliable prices for components of the risks in our contracts from external sources rather than on a contract-by-contract basis. Thus, the portion of long-term contracts that is valued using external price sources is presented under the caption "prices provided by external sources." This is consistent with how we manage our risk, and we believe it provides the best indication of the basis for the valuation of our portfolio. Since we manage our risk on a portfolio basis rather than contract-by-contract, it is not practicable to determine separately the portion of long-term contracts that is included in each valuation category. We describe the commodities, products, and delivery periods included in each valuation category in detail below.

        The amounts for which fair value is determined using prices provided by external sources represent the portion of forward, swap, and option contracts for which price quotations are available through brokers or over-the-counter transactions. The term for which such price information is available varies by commodity, region, and product. The fair values included in this category are the following portions of our contracts:

•

forward purchases and sales of electricity during peak and off-peak hours for delivery terms primarily through 2004, but up to 2006, depending upon the region,

•

options for the purchase and sale of electricity during peak hours for delivery terms through 2004, depending upon the region,




•

forward purchases and sales of electric capacity for delivery terms through 2004,

•

forward purchases and sales of natural gas, coal and oil for delivery terms through 2005, and

•

options for the purchase and sale of natural gas, coal and oil for delivery terms through 2005.

        The remainder of the net mark-to-market energy asset or liability is valued using models. The portion of contracts for which such techniques are used includes standard products for which external prices are not available and customized products that are valued using modeling techniques to determine expected future market prices, contract quantities, or both.

        Modeling techniques include estimating the present value of cash flows based upon underlying contractual terms and incorporate, where appropriate, option pricing models and statistical and simulation procedures. Inputs to the models include:

•

observable market prices,

•

estimated market prices in the absence of quoted market prices,

•

the risk-free market discount rate,

•

volatility factors,

•

estimated correlation of energy commodity prices, and

•

expected generation profiles of specific regions.

        Additionally, we incorporate counterparty-specific credit quality and factors for market price and volatility uncertainty and other risks in our valuation. The inputs and factors used to determine fair value reflect management's best estimates.

        The electricity, fuel, and other energy contracts we hold have varying terms to maturity, ranging from contracts for delivery the next hour to contracts with terms of ten years or more. Because an active, liquid electricity futures market comparable to that for other commodities has not developed, the majority of contracts used in the origination and risk management operation are direct contracts between market participants and are not exchange-traded or financially settling contracts that can be readily liquidated in their entirety through an exchange or other market mechanism. Consequently, we and other

45

market participants generally realize the value of these contracts as cash flows become due or payable under the terms of the contracts rather than through selling or liquidating the contracts themselves.

        Consistent with our risk management practices, the amounts shown in the tables on the previous page as being valued using prices from external sources include the portion of long-term contracts for which we can obtain reliable prices from external sources. The remaining portions of these long-term contracts are shown in the tables as being valued using models. In order to realize the entire value of a long-term contract in a single transaction, we would need to sell or assign the entire contract. If we were to sell or assign any of our long-term contracts in their entirety, we may not realize the entire value reflected in the tables. However, based upon the nature of the origination and risk management operation, we expect to realize the value of these contracts, as well as any contracts we may enter into in the future to manage our risk, over time as the contracts and related hedges settle in accordance with their terms. We do not expect to realize the value of these contracts and related hedges by selling or assigning the contracts themselves in total.

        The fair values in the tables represent expected future cash flows based on the level of forward prices and volatility factors as of June 30, 2003 and could change significantly as a result of future changes in these factors. Additionally, because the depth and liquidity of the power markets varies substantially between regions and time periods, the prices used to determine fair value could be affected significantly by the volume of transactions executed.

        Management uses its best estimates to determine the fair value of commodity and derivative contracts it holds and sells. These estimates consider various factors including closing exchange and over-the-counter price quotations, time value, volatility factors, and credit exposure. However, future market prices and actual quantities will vary from those used in recording mark-to-market energy assets and liabilities, and it is possible that such variations could be material.

Other

	Quarter Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(In millions)
Revenues	$	6.8		$	7.1		$	39.7		$	31.2
Fuel and purchased energy expenses		(4.4	)		(6.9	)		(20.4	)		(8.1	)
Revenues less fuel and purchased energy	$	2.4		$	0.2		$	19.3		$	23.1

        We analyze the revenues and fuel and purchased energy expenses of the final category of our merchant energy business below.

Revenues

Our other merchant energy business revenues were about the same during the quarter ended June 30, 2003 compared to the same period of 2002 mostly because we had lower revenues from our gas-fired facilities in the Mid-West region, partially offset by higher revenues from our generation services operation. Our Mid-West region gas-fired facilities became part of our competitive supply activities on April 1, 2003, as previously discussed.

        Revenues from our other merchant energy business increased during the six months ended June 30, 2003 compared to the same period of 2002 mostly because we had higher revenues from our gas-fired facilities in the Mid-West region (during the first quarter of 2003) compared to the six months ended June 30, 2002. This was partially offset by lower revenues from our investments in qualifying facilities and domestic power projects.

        We discuss our investments in qualifying facilities and domestic power projects in more detail below.

Investments in Qualifying Facilities and Domestic Power Projects

Our merchant energy business holds up to a 50% ownership interest in 28 operating domestic energy projects that consist of electric generation, fuel processing, or fuel handling facilities. Of these 28 projects, 20 are "qualifying facilities" that receive certain exemptions and pricing under the Public Utility Regulatory Policy Act of 1978 based on the facilities' energy source or the use of a cogeneration process.

46

        Revenues from our investment in qualifying facilities and domestic power projects during the quarter ended June 30, 2003 were about the same as the same period in 2002. A decrease in revenues of $13.4 million during the six months ended June 30, 2003 compared to the same period of 2002 was due to the following:

•

We had lower revenues from our California projects because we reversed certain credit reserves that totaled $9.1 million during the first quarter of 2002, as we began receiving payments from the California utilities, which had a positive impact in 2002.

•

We had lower revenues from a geothermal project that generated at a lower capacity in 2003.

        We believe the current market conditions for our equity-method investments that own geothermal, coal, hydroelectric, and fuel processing projects provide sufficient positive cash flows to recover our investments. We continuously monitor issues that potentially could impact future profitability of these investments, including environmental and legislative initiatives. We discuss certain risks and uncertainties in more detail in our Forward Looking Statements section on page 62. However, should future events cause these investments to become uneconomic, our investments in these projects could become impaired under the provisions of APB No. 18.

        We have an investment in a partnership that owns a geothermal project with a book value of $103.0 million at June 30, 2003. Recently, the project completed well-drilling efforts designed to restore the output of the project, and the project currently is producing at a level such that we expect the project to generate sufficient cash flows over its life to enable us to recover our equity interest in the project.

        Under the provisions of FIN 46, effective July 1, 2003, we removed our investment in this partnership and consolidated the assets and liabilities associated with the project in our Consolidated Balance Sheets. However, should the project not continue to produce a sufficient geothermal resource, or should future well drilling at this project prove to be unsuccessful or become uneconomic, causing us not to make future investments in the project, the project's assets could become impaired under the provisions of SFAS No. 144, and any losses recognized could be material.

        The ability to recover our costs in our equity-method investments that own biomass and solar projects is partially dependent upon subsidies from the State of California. Under the California Public Utility Act, subsidies currently exist in that the California Public Utilities Commission (CPUC) requires electric corporations to identify a separate rate component to fund the development of renewable resources technologies, including solar, biomass, and wind facilities. In addition, legislation in California requires that each electric corporation increase its total procurement of eligible renewable energy resources by at least one percent per year so that 20% of its retail sales are procured from eligible renewable energy resources by 2017. The legislation also requires the California Energy Commission to award supplemental energy payments to electric corporations to cover above market costs of renewable energy.

        Given the need for electric power and the desire for renewable resource technologies, we believe California will continue to subsidize the use of renewable energy to make these projects economical to operate. However, should the California legislation fail to adequately support the renewable energy initiatives, our equity-method investments in these types of projects could become impaired under the provisions of APB No. 18, and any losses recognized could be material.

        If our strategy were to change from an intent to hold to an intent to sell for any of our equity-method investments in qualifying facilities or power projects, we would need to adjust their book value to fair value, and that adjustment could be material. If we were to sell these investments in the current market, we may have losses that could be material.

Fuel and Purchased Energy Expenses

Our other merchant energy business fuel and purchased energy expenses decreased $2.5 million during the quarter ended June 30, 2003 compared to the same period of 2002, primarily due to our gas-fired facilities in the Mid-West region, partially offset by higher expenses from our generation services operation. As previously discussed, the Mid-West region facilities became part of the competitive supply portfolio on April 1, 2003.

        Our other merchant energy business fuel and purchased energy expenses increased $12.3 million for the six months ended June 30, 2003 compared to the same period of 2002 mostly because we had higher fuel and purchased energy expenses for our gas-fired facilities in the Mid-West region (during the first quarter of 2003).

47

Operations and Maintenance Expenses

Our merchant energy business operations and maintenance expenses increased $87.5 million in the second quarter of 2003 compared to the same period of 2002 mostly due to the following:

•

an increase of $27.6 million due to the acquisitions of NewEnergy and Alliance,

•

an increase of $13.9 million at Nine Mile Point that includes approximately $10 million related to higher costs associated with the refueling outage of Unit 1 in 2003 compared to the 2002 refueling outage of Unit 2. Since we own 100% of Unit 1, we incur all outage costs compared to 82% of costs for Unit 2,

•

an increase in costs related to our origination and risk management operation as a result of the growth of this operation,

•

costs related to our High Desert Power Project that commenced operations in the second quarter of 2003, and

•

higher benefit and other inflationary cost increases.

        These increases were offset in part by cost reductions due to productivity initiatives including our corporate-wide workforce reduction programs.

        Our merchant energy business operations and maintenance expenses increased $101.3 million for the six months ended June 30, 2003 compared to the same period of 2002 mostly due to the following:

•

an increase of $45.7 million due to the acquisitions of NewEnergy and Alliance,

•

an increase of $21.0 million at Nine Mile Point that includes approximately $12 million related to higher costs associated with the refueling outage of Unit 1 in 2003 compared to the 2002 refueling outage of Unit 2. Since we own 100% of Unit 1, we incur all outage costs compared to 82% of costs for Unit 2,

•

an increase in costs related to our origination and risk management operation as a result of the growth of this operation,

•

costs related to our High Desert Power Project that commenced operations in the second quarter of 2003, and

•

higher benefit and other inflationary cost increases.

        These increases were offset in part by cost reductions due to productivity initiatives including our corporate-wide workforce reduction programs.

Workforce Reduction Costs

Our merchant energy business recognized $0.4 million in the second quarter of 2003 and $5.3 million in the same period of 2002 of expenses associated with our workforce reduction efforts. During the six months ended June 30, 2003 our merchant energy business recognized expenses associated with our workforce reduction efforts of $0.8 million compared to $10.3 million for the same period in 2002.

        We discuss these workforce reduction costs in more detail in the Notes to Consolidated Financial Statements on page 11.

Depreciation and Amortization Expense

Merchant energy depreciation and amortization expense decreased $0.6 million in the second quarter of 2003 compared to the same period of 2002 and $6.4 million for the six months ended June 30, 2003 compared to the same period of 2002 mostly because of the adoption of SFAS No. 143.

        Under SFAS No. 143, a portion of the decommissioning amortization is included as "Accretion of asset retirement obligations" expense beginning in 2003 as discussed below. In addition, we no longer include the expected net future costs of removal as a component of depreciation expense beginning in 2003. These decreases were partially offset by higher depreciation expense of new generating facilities that commenced operations in mid-2002.

Accretion of Asset Retirement Obligations

On January 1, 2003, we adopted SFAS No. 143 that requires the accretion of the asset retirement obligation liability due to the passage of time until the liability is settled. Accordingly, we recognized $10.7 million of accretion expense in the second quarter of 2003 and $21.3 million of accretion expense for the six months ended June 30, 2003. We discuss SFAS No. 143 in the Notes to Consolidated Financial Statements on page 22.

Taxes Other Than Income Taxes

Merchant energy taxes other than income taxes increased $6.9 million in the second quarter of 2003 compared to the same period of 2002 and $12.3 million for the six months ended June 30, 2003 compared to the same period of 2002 mostly because of taxes other than income taxes associated with NewEnergy and the new generating facilities.

48

Regulated Electric Business

As previously discussed, our regulated electric business was significantly impacted by the July 1, 2000 implementation of customer choice. These changes include BGE's generating assets and related liabilities becoming part of our nonregulated merchant energy business on that date.

        BGE's electric rates are frozen in total during the transition period and are unbundled to show separate components for delivery service, transition charges, standard offer services (generation), transmission, universal service, and certain taxes. In addition, 90% of the CTC revenues BGE collects and the portion of its revenues providing for decommissioning costs are included in revenues of the merchant energy business.

        As part of the deregulation of electric generation, while total rates are frozen over the transition period, the increasing rates received from customers under standard offer service are offset by declining CTC rates.

Results

		Quarter Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions)
Revenues		$	437.0		$	480.4		$	923.3		$	940.8
Electricity purchased for resale expenses			(237.2	)		(273.8	)		(480.8	)		(514.3	)
Operations and maintenance expenses			(61.7	)		(59.5	)		(115.6	)		(120.3	)
Workforce reduction costs			(0.2	)		(7.9	)		(0.5	)		(28.8	)
Depreciation and amortization			(44.5	)		(44.0	)		(88.7	)		(87.8	)
Taxes other than income taxes			(33.7	)		(34.2	)		(69.0	)		(68.9	)
Income from Operations		$	59.7		$	61.0		$	168.7		$	120.7
Net Income		$	20.8		$	17.4		$	71.0		$	33.8
Special Items Included in Operations (after-tax)
	Workforce reduction costs	$	(0.1	)	$	(4.8	)	$	(0.3	)	$	(17.4	)

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 14 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

         Net income from the regulated electric business increased during the quarter ended June 30, 2003 compared to the same period of 2002 mostly because of the following:

•

lower workforce reduction costs of $4.7 million after-tax related to our 2002 corporate-wide workforce reduction programs, and

•

lower interest expense.

        These favorable results were partially offset by a decrease in revenues from lower distribution sales volumes primarily due to milder weather.

        Net income from the regulated electric business increased during the six months ended June 30, 2003 compared to the same period of 2002 mostly because of the following:

•

lower workforce reduction costs of $17.1 million after-tax related to our 2002 corporate-wide workforce reduction programs,

•

lower interest expense,

•

increased distribution sales volumes due to colder winter weather, and

•

cost reductions in 2003 resulting from our corporate-wide workforce reduction programs and other productivity initiatives.

Electric Revenues

The changes in electric revenues in 2003 compared to 2002 were caused by:

	Quarter Ended June 30, 2003 vs. 2002			Six Months Ended June 30, 2003 vs. 2002
	(In millions)
Distribution sales volumes	$	(5.9	)	$	10.9
Standard offer service		(39.3	)		(36.9	)
Total change in electric revenues from electric system sales		(45.2	)		(26.0	)
Other		1.8			8.5
Total change in electric revenues	$	(43.4	)	$	(17.5	)

49

Distribution Sales Volumes

"Distribution sales volumes" are sales to customers in BGE's service territory at rates set by the Maryland PSC.

        The percentage changes in our distribution sales volumes, by type of customer, in 2003 compared to 2002 were:

	Quarter Ended June 30, 2003 vs. 2002		Six Months Ended June 30, 2003 vs. 2002
Residential	(3.0	)%	8.8	%
Commercial	0.9		2.5
Industrial	(5.2	)	(3.7	)

        During the second quarter of 2003, we distributed less electricity to residential customers compared to the same period of 2002 mostly due to milder weather partially offset by increased usage per customer. We distributed about the same amount of electricity to commercial customers. We distributed less electricity to industrial customers mostly because of lower usage by industrial customers.

        During the six months ended June 30, 2003, we distributed more electricity to residential customers compared to the same period of 2002 due to increased usage per customer, colder winter weather, and an increased number of customers, partially offset by milder summer weather. We distributed more electricity to commercial customers mostly due to increased usage per customer and colder winter weather, partially offset by milder summer weather. We distributed less electricity to industrial customers mostly because of lower usage by industrial customers.

Standard Offer Service

BGE provides standard offer service for customers that do not select an alternative generation supplier as previously discussed.

        Standard offer service revenues decreased during the second quarter of 2003 compared to the same period of 2002 mostly due to milder weather in the second quarter of 2003 and the loss of approximately 1,200 megawatts of large commercial and industrial customers leaving BGE's standard offer service in the second quarter of 2002 and electing other electric generation suppliers.

        Standard offer service revenues decreased during the six months ended June 30, 2003 compared to the same period of 2002 mostly due to approximately 1,200 megawatts of large commercial and industrial customers leaving BGE's standard offer service in the second quarter of 2002 and electing other electric generation suppliers. This decrease was partially offset by increased residential standard offer service revenues due to increased usage per customer, colder winter weather, and an increased number of customers, partially offset by milder summer weather.

Electricity Purchased for Resale Expenses

Electricity purchased for resale expenses include the cost of electricity purchased for resale to our standard offer service customers. These costs do not include the cost of electricity purchased by delivery service customers.

        Our electricity purchased for resale expenses for the second quarter of 2003 were lower compared to the same period of 2002 mostly due to milder weather in the second quarter of 2003 and large commercial and industrial customers leaving BGE's standard offer service and electing other electric generation suppliers as previously discussed.

        Our electricity purchased for resale expenses were lower during the six months ended June 30, 2003 compared to the same period of 2002 mostly due to large commercial and industrial customers leaving BGE's standard offer service and electing other electric generation suppliers, partially offset by increased consumption by residential customers.

Electric Operations and Maintenance Expenses

Regulated electric operations and maintenance expenses were about the same for the second quarter of 2003 compared to the same period of 2002 primarily due to higher benefit and other inflationary costs offset by cost reductions resulting from our corporate-wide workforce reduction programs and other productivity initiatives.

        Regulated electric operations and maintenance expenses decreased $4.7 million during the six months ended June 30, 2003 compared to the same period of 2002 mostly due to cost reductions resulting from our corporate-wide workforce reduction programs and other productivity initiatives.

Workforce Reduction Costs

BGE's electric business workforce reduction expenses decreased $7.7 million pre-tax, or $4.7 million after-tax, in the second quarter of 2003 and decreased $28.3 million pre-tax, or $17.1 million after-tax, during the six months ended June 30, 2003 compared to the same periods in 2002 because these programs were substantially completed in 2002. We discuss our workforce reduction efforts in the Notes to Consolidated Financial Statements on page 11.

Other Electric Operating Expenses

Regulated other electric operating expenses were about the same for the quarter and six months ended June 30, 2003 compared to the same periods of 2002.

50

Regulated Gas Business

All BGE customers have the option to purchase gas from other suppliers. To date, customer choice has not had a material effect on our, or BGE's, financial results.

Results

	Quarter Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(In millions)
Gas revenues	$	140.0		$	92.5		$	443.6		$	315.9
Gas purchased for resale expenses		(86.3	)		(38.7	)		(289.4	)		(163.0	)
Operations and maintenance expenses		(24.4	)		(22.1	)		(47.7	)		(45.9	)
Depreciation and amortization		(11.5	)		(11.8	)		(23.2	)		(24.5	)
Taxes other than income taxes		(8.3	)		(7.8	)		(18.2	)		(17.2	)
Income from operations	$	9.5		$	12.1		$	65.1		$	65.3
Net Income	$	0.9		$	2.9		$	29.5		$	30.7

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 14 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

         Net income from the regulated gas business for the quarter and six months ended June 30, 2003 was about the same compared to the same periods of 2002.

Gas Revenues

The changes in gas revenues in 2003 compared to 2002 were caused by:

	Quarter Ended June 30, 2003 vs. 2002			Six Months Ended June 30, 2003 vs. 2002
	(In millions)
Distribution sales volumes	$	7.8		$	26.0
Base rates		(0.2	)		(1.1	)
Weather normalization		(8.0	)		(23.7	)
Gas cost adjustments		44.8			116.7
Total change in gas revenues from gas system sales		44.4			117.9
Off-system sales		2.5			8.9
Other		0.6			0.9
Total change in gas revenues	$	47.5		$	127.7

Distribution Sales Volumes

The percentage changes in our distribution sales volumes, by type of customer, in 2003 compared to 2002 were:

	Quarter Ended June 30, 2003 vs. 2002		Six Months Ended June 30, 2003 vs. 2002
Residential	36.8	%	32.7	%
Commercial	32.1		19.8
Industrial	(8.6	)	(12.8	)

        During the quarter and six months ended June 30, 2003, we distributed more gas to residential and commercial customers compared to the same periods of 2002 mostly due to cooler weather and increased usage per customer. We distributed less gas to industrial customers mostly due to decreased usage by industrial customers.

Base Rates

Base rate revenues were about the same for the quarter and six months ended June 30, 2003 compared to the same periods of 2002.

Weather Normalization

The Maryland PSC allows us to record a monthly adjustment to our gas revenues to eliminate the effect of abnormal weather patterns on our gas distribution sales volumes. This means our monthly gas base rate revenues are based on weather that is considered "normal" for the month and, therefore, are not affected by actual weather conditions.

Gas Cost Adjustments

We charge our gas customers for the natural gas they purchase from us using gas cost adjustment clauses set by the Maryland PSC as described in Note 1 of our 2002 Annual Report on Form 10-K. However, under market-based rates, our actual cost of gas is compared to a market index (a measure of the market price of gas in a given period). The difference between our actual cost and the market index is shared equally between shareholders and customers.

        Delivery service customers are not subject to the gas cost adjustment clauses because we are not selling gas to them. We charge these customers fees to recover the fixed costs for the transportation service we provide. These fees are the same as the base rate charged for gas distributed and are included in gas distribution sales volumes.

        During the quarter and six months ended June 30, 2003, gas cost adjustment revenues increased compared to the same periods of 2002 because we sold more gas at a higher price.

51

        In December 2002, a Hearing Examiner from the Maryland PSC issued a proposed order related to our annual gas cost adjustment clause review proceeding that will allow us to recover $1.7 million of a previously established regulatory asset of $9.4 million for certain credits that were over-refunded to customers through our market-based rates. BGE reserved the remaining difference of $7.7 million as disallowed fuel costs in the fourth quarter of 2002. However, we appealed the proposed order. As of the date of this report, the Maryland PSC has not acted on BGE's appeal.

Off-System Gas Sales

Off-system gas sales are low-margin direct sales of gas to wholesale suppliers of natural gas outside our service territory. Off-system gas sales, which occur after we have satisfied our customers' demand, are not subject to gas cost adjustments. The Maryland PSC approved an arrangement for part of the margin from off-system sales to benefit customers (through reduced costs) and the remainder to be retained by BGE (which benefits shareholders). Changes in off-system sales do not significantly impact earnings.

        During the quarter and six months ended June 30, 2003, revenues from off-system gas sales increased compared to the same periods of 2002 mostly because the gas we sold off-system was at a higher price, partially offset by less gas sold.

Gas Purchased For Resale Expenses

Gas purchased for resale expenses include the cost of gas purchased for resale to our customers and for off-system sales. These costs do not include the cost of gas purchased by delivery service customers.

        During the quarter and six months ended June 30, 2003, gas purchased for resale expenses increased compared to the same periods of 2002 because we purchased more gas at a higher price.

Gas Operations and Maintenance Expenses

Regulated gas operations and maintenance expenses were about the same during the quarter and six months ended June 30, 2003 compared to the same periods of 2002.

Other Gas Operating Expenses

Regulated other gas operating expenses were about the same during the quarter and six months ended June 30, 2003 compared to the same periods of 2002.

Other Nonregulated Businesses

Results

		Quarter Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(In millions)
Revenues		$	143.1		$	131.8		$	298.7		$	252.1
Operating expenses			(130.5	)		(116.9	)		(273.7	)		(233.2	)
Workforce reduction costs			(0.1	)		(0.1	)		(0.1	)		(0.1	)
Depreciation and amortization			(4.3	)		(4.2	)		(8.5	)		(8.1	)
Taxes other than income taxes			(0.8	)		(1.1	)		(1.8	)		(2.1	)
Net gain on sale of investments and other assets			0.5			3.2			14.2			260.3
Income from Operations		$	7.9		$	12.7		$	28.8		$	268.9
Net (Loss) Income		$	(0.1	)	$	4.6		$	8.6		$	162.1
Special Items Included in Operations (after-tax)
	Gain on sale of investments and other assets	$	0.3		$	1.9		$	8.6		$	166.2

Above amounts include intercompany transactions eliminated in our Consolidated Financial Statements. The Information by Operating Segment section within the Notes to Consolidated Financial Statements on page 14 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

         During the quarter ended June 30, 2003, net income from our other nonregulated businesses decreased compared to the same period of 2002 mostly because we recognized higher gains on sale of investments and other assets at our real estate and financial investments operations in 2002 that had a positive impact in that period.

        During the six months ended June 30, 2003, net income from our other nonregulated businesses decreased compared to the same period of 2002 mostly because we recognized a $163.3 million after-tax gain on the sale of our investment in Orion in 2002 that had a positive impact in that period. This decrease was partially offset by the following:

•

a $7.2 million pre-tax gain on the sale of an oil tanker to the U.S. Navy,

52

•

a $5.3 million pre-tax gain on the favorable settlement of a contingent obligation we had previously reserved relating to the sale of our Guatemalan power plant operation in the fourth quarter of 2001,

•

a $1.2 million pre-tax gain on an installment sale of a parcel of real estate,

•

a $0.5 million pre-tax gain on the sale of financial investments, and

•

higher net income from BGE Home due to improved performance in their gas and electric commodity programs.

        As previously discussed in our 2002 Annual Report on Form 10-K, we decided to sell certain non-core assets and accelerate the exit strategies on other assets that we will continue to hold and own over the next several years. While our intent is to dispose of these assets, market conditions and other events beyond our control may affect the actual sale of these assets. In addition, a future decline in the fair value of these assets could result in additional losses.

        Our remaining real estate projects, which represent approximately 380 acres of land holdings at June 30, 2003, are partially or substantially developed. Our strategy is to hold and in some cases further develop these projects to increase their value. However, if we were to sell these projects in the current market, we may have losses that could be material, although the amount of the losses is hard to predict.

        In addition, we initiated a liquidation program for our financial investments operation and expect to sell substantially all of our investments in this operation by the end of 2003. Through June 30, 2003, we liquidated approximately 88% of our investment portfolio since the beginning of 2002.

Consolidated Nonoperating Income and Expenses

Fixed Charges

During the quarter and six months ended June 30, 2003, total fixed charges increased compared to the same periods of 2002 mostly because we had lower capitalized interest due to our new generating facilities commencing operations and a higher level of long-term debt. The majority of this debt, $1.8 billion was issued in the first quarter of 2002, with additional issuances totaling $700 million occurring in the second half of 2002. We used the proceeds of these issuances primarily to repay our short-term borrowings that funded our construction program and acquisitions.

        During the quarter and six months ended June 30, 2003, total fixed charges at BGE decreased compared to the same periods of 2002 mostly because of a lower level of debt outstanding and lower interest rates.

Income Taxes

During the quarter ended June 30, 2003, our income taxes increased compared to the same period of 2002 mostly because of higher taxable income in the second quarter of 2003 compared to 2002.

        During the six months ended June 30, 2003, our income taxes decreased compared to the same period of 2002 mostly because of the gain on the sale of our investment in Orion in the first quarter of 2002 that increased income taxes in that period and a higher level of synthetic fuel tax credits in 2003.

        During the quarter ended June 30, 2003, income taxes at BGE were about the same compared to the same period of 2002. During the six months ended June 30, 2003, income taxes at BGE increased compared to the same period of 2002 mostly because of higher taxable income.

53

Financial Condition

Cash Flows

Cash provided by operations was $390.7 million for the six months ended June 30, 2003 compared to $333.5 million for the same period in 2002.

        Cash used in investing activities for the six months ended June 30, 2003 was $811.0 million compared to cash provided by investing activities of $295.5 million for the same period in 2002. This $1.1 billion change was primarily due to a decrease in the sales of investments and other assets because of the sale of Orion and Corporate Office Properties Trust that generated $555.4 million in cash proceeds in 2002 and the acquisition of the High Desert Power Project in 2003.

        Cash provided by financing activities for the six months ended June 30, 2003 was $556.3 million compared to cash used in financing activities of $450.4 million for the same period in 2002. This change was primarily due to a lower repayment of debt, partially offset by lower issuances of long-term debt compared to the same period in 2002.

Security Ratings

Independent credit-rating agencies rate Constellation Energy's and BGE's fixed-income securities. The ratings indicate the agencies' assessment of each company's ability to pay interest, distributions, dividends, and principal on these securities. These ratings affect how much it will cost each company to sell these securities. The better the rating, the lower the cost of the securities to each company when they sell them.

        The factors that credit-rating agencies consider in establishing Constellation Energy's and BGE's credit ratings include, but are not limited to, cash flows, liquidity, and the amount of debt as a component of total capitalization. All Constellation Energy and BGE credit ratings have stable outlooks. At the date of this report, our credit ratings were as follows:

		Standard & Poor's Rating Group	Moody's Investors Service	Fitch- Ratings
Constellation Energy
	Commercial Paper	A-2	P-2	F-2
	Senior Unsecured Debt	BBB+	Baa1	A-
BGE
	Commercial Paper	A-2	P-1	F-1
	Mortgage Bonds	A	A1	A+
	Senior Unsecured Debt	BBB+	A2	A
	Trust Originated Preferred Securities and Preference Stock	BBB	Baa1	A-

Available Sources of Funding

As previously discussed in our 2002 Annual Report on Form 10-K, we decided to sell certain non-core assets to focus on our core strategies. We expect to use the proceeds from the sale of non-core assets to reduce our debt and fund our merchant energy business. We continuously monitor our liquidity requirements and believe that our facilities and access to the capital markets provide sufficient liquidity to meet our business requirements. We discuss our available sources of funding in more detail below.

Constellation Energy

In addition to our cash balance, we have a commercial paper program under which we can issue short-term notes to fund our subsidiaries. At June 30, 2003, we had credit facilities of approximately $1.5 billion as discussed below.

        In June 2003, Constellation Energy arranged a $447.5 million 364-day revolving credit facility and a $447.5 million three-year revolving credit facility replacing a $640 million 364-day revolving credit facility and a $188.5 million three-year revolving credit facility. We use these two new facilities to allow the issuance of commercial paper and letters of credit. We also use the multi-year facility to support letters of credit primarily for our merchant energy business.

        Constellation Energy also has an existing $640 million revolving credit facility available to allow issuance of commercial paper and letters of credit. This facility expires in June 2005. These revolving credit facilities allow the issuance of letters of credit up to approximately $1.1 billion.

        At June 30, 2003, letters of credit that totaled $426.1 million were issued under all of our facilities, which results in approximately $1.1 billion of unused credit facilities. Constellation Energy also has access to interim lines of credit as required from time to time to support its outstanding commercial paper.

BGE

During the second quarter of 2003, certain credit facilities expired and BGE renewed those facilities. BGE continues to maintain $200 million in annual committed credit facilities, expiring August 2003 through June 2004, in order to allow commercial paper to be issued. As of June 30, 2003, BGE had no outstanding commercial paper, which results in $200.0 million in unused credit facilities.

Other Nonregulated Businesses

BGE Home Products & Services maintains a program to sell up to $50 million of receivables.

        If we can get a reasonable value for our remaining real estate projects and other investments, additional cash may be obtained by selling them. Our ability to sell or liquidate assets will depend on market conditions, and we cannot give assurances that these sales or liquidations could be made.

54

Capital Resources

Our business requires a great deal of capital. Our estimated annual amounts for the years 2003 and 2004 are shown in the table below.

        We will continue to have cash requirements for:

•

working capital needs,

•

payments of interest, distributions, and dividends,

•

capital expenditures, and

•

the retirement of debt and redemption of preference stock.

        Capital requirements for 2003 and 2004 include estimates of spending for existing and anticipated projects. We continuously review and modify those estimates. Actual requirements may vary from the estimates included in the table below because of a number of factors including:

•

regulation, legislation, and competition,

•

BGE load requirements,

•

environmental protection standards,

•

the type and number of projects selected for construction or acquisition,

•

the effect of market conditions on those projects,

•

the cost and availability of capital, and

•

the availability of cash from operations.

        Our estimates are also subject to additional factors. Please see the Forward Looking Statements section on page 62.

Calendar Year Estimates			2003		2004
			(In millions)
Nonregulated Capital Requirements:
	Merchant energy
		Steam generators	$	55	$	—
		Environmental controls		15		—
		Reactor vessel head replacement		10		25
		Continuing requirements (including nuclear fuel)		320		340
	Total merchant energy capital requirements			400		365
	Other nonregulated capital requirements			60		65
	Total nonregulated capital requirements			460		430
Utility Capital Requirements:
	Regulated electric			205		205
	Regulated gas			60		60
	Total utility capital requirements			265		265
Total capital requirements			$	725	$	695

The table does not include amounts associated with the refinancing of the High Desert Power Project or the capital requirements and financing costs of approximately $40 million for the High Desert Power Project for the six months ended June 30, 2003. We discuss the acquisition of the High Desert Power Project in the Events of 2003 section on page 30.

Capital Requirements

Merchant Energy Business

Our merchant energy business will require additional funding for the following:

•

Costs for replacing the steam generators for Unit 2 at Calvert Cliffs. The 2003 steam generators replacement occurred during the 2003 refueling outage for Unit 2 and was completed in April 2003.

•

Costs for replacing the reactor vessel heads at Calvert Cliffs. We expect to replace the reactor vessel heads during the 2006 refueling outage for Unit 1 and the 2007 refueling outage for Unit 2.

•

Continuing requirements, including construction expenditures for improvements to generating plants, nuclear fuel costs, costs of complying with the Environmental Protection Agency (EPA), Maryland, and Pennsylvania nitrogen oxides (NOx) emissions regulations, and enhancements to our information technology infrastructure. We discuss the NOx regulations and timing of expenditures in the Environmental Matters section of the Notes to Consolidated Financial Statements beginning on page 17.

Regulated Electric and Gas

Regulated electric and gas construction expenditures primarily include new business construction needs and improvements to existing facilities.

Funding for Capital Requirements

Merchant Energy Business

Funding for the expansion of our merchant energy business is expected from internally generated funds. We also have available sources from commercial paper issuances, issuances of long-term debt and equity, leases, and other financing activities.

        The projects that our merchant energy business develops typically require substantial capital investment. Most of the projects recently constructed were funded through corporate borrowings by Constellation Energy. Many of the qualifying facilities and independent power projects that we have an interest in are financed primarily with non-recourse debt that is repaid from the project's cash flows. This debt is collateralized by interests in the physical assets, major project contracts and agreements, cash accounts and, in some cases, the ownership interest in that project.

        We expect to fund acquisitions with a mixture of debt and equity with an overall goal of maintaining a strong investment grade credit profile.

55

BGE

Funding for utility capital expenditures is expected from internally generated funds. During 2003, we expect our regulated utility business to generate significant cash flow from operations. If necessary, additional funding may be obtained from commercial paper issuances, available capacity under credit facilities, the issuance of long-term debt, trust securities, or preference stock, and/or from time to time equity contributions from Constellation Energy. BGE also participates in a cash pool administered by Constellation Energy as discussed in the Notes to Consolidated Financial Statements section on page 25.

Other Nonregulated Businesses

Funding for our other nonregulated businesses is expected from internally generated funds, commercial paper issuances, issuances of long-term debt of Constellation Energy, sales of securities and assets, and/or from time to time equity contributions from Constellation Energy. BGE Home Products & Services can continue to fund capital requirements through sales of receivables.

        Our ability to sell or liquidate securities and non-core assets will depend on market conditions, and we cannot give assurances that these sales or liquidations could be made. We discuss our remaining non-core assets and market conditions in the Results of Operations—Other Nonregulated Businesses section on page 52.

Committed Amounts

Our total contractual and contingent obligations as of June 30, 2003 are shown in the following table:

	Payments/Expiration
	2003		2004- 2005		2006- 2007		There- after		Total
	(In millions)
Contractual Obligations
Short-term borrowings	$	11.4	$	—	$	—	$	—	$	11.4
Nonregulated long-term debt1		4.1		315.8		620.8		2,756.1		3,696.8
BGE long-term debt1		304.3		194.7		591.3		859.4		1,949.7
BGE preference stock		—		—		—		190.0		190.0
Fuel and transportation2		264.0		384.4		159.9		74.3		882.6
Purchased capacity and energy3		680.2		1,120.1		393.5		245.2		2,439.0
Operating leases		11.2		39.4		34.5		145.9		231.0
Capital and other commitments4		26.7		45.8		40.0		309.3		421.8
Total contractual obligations	$	1,301.9	$	2,100.2	$	1,840.0	$	4,580.2	$	9,822.3
Contingent Obligations
Letters of credit	$	332.1	$	94.0	$	—	$	—	$	426.1
Guarantees – competitive supply5		2,209.9		794.9		50.8		220.8		3,276.4
Other guarantees, net6		6.7		6.0		2.9		246.5		262.1
Total contingent obligations	$	2,548.7	$	894.9	$	53.7	$	467.3	$	3,964.6
Total obligations	$	3,850.6	$	2,995.1	$	1,893.7	$	5,047.5	$	13,786.9

1

Amounts reflected in long-term debt maturities do not include $394.3 million investors may require us to repay early through put options and remarketing features.

2

We have recorded approximately $3.3 million of liabilities related to fuel and transportation obligations at June 30, 2003 in our Consolidated Balance Sheets.

3

Our contractual obligations for purchased capacity and energy are shown on a gross basis for certain transactions, including the fixed payment portions related to capacity payments under tolling contracts that were previously included in mark-to-market energy assets and liabilities prior to EITF 02-3. We have recorded approximately $72.4 million of liabilities related to purchased capacity and energy obligations at June 30, 2003 in our Consolidated Balance Sheets.

4

Amounts related to capital expenditures are included for applicable years in our capital requirements table.

5

While the face amount of these guarantees is $3,276.4 million, we do not expect to fund the full amount as our calculation of the fair value of obligations covered by these guarantees was $787.1 million at June 30, 2003.

6

Other guarantees in the above table are shown net of liabilities recorded at June 30, 2003 in our Consolidated Balance Sheets.

        While we included our contingent obligations in the table above, these amounts do not represent incremental consolidated Constellation Energy obligations; rather, they primarily represent parental guarantees for our subsidiaries. We do not expect to fund the full amounts under the letters of credit and guarantees. Specifically, the $3,276.4 million guarantees—competitive supply represent the face amount of these guarantees. However, we do not expect to fund the full amount, as our calculation of the fair value of obligations covered by these guarantees was $787.1 million at June 30, 2003.

56

Liquidity Provisions

We have certain agreements that contain provisions that would require additional collateral upon significant credit rating decreases in the Senior Unsecured Debt of Constellation Energy. Decreases in Constellation Energy's credit ratings would not trigger an early payment on any of our credit facilities. However, under counterparty contracts related to our origination and risk management operation, where we are obligated to post collateral, we estimate that we would have additional collateral obligations based on downgrades to the following credit ratings for our Senior Unsecured Debt:

Credit Ratings Downgraded	Level Below Current Rating	Incremental Obligations		Cumulative Obligations
		(In millions)
BBB/Baa2	1	$	30	$	30
BBB-/Baa3	2		128		158
Below investment grade	3		579		737

         At June 30, 2003, we had approximately $1.3 billion of unused credit facilities and $751.0 million of cash available to meet these potential requirements. However, based on market conditions and contractual obligations at the time of such a downgrade, we could be required to post collateral in an amount that could exceed the amounts specified above, and which could be material.

        In many cases, customers of our origination and risk management operation rely on the creditworthiness of Constellation Energy. A decline below investment grade by Constellation Energy would negatively impact the business prospects of that operation.

        The credit facilities of Constellation Energy and BGE have limited material adverse change clauses that only consider a material change in financial condition and are not directly affected by decreases in credit ratings. If these clauses are violated, the lending institutions can decline making new advances or issuing new letters of credit, but cannot accelerate existing amounts outstanding. The long-term debt indentures of Constellation Energy and BGE do not contain material adverse change clauses or financial covenants.

        Certain credit facilities of Constellation Energy contain a provision requiring Constellation Energy to maintain a ratio of debt to capitalization equal to or less than 65%. At June 30, 2003, the debt to capitalization ratios as defined in the credit agreements were no greater than 58%.

        A BGE credit facility of $50.0 million that expires in August 2003 requires BGE to maintain a ratio of debt to capitalization equal to or less than 70%. At June 30, 2003, the debt to capitalization ratio for BGE as defined in the credit agreement was 54%. At June 30, 2003, no amount is outstanding under this facility.

        Failure by Constellation Energy, or BGE, to comply with these covenants could result in the maturity of the debt outstanding under these facilities being accelerated. The credit facilities of Constellation Energy contain usual and customary cross-default provisions that apply to defaults on debt by Constellation Energy and certain subsidiaries over a specified threshold. Certain BGE credit facilities also contain usual and customary cross-default provisions that apply to defaults on debt by BGE over a specified threshold. The indentures pursuant to which BGE has issued and outstanding mortgage bonds and subordinated debentures provide that a default under any debt instrument issued under the relevant indenture may cause a default of all debt outstanding under such indenture.

        Constellation Energy also provides credit support to Calvert Cliffs and Nine Mile Point to ensure these plants have funds to meet expenses and obligations to safely operate and maintain the plants.

57

Other Matters

Environmental Matters

We are subject to federal, state, and local laws and regulations that work to improve or maintain the quality of the environment. If certain substances were disposed of, or released at any of our properties, whether currently operating or not, these laws and regulations require us to remove or remedy the effect on the environment. This includes Environmental Protection Agency Superfund sites.

        You will find details of our environmental matters in the Environmental Matters section of the Notes to Consolidated Financial Statements beginning on page 17 and in our 2002 Annual Report on Form 10-K in Item 1. Business—Environmental Matters. These details include financial information. Some of the information is about costs that may be material.

Accounting Standards Issued and Adopted

We discuss recently issued and adopted accounting standards in the Accounting Standards Issued and Accounting Standards Adopted sections of the Notes to Consolidated Financial Statements beginning on page 21.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We discuss the following information related to our market risk:

•

financing activities and SFAS No. 133 hedging activities sections in the Notes to Consolidated Financial Statements beginning on page 15,



•

activities of our origination and risk management operation in the Merchant Energy Business section of Management's Discussion and Analysis beginning on page 38, and

•

changes to our business environment in the Business Environment section of Management's Discussion and Analysis beginning on page 32.

Item 4. Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Constellation Energy or BGE have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people.

        The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no absolute assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The principal executive officers and principal financial officer of both Constellation Energy and BGE have evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the fiscal quarter covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, Constellation Energy's and BGE's disclosure controls and procedures are effective, in that they provide reasonable assurance that such officers are alerted on a timely basis to material information relating to Constellation Energy and BGE that is required to be included in Constellation Energy's and BGE's periodic filings under the Exchange Act.

        During the fiscal quarter covered by this quarterly report, there has been no change in either Constellation Energy's or BGE's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, either Constellation Energy's or BGE's internal control over financial reporting.

58

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

California

Baldwin Associates, Inc. v. Gray Davis, Governor of California and 22 other defendants (including Constellation Power Development, Inc., a subsidiary of Constellation Power, Inc.)—This class action lawsuit was filed on October 5, 2001 in the Superior Court, County of San Francisco. The action seeks damages of $43 billion, recession and reformation of approximately 38 long-term power purchase contracts, and an injunction against improper spending by the state of California.

        Constellation Power Development, Inc. is named as a defendant but does not have a power purchase agreement with the State of California. However, our High Desert Power Project does have a power purchase agreement with the California Department of Water Resources. In 2002, the court issued an order to the plaintiff asking that he show cause why he had not yet served the defendants. In April 2002, a second show cause order was issued. After several postponements, a hearing is now scheduled in November 2003 on that order.

NewEnergy

Constellation NewEnergy, Inc. v. PowerWeb Technology, Inc.—Prior to our acquisition, NewEnergy filed a complaint on May 9, 2002 in the U.S. District Court of Eastern Pennsylvania seeking approximately $100,000 in direct damages relating to a contract previously entered into with PowerWeb. PowerWeb Technology has counter-claimed seeking $100 million in damages against NewEnergy alleging a breach of a non-disclosure agreement by misappropriation of trade secrets and tortious interference claims. Discovery is ongoing in the matter. We cannot predict the timing, or outcome, of the action or its possible effect on our financial results. However, based on the information available to Constellation Energy at this time, we believe NewEnergy has meritorious defenses to the PowerWeb Technology counterclaim.

Mercury Poisoning

Beginning in September 2002, BGE, Constellation Energy, and several other defendants have been involved in numerous actions alleging mercury poisoning from several sources, including coal plants formerly owned by BGE. The plants are now owned by a subsidiary of Constellation Energy. In addition to BGE and Constellation Energy, approximately 11 other defendants, consisting of pharmaceutical companies, manufacturers of vaccines and manufacturers of Thimerosal have been sued. Approximately 50 cases have been filed to date in the Circuit Court for Baltimore City, with each case seeking $90 million in damages from the group of defendants. In a recent ruling applicable to all but one of the cases, the Circuit Court for Baltimore City dismissed with prejudice, all claims against BGE and Constellation Energy and entered a stay of the proceedings as they relate to other Defendants. The one case that was not dismissed was filed subsequent to the dismissal. Plaintiffs' appeal rights do not expire until the cases are finally concluded as to all Defendants. At this time no discovery has occurred. We believe that we have meritorious defenses to all of the cases and intend to defend the action vigorously. However, we cannot predict the timing, or outcome, of these cases, or their possible effect on our, or BGE's, financial results.

Employment Discrimination

Miller, et. al v. Baltimore Gas and Electric Company, et al.—This action was filed on September 20, 2000 in the U.S. District Court for the District of Maryland. Besides BGE, Constellation Energy Group, Constellation Nuclear, and Calvert Cliffs Nuclear Power Plant are also named defendants. The action seeks class certification for approximately 150 past and present employees and alleges racial discrimination at Calvert Cliffs Nuclear Power Plant. The amount of damages is unspecified, however the plaintiffs seek back and front pay, along with compensatory and punitive damages. The Court scheduled a briefing process for the motion to certify the case as a class action suit. The briefing process is scheduled to end in October 2003. We do not believe class certification is appropriate and we further believe that we have meritorious defenses to the underlying claims and intend to defend the action vigorously. However, we cannot predict the timing, or outcome, of the action or its possible effect on our, or BGE's, financial results.

Asbestos

Since 1993, BGE has been involved in several actions concerning asbestos. The actions are based upon the theory of "premises liability," alleging that BGE knew of and exposed individuals to an asbestos hazard. The actions relate to two types of claims.

        The first type is direct claims by individuals exposed to asbestos. BGE is involved in these claims with approximately 70 other defendants. Approximately 575 individuals that were never employees of BGE each claim $6 million in damages ($2 million compensatory and $4 million punitive). These claims are currently pending in state courts in Maryland and Pennsylvania. BGE does not know the specific facts necessary to estimate its potential liability for these claims. The specific facts BGE does not know include:

•

the identity of BGE's facilities at which the plaintiffs allegedly worked as contractors,

•

the names of the plaintiff's employers,

•

the date on which the exposure allegedly occurred, and

•

the facts and circumstances relating to the alleged exposure.

59

        To date, 129 asbestos cases were dismissed or resolved for amounts that were not significant. Approximately 235 cases are scheduled for trial in 2003-2004.

        The second type is claims by one manufacturer—Pittsburgh Corning Corp. (PCC)—against BGE and approximately eight others, as third-party defendants. On April 17, 2000, PCC declared bankruptcy.

        These claims relate to approximately 1,500 individual plaintiffs and were filed in the Circuit Court for Baltimore City, Maryland in the fall of 1993. To date, about 375 cases have been resolved, all without any payment by BGE. BGE does not know the specific facts necessary to estimate its potential liability for these claims. The specific facts we do not know include:

•

the identity of BGE facilities containing asbestos manufactured by the manufacturer,

•

the relationship (if any) of each of the individual plaintiffs to BGE,

•

the settlement amounts for any individual plaintiffs who are shown to have had a relationship to BGE,

•

the dates on which/places at which the exposure allegedly occurred, and

•

the facts and circumstances relating to the alleged exposure.

        Until the relevant facts for both types of claims are determined, we are unable to estimate what our, or BGE's, liability might be. Although insurance and hold harmless agreements from contractors who employed the plaintiffs may cover a portion of any awards in the actions, the potential effect on our, or BGE's, financial results could be material.

Other

McCray, et. al. v. Baltimore Gas and Electric Company—On June 10, 2002, a suit was filed in the Circuit Court of Baltimore City, Maryland seeking a total of $585 million in compensatory and punitive damages from BGE as a result of a fire in a home that caused five fatalities. Electricity to the home was shut off. BGE believes it has meritorious defenses and intends to defend the action vigorously. However, we cannot predict the timing, or outcome, of the action or its possible effect on our, or BGE's, financial results.

60

Item 4. Submission of Matters to a Vote of Security Holders

On April 25, 2003, we held our annual meeting of shareholders. At that meeting, the following matters were voted upon:

1.

All of the Directors nominated by Constellation Energy Group were elected as follows:

	COMMON SHARES CAST:
	For	Against	Abstain
Douglas L. Becker	146,589,146	900,026	3,140,416
Frank P. Bramble, Sr.	138,644,627	8,844,545	3,140,416
Edward A. Crooke	145,815,032	1,674,140	3,140,416
Mayo A. Shattuck III	146,443,106	1,046,066	3,140,416
Michael D. Sullivan	146,474,815	1,014,357	3,140,416

All other directors whose term of office continued after the date of this meeting are:

James T. Brady

James R. Curtiss

Roger W. Gale

Dr. Freeman A. Hrabowski, III

Edward J. Kelly, III

Nancy Lampton

Robert J. Lawless

2.

The ratification of PricewaterhouseCoopers LLP as independent accountants was approved. With respect to holders of common stock, the number of affirmative votes cast was 144,430,204, the number of votes cast against was 4,768,079, and the number of abstentions was 1,612,285.



3.

The proposal concerning performance-based stock option grants was defeated. With respect to holders of common stock, the number of affirmative votes cast was 17,144,856, the number of votes cast against was 109,482,824, and the number of abstentions was 3,771,420.

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Item 5. Other Information

Forward Looking Statements

We make statements in this report that are considered forward looking statements within the meaning of the Securities Exchange Act of 1934. Sometimes these statements will contain words such as "believes," "expects," "intends," "plans," and other similar words. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project. These risks, uncertainties, and factors include, but are not limited to:

•

the timing and extent of changes in commodity prices and volatilities for energy including coal, natural gas, oil, electricity, and emission allowances,

•

the timing and extent of deregulation of, and competition in, the energy markets in North America, and the rules and regulations adopted on a transitional basis in those markets,

•

the conditions of the capital markets, interest rates, availability of credit, liquidity, and general economic conditions, as well as Constellation Energy's and BGE's ability to maintain their current credit ratings,

•

the effectiveness of Constellation Energy's and BGE's risk management policies and procedures and the ability of their counterparties to satisfy their financial and performance commitments,

•

the liquidity and competitiveness of wholesale markets for energy commodities,

•

operational factors affecting the start-up or ongoing commercial operations of our generating facilities (including nuclear facilities) and BGE's transmission and distribution facilities, including catastrophic weather related damages, unscheduled outages or repairs, unanticipated changes in fuel costs or availability, unavailability of gas transportation or electric transmission services, workforce issues, terrorism, liabilities associated with catastrophic events, and other events beyond our control,

•

the inability of BGE to recover all its costs associated with providing electric retail customers service during the electric rate freeze period,




•

the effect of weather and general economic and business conditions on energy supply, demand, and prices,

•

regulatory or legislative developments that affect deregulation, transmission or distribution rates and revenues, demand for energy, or increase costs, including costs related to nuclear power plants, safety, or environmental compliance,

•

the actual outcome of uncertainties associated with assumptions and estimates using judgment when applying critical accounting policies and preparing financial statements, including factors that are estimated in determining the fair value of energy contracts, such as the ability to obtain market prices and in the absence of verifiable market prices the appropriateness of models and model inputs (including, but not limited to, estimated contractual load obligations, unit availability, forward commodity prices, interest rates, correlation and volatility factors),

•

changes in accounting principles or practices,

•

the ability to attract and retain customers in our competitive supply business and to adequately forecast their energy usage,

•

losses on the sale or write down of assets due to impairment events or changes in management intent with regard to either holding or selling certain assets, and

•

cost and other effects of legal and administrative proceedings that may not be covered by insurance, including environmental liabilities.

        Given these uncertainties, you should not place undue reliance on these forward looking statements. Please see the other sections of this report and our other periodic reports filed with the SEC for more information on these factors. These forward looking statements represent our estimates and assumptions only as of the date of this report.

        Changes may occur after that date, and neither Constellation Energy nor BGE assume responsibility to update these forward looking statements.

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Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibit 10 (a)	Executive Annual Incentive Plan of Constellation Energy Group, Inc., as amended and restated.
	Exhibit 10 (b)	Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan, as amended and restated
	Exhibit 10 (c)	Constellation Energy Group, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended and restated.
	Exhibit 10 (d)	Grantor Trust Agreement Dated as of April 25, 2003 between Constellation Energy Group, Inc. and Citibank, N.A.
	Exhibit 10 (e)	Grantor Trust Agreement dated as of April 25, 2003 between Constellation Energy Group, Inc. and T. Rowe Price Trust Company.
	Exhibit 10 (f)	Constellation Energy Group, Inc. Supplemental Pension Plan, as amended and restated.
	Exhibit 10 (g)	Constellation Energy Group, Inc. Senior Executive Supplemental Plan, as amended and restated.
	Exhibit 10 (h)	Constellation Energy Group, Inc. Executive Long-Term Incentive Plan, as amended and restated.
	Exhibit 10 (i)	Constellation Energy Group, Inc. 2002 Executive Annual Incentive Plan, as amended and restated.
	Exhibit 10 (j)	Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan, as amended and restated.
	Exhibit 10 (k)	Constellation Energy Group, Inc. Management Long-Term Incentive Plan, as amended and restated.
	Exhibit 10 (l)	Consent to Assignment and Assumption Agreement by and among Allegheny Energy Supply, LLC and Baltimore Gas and Electric Company and Constellation Power Source, Inc. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.)
	Exhibit No. 12(a)	Constellation Energy Group, Inc. Computation of Ratio of Earnings to Fixed Charges.
	Exhibit No. 12(b)	Baltimore Gas and Electric Company Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements.
	Exhibit No. 31(a)	Rule 13a-14(a)/15(d)-14(a) Certification
	Exhibit No. 31(b)	Rule 13a-14(a)/15(d)-14(a) Certification
	Exhibit No. 31(c)	Rule 13a-14(a)/15(d)-14(a) Certification
	Exhibit No. 31(d)	Rule 13a-14(a)/15(d)-14(a) Certification
	Exhibit No. 32(a)	Section 1350 Certification
	Exhibit No. 32(b)	Section 1350 Certification
	Exhibit No. 32(c)	Section 1350 Certification
	Exhibit No. 32(d)	Section 1350 Certification

        (b) Reports on Form 8-K for the quarter ended June 30, 2003:

Date	Item Reported
April 24, 2003	Item 7. Financial Statements and Exhibits
	Item 12. Results of Operations and Financial Condition
April 30, 2003	Item 7. Financial Statements and Exhibits
	Item 12. Results of Operations and Financial Condition
May 22, 2003	Item 5. Other Events
	Item 7. Financial Statements and Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CONSTELLATION ENERGY GROUP, INC.(Registrant)
	BALTIMORE GAS AND ELECTRIC COMPANY(Registrant)
Date: August 13, 2003	/s/	E. FOLLIN SMITH
	E. Follin Smith, Senior Vice President on behalf of each Registrant and as Principal Financial Officer of each Registrant

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EX-10.(A)

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Exhibit 10(a)

Executive Annual Incentive Plan
Of
Constellation Energy Group, Inc.

1.Plan Objective.    The objective of this Plan is to allow Constellation Energy Group, Inc. (Constellation Energy Group or Company) to attract, retain and motivate highly competent officers and key employees of the Company and its subsidiaries by focusing incentive compensation toward the achievement of performance results that primarily support the interests of shareholders and customers of the Company.

2.Plan Administration.    The Plan is administered by the Constellation Energy Group Board of Directors' (Board) Committee on Management (Committee on Management) which has sole authority (unless otherwise specified herein) to interpret the Plan; to refine its provisions from time to time, particularly those relating to factors, targets and procedures used in connection with calculating the awards (which refinements shall be reflected in guidelines for the performance year); to suspend the Plan at any time; and in general, to make all other determinations necessary or advisable for the administration of the Plan to achieve its stated objective.

        The Committee on Management shall have the power to delegate all or any part of their duties to one or more designees, and to withdraw such authority, by written designation.

3.Eligibility.    Each officer or key employee of Constellation Energy Group or its subsidiaries may be designated in writing by the Committee on Management as a participant under the Plan. Once designated, participation shall continue until such designation is withdrawn at the discretion and by written order of the Committee on Management. Participation is subject to the following conditions:

        Participant must have been an eligible participant for some portion of the performance year and at the time of distribution be actively employed by the Company or elsewhere with the approval of the Company unless employment was terminated by death, disability or retirement. Except as otherwise provided herein, where an individual is not an eligible participant for the entire performance year, the amount of the award, whether full, partial or none, will be at the Committee on Management's discretion.

        Where, prior to the end of a performance year, a participant's active employment is terminated as a result of death, disability or retirement, the award is calculated based on the participant's position at the time of termination. Unless otherwise stated, any such award will be made on a pro-rata basis for the period of active employment, or, in total, at the discretion of the Committee on Management. Where active employment is terminated as a result of death of participant, distribution is made in accordance with Section 9. (Designation of Beneficiary) of this Plan.

4.Performance Goals

A.Performance Targets.    The Committee on Management shall establish for each plan year Performance Targets designed to accomplish the purpose set forth in Section 1 of this Plan. The Committee on Management will ensure that each plan year's Performance Targets meet the following general criteria:

        (1)   The interests of the Company's shareholders will be balanced with the interests of the Company's customers.

        (2)   The targets should be set at levels which are attainable, but which, in the Committee on Management's judgment, are attainable only with a high degree of competence and diligence.

        The Committee on Management shall have sole authority to amend Performance Targets at any time when, in the Committee's judgment, unforeseen circumstances exist which require modification in order to ensure that the purpose of the Plan is properly served.

        The Committee on Management shall have authority to establish appropriate Performance Targets, differing to the degree necessary from those established for the Company, for each of the Company's subsidiaries employing one or more participants in this Plan; and shall have authority to adjust such targets subsequently should unforeseen circumstances arise.

B.Individual Performance.    A participant's individual per- formance will be evaluated by the Chairman of the Board.

5.Award Opportunity.    The Committee on Management shall establish for each plan year the Award Opportunity (minimum, target, and maximum, as appropriate) applicable to participants in the Plan. The Award Opportunity may be allocated among the various Performance Targets and Individual Performance and may vary among classes of participants.

6.Award Determination.    The Committee on Management shall determine the Awards, if any, to be made for each plan year as soon after the end of the plan year as is practical.

        Awards are calculated taking into account the degree of attainment of performance targets, individual performance, and the percent of participation during the performance year. The dollar amount of the participants' award is determined by multiplying the participant's prior December 31 annualized base salary by the award percentage.

7.Payment of Awards.    Awards approved by the Committee on Management for each plan year shall be paid as soon as practicable after such determination has been made. Payment may be made in a lump cash sum or, at the participants' election, may be deferred in whole or in part. When required by applicable law, Federal, State and FICA taxes will be withheld from awards at applicable rates.

        Awards will not be paid for any performance year in which Company earnings are less than the amount necessary to fund the annual dividend. Additionally, awards will not be paid for any plan year in which the dividend is suspended or effectively reduced from its prior amount.

8.Deferred Payment of Award.    A participant may elect to defer the receipt of all or a portion of the award for the plan year. Any such deferral and investment of any such amounts deferred pursuant to this Plan shall be made in accordance with the provisions of the Constellation Energy Group Nonqualified Deferred Compensation Plan.

9.Designation of Beneficiary.    A participant shall have the right to designate a beneficiary or beneficiaries who are to receive in a lump sum any undistributed incentive compensation award to the extent a participant has chosen not to defer all or a portion of his incentive award pursuant to Section 8 hereof, should the participant die during the plan year and be entitled to an incentive award for that plan year. Such designation shall apply only to the portion of the undistributed incentive award not subject to a deferral election. Any designation, change or rescission of the designation shall be made in writing by completing and furnishing to the Vice President—Human Resources of the Company a notice on an appropriate form designated by the Vice President—Human Resources of the Company. The last designation of beneficiary received by the Vice President—Human Resources of the Company shall be controlling over any testamentary or purported disposition by the participant, provided that no designation, rescission or change thereof shall be effective unless received prior to death of the participant. Distribution of any incentive awards previously deferred pursuant to Section 8 of the Plan shall be paid to the beneficiary or beneficiaries designated under the Constellation Energy Group Nonqualified Deferred Compensation Plan.

10.Change in Control.    Notwithstanding any other provisions of this Plan to the contrary, if a participant separates from service with Constellation Energy Group or a subsidiary of Constellation Energy Group (except due to a participant's transfer of employment to or from a subsidiary of Constellation Energy Group), within 2 years following a change in control, such participant is eligible for an award for the performance year during which the separation from service occurs. The award is calculated assuming maximum performance achievement and based on the participant's position at the

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time of termination and is pro-rated for the period of active employment during the performance year. The Committee on Management, in its discretion, may grant a total, rather than pro-rated award. Payment of the award will be made in a lump cash sum within 60 days after the participant's separation from service. Payment may not be deferred.

        A change in control for purposes of this Section 10 shall mean the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)   any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)  Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a

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majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

        Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        Notwithstanding any provision in the Plan to the contrary, on or within 2 years after a Change in Control, no action, including, but not by way of limitation, the amendment, suspension or termination of the Plan, shall be taken which would adversely affect the rights of any participant without such participant's prior written consent.

11.Miscellaneous.    The plan year and the performance year shall be the same and shall be the calendar year.

        Any payments made under this Plan are not considered as earnings for purposes of determining benefits under any pension, profit sharing or other retirement or welfare plan, or for any other general employee benefit program, unless expressly considered as compensation under the terms of such plan or program.

        None of the payments provided under this Plan which are deferred shall be subject to alienation or assignment by any participant or beneficiary nor shall any of them be subject to attachment or garnishment or other legal process except to the extent specifically mandated and directed by applicable State or Federal statute. Payment shall be made only into the hands of the participant or beneficiary entitled to receive the same or into the hands of his or her authorized legal representative. Deposit of any sum into any financial institution to the credit of the participant or beneficiary entitled thereto shall constitute payment into his or her hands. Notwithstanding the foregoing, at the request of the participant or beneficiary or as required by law, such sums as may be requisite for payment of any estimated or currently accrued income tax liability may be withheld and paid over to the governmental entity entitled to receive the same.

        Participation in this Plan shall not constitute a contract of employment between the Company and any employee and shall not be deemed to be consideration for, inducement to, or a condition of employment of any person. The deferral of any incentive compensation amounts pursuant to the provisions of the Plan shall not be construed to give any employee the right to be retained in the employ of the Company or to interfere with the right of the company to terminate such employment at any time.

        The Committee on Management intends to continue the Plan indefinitely but reserves the right to amend the Plan from time to time or to permanently discontinue it provided none of these, nor any suspension, may deprive the participants of any payment of amounts which were previously awarded at the time thereof.

        In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of Constellation Energy Group will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy Group under this Plan.

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Executive Annual Incentive Plan Of Constellation Energy Group, Inc.

EX-10.(B)

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Exhibit 10(b)

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
1995 Long-Term Incentive Plan
(Plan)

        1.Objective.    The objective of this Plan is to increase shareholder value by providing a long-term incentive to reward officers and key employees of CEG and its Subsidiaries, who are mainly responsible for the continued growth, development, and financial success of CEG and its Subsidiaries, for the continued profitable performance of CEG and its subsidiaries. The Plan is also designed to permit CEG and its Subsidiaries to retain talented and motivated officers and key employees and to increase their ownership of CEG common stock.

        2.Definitions.    All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

        "Award" means individually or collectively, Restricted Stock, Options, Performance Units, Stock Appreciation Rights, or Dividend Equivalents granted under this Plan.

        "Board" means the Board of Directors of CEG.

        "Book Value" means the book value of a share of Stock determined in accordance with CEG's regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

        "CEG" means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any "New Company" as provided in Section 14I.

        "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

        "Committee" means the Committee on Management of the Board, provided, however, that if such Committee fails to satisfy the disinterested administration provisions of Section 16b-3 of the 1934 Act, "Committee" shall mean a committee of directors of CEG who satisfy the disinterested person requirements of such Section.

        "Date of Grant" means the date on which the granting of an Award is authorized by the Committee or such later date as may be specified by the Committee in such authorization.

        "Date of Retirement" means the date of Retirement or Early Retirement.

        "Disability" means the determination that a Participant is "disabled" under the CEG disability plan in effect at that time.

        "Dividend Equivalent" means an award granted under Section 11.

        "Early Retirement" means retirement prior to the Normal Retirement Date.

        "Earned Performance Award" means an actual award of a specified number of Performance Units (or shares of Restricted Stock, as the context requires) which the Committee has determined have been earned and are payable (or, in the case of Restricted Stock, earned and with respect to which restrictions will lapse) for a particular Performance Period.

        "Eligible Employee" means any person employed by CEG or a Subsidiary on a regularly scheduled basis who satisfies all of the requirements of Section 5.

        "Exercise Period" means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

        "Fair Market Value" means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date.

        "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code.

        "1934 Act" means the Securities Exchange Act of 1934, as amended.

        "Normal Retirement Date" is the retirement date as described in the Pension Plan or a Subsidiary's retirement or pension plan.

        "Option" or "Stock Option" means either a nonqualified stock option or an incentive stock option granted under Section 8.

        "Option Period" or "Option Periods" means the period or periods during which an Option is exercisable as described in Section 8.

        "Participant" means an employee of CEG or a Subsidiary who has been granted an Award under this Plan.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

        "Performance-Based" means that in determining the amount of a Restricted Stock Award payout, the Committee will take into account the performance of the Participant, CEG, one or more Subsidiaries, or any combination thereof.

        "Performance Period" means a period of time, established by the Committee at the time an Award is granted, during which corporate and/or individual performance is measured.

        "Performance Unit" means a unit of measurement equivalent to such amount or measure as defined by the Committee which may include, but is not limited to, dollars, market value shares, or book value shares.

        "Plan Administrator" means, as set forth in Section 4, the Committee.

        "Restricted Stock" means an Award granted under Section 7.

        "Retirement" means retirement on or after the "Normal Retirement Date" (as such term is defined in the Pension Plan or a Subsidiary's retirement or pension plan).

        "Service-Based" means that in determining the amount of a Restricted Stock Award payout, the Committee will take into account only the period of time that the Participant performed services for CEG or its Subsidiaries since the Date of Grant.

        "Stock" means the common stock, without par value, of CEG.

        "Stock Appreciation Right" means an Award granted under Section 10.

        "Subsidiary(ies)" means any corporation of which 20% or more of its outstanding voting stock or voting power is beneficially owned, directly or indirectly, by CEG.

        "Target Performance Award" means a targeted award of a specified number of Performance Units (or shares of Restricted Stock, as the context requires) which may be earned and payable (or, in the case of Restricted Stock, earned and with respect to which restrictions will lapse) based upon the performance objectives for a particular Performance Period, all as determined by the Committee. The

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Target Performance Award will be a factor in the Committee's ultimate determination of the Earned Performance Award.

        "Termination" means resignation or discharge from employment with CEG or any of its Subsidiaries except in the event of death, Disability, Retirement or Early Retirement.

        3.Effective Date, Duration and Stockholder Approval.

        A.Effective Date and Stockholder Approval.    This Plan has been transferred from Baltimore Gas and Electric Company (BGE) to CEG effective April 30, 1999 in connection with a share exchange between CEG and the common stockholders of BGE. The Plan was approved by a majority of the outstanding shares of common stock of BGE voted at its 1995 Annual Meeting of Stockholders, and became effective as of January 1, 1995.

        B.Period for Grants of Awards.    Awards may be made as provided herein for a period of 10 years after January 1, 1995.

        C.Termination.    The Plan will continue in effect until all matters relating to the payment of outstanding Awards and administration of the Plan have been settled.

        D.Grants Outstanding.    Grants outstanding at the effective time of the share exchange between CEG and the common stockholders of Baltimore Gas and Electric Company (BGE) will be converted from BGE common stock-based grants to CEG common stock-based grants.

        4.Plan Administration.    The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated objective. Such determinations shall be final and not subject to further appeal.

        5.Eligibility.    Each officer or key employee of CEG and its Subsidiaries (including officers or employees who are members of the Board, but excluding directors who are not officers or employees) may be designated by the Committee as a Participant, from time to time, with respect to one or more Awards. No officer or employee of CEG or its Subsidiaries shall have any right to be granted an Award under this Plan.

        6.Grant of Awards and Limitation of Number of Shares Awarded.    The Committee may, from time to time, grant Awards to one or more Eligible Employees, provided that (i) subject to any adjustment pursuant to Section 14H, the aggregate number of shares of Stock subject to Awards under this Plan may not exceed three million (3,000,000) shares; (ii) to the extent that an Award lapses or the rights of the Participant to whom it was granted terminate, any shares of Stock subject to such Award shall again be available for the grant of an Award under the Plan; and (iii) shares delivered by CEG under the Plan may be authorized and unissued Stock, Stock held in the treasury of CEG, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

        7.Restricted Stock Awards.

        A.Grants of Restricted Shares.    One or more shares of Restricted Stock may be granted to any Eligible Employee. The Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Restricted Stock will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Restricted Stock until the expiration of the restriction period.

        The Committee may also impose such other restrictions and conditions on the Restricted Stock as it deems appropriate, and will designate the grant as either a Service-Based or Performance-Based Award.

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        Upon issuance to the Participant of the Restricted Stock, the Participant will have the right to vote the Restricted Stock, and subject to the Committee's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Committee, in its sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Committee.

        B.Service-Based Award.

        i.Restriction Period.    At the time a Service-Based Restricted Stock Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Committee.

        ii.Forfeiture or Payout of Award.    In the event a Participant ceases employment during a restriction period, a Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock Award is prorated for service during the period; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Restricted Stock Award is determined at the discretion of the Committee, or if at CEG's request, payout of the Restricted Stock Award is prorated for service during the period; provided, however, that the Committee may modify the above if it determines at its sole discretion that special circumstances warrant such modification.

        Any shares of Restricted Stock which are forfeited will be transferred to CEG.

        Upon completion of the restriction period, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

        C.Performance-Based Award.

        i.Restriction Period.    At the time a Performance-Based Restricted Stock Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Committee. The Committee will also establish a Performance Period.

        ii.Performance Objectives.    The Committee will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant's Target Performance Award and the number of shares of Restricted Stock for each Target Performance Award that will be issued on the Date of Grant. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Committee deems appropriate, which may include, but not be limited to, the performance of the Participant, CEG, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance-Based Restricted Stock Awards for which different Performance Periods are prescribed.

        If, during the course of a Performance Period significant events occur as determined in the sole discretion of the Committee, which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective.

        iii.Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Committee will determine whether the performance objectives and other material terms of the Award were satisfied. The Committee's determination of all such matters will be final and conclusive.

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        As soon as practicable after the later of (i) the date the Committee makes the above determination, or (ii) the completion of the restriction period, the Committee will determine the Earned Performance Award for each Participant. Such determination may result in forfeiture of all or some shares of Restricted Stock (if Target Performance Award performance objectives were not attained), or the issuance of additional shares of Stock (if Target Performance Award performance objectives were exceeded), and will be based upon such factors as the Committee determines at its sole discretion, but including the Target Performance Award performance objectives.

        In the event a Participant ceases employment during a restriction period, the Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock Award is prorated taking into account factors including, but not limited to, service during the period; and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Restricted Stock Award is determined at the discretion of the Committee, or if at CEG's request, payout of the Restricted Stock Award is prorated taking into account factors including, but not limited to, service during the period and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Committee may modify the above if it determines at its sole discretion that special circumstances warrant such modification.

        Any shares of Restricted Stock which are forfeited will be transferred to CEG.

        With respect to shares of Restricted Stock for which restrictions lapse, new certificates will be issued (the payout) without the restrictive legend described in Section 7A. New certificates will also be issued for additional Stock, if any, awarded to the Participant because Target Performance Award performance objectives were exceeded.

        D.Waiver of Section 83(b) Election.    Unless otherwise directed by the Committee, as a condition of receiving an Award of Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Restricted Stock as income on the Date of Grant.

        8.Stock Options.

        A.Grants of Options.    One or more Options may be granted to any Eligible Employee on the Date of Grant without the payment of consideration by the Participant.

        B.Stock Option Agreement.    Each Option granted under the Plan will be evidenced by a "Stock Option Agreement" between CEG and the Participant containing provisions determined by the Committee, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Committee at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant's purchase of the Stock to which the Option relates, (b) the Participant's exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate CEG with another company is submitted to the stockholders of CEG for a vote, the

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Committee, in its sole discretion, may declare any previously granted Option to be immediately exercisable.

        C.Option Price.    The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

        D.Form of Payment.    At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Committee in its sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the date the Option is exercised.

        E.Other Terms and Conditions.    The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

        F.Lapse of Option.    An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—the Option will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Option will lapse at the expiration of the Option Period set by the grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification. If the Participant dies within the Option Period and prior to the lapse of the Option, the Option will lapse at the expiration of the Option Period set by the grant unless it is exercised before such time by the Participant's legal representative(s) or by the person(s) entitled to do so under the Participant's Will or, if the Participant fails to make testamentary disposition of the Option or dies intestate, by the person(s) entitled to receive the Option under the applicable laws of descent and distribution.

        G.Individual Limitation.    In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

        9.Performance Units.

        A.Performance Units.    One or more Performance Units may be earned by an Eligible Employee based on the achievement of preestablished performance objectives during a Performance Period.

        B.Performance Period and Performance Objectives.    The Committee will determine a Performance Period and will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant's Target Performance Award and the number of Performance Units subject to each Target Performance Award. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Committee deems appropriate, which may include, but not be limited to, the performance of the Participant, CEG, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Units for which different Performance Periods are prescribed.

        If during the course of a Performance Period significant events occur as determined in the sole discretion of the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective.

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        C.Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Committee will determine whether the performance objectives and other material terms of the Award were satisfied. The Committee's determination of all such matters will be final and conclusive.

        As soon as practicable after the date the Committee makes the above determination, the Committee will determine the Earned Performance Award for each Participant. Such determination may result in an increase or decrease in the number of Performance Units payable based upon such Participant's Target Performance Award, and will be based upon such factors as the Committee determines in its sole discretion, but including the Target Performance Award performance objectives.

        In the event a Participant ceases employment during a Performance Period, the Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Performance Unit Award is determined at the discretion of the Committee, or if at CEG's request, payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

        D.Form and Timing of Payment.    Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Committee in its sole discretion. Such payment will be made as soon as practicable after the Earned Performance Award is determined.

        10.Stock Appreciation Rights.

        A.Grants of Stock Appreciation Rights.    Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Committee may impose.

        B.Right to Exercise; Exercise Period.    A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant's Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate CEG with another company is submitted to the stockholders of CEG for a vote, the Committee, in its sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

        C.Failure to Exercise.    If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

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        D.Payment.    An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

        The Committee may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Committee may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Committee must consent to or disapprove such election and (ii) unless the Committee directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

        E.Nontransferable.    A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative.

        F.Lapse of a Stock Appreciation Right.    A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—the Stock Appreciation Right will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification. If the Participant dies within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant unless it is exercised before such time by the Participant's legal representative(s) or by the person(s) entitled to do so under the Participant's Will or, if the Participant fails to make testamentary disposition of the Stock Appreciation Right or dies intestate, by the person(s) entitled to receive the Stock Appreciation Right under the applicable laws of descent and distribution.

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        11.Dividend Equivalents.

        A.Grants of Dividend Equivalents.    Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance Units, at any time during the Performance Period, without consideration by the Participant. Dividend Equivalents will be granted under a Performance-Based Restricted Stock Award in conjunction with additional shares of Stock issued if Target Performance Award performance objectives are exceeded.

        B.Payment.    Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Committee, in its sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Committee.

        C.Nontransferable.    A Dividend Equivalent will not be transferable by the Participant.

        D.Lapse of a Dividend Equivalent.    Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock Award; or (iv) the lapse date established by the Committee on the Date of Grant of the Dividend Equivalent.

        12.Accelerated Award Payout/Exercise.

        A.Change in Control.    Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout or accelerated Option or Exercise Period (as set forth in Section 12B) with respect to any previously granted Award, upon the happening of a change in control.

        A change in control for purposes of this Section 12 means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of CEG in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of CEG as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)   any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of CEG representing 20% or more of the combined voting power of CEG's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by CEG or any corporation with respect to which CEG owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or

9

related trust) sponsored or maintained by CEG or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

        (iii)  CEG shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving CEG or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)  the stockholders of CEG approve a plan of complete liquidation or dissolution of CEG, or the consummation of a sale of all or substantially all of CEG's assets.

        Notwithstanding the foregoing, a Change in Control of CEG shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by CEG which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by CEG such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        B.Amount of Award Subject to Accelerated Payout/Option Period/Exercise Period.    The amount of a Participant's previously granted Award that will be paid or exercisable upon the happening of a change in control will be determined as follows:

        Restricted Stock Awards.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Restricted Stock that were issued on the Date of Grant, prorated based on the number of months of the restriction period that have elapsed as of the payout date. Also, with respect to Performance-Based Restricted Stock Awards, in determining the amount of the payout, maximum performance achievement will be assumed.

        Stock Option Awards and Stock Appreciation Rights.    Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately exercisable.

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        Performance Units.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of Performance Units subject to the Target Performance Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

        C.Timing of Accelerated Payout/Option Period/Exercise Period.    The accelerated payout set forth in Section 12B will be made in cash within 30 days after the date of the change in control. The accelerated Option Period/Exercise Period set forth in Section 12B will begin on the date of the change in control, and applicable payments will be in cash. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout or exercise date, whichever is applicable.

        13.Amendment of Plan.

        The Committee may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except (i) no such action may be taken without stockholder approval which materially increases the benefits accruing to Participants pursuant to the Plan, materially increases the number of securities which may be issued pursuant to the Plan (except as provided in Section 14H), extends the period for granting Options under the Plan or materially modifies the requirements as to eligibility for participation in the Plan; and (ii) no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder. Notwithstanding the foregoing, the Committee may amend the Plan as desirable at the discretion of the Committee to address any issues concerning (i) Section 162(m) of the Code, or (ii) maintaining an exemption under rule 16b-3 of the 1934 Act.

        14.Miscellaneous Provisions.

        A.Nontransferability.    No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute, (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Committee, to satisfy income tax withholding, and (iii) as requested by the Participant and approved by the Committee, to members of the Participant's family, or a trust established by the Participant for the benefit of family members.

        B.No Employment Right.    Participation in this Plan shall not constitute a contract of employment between CEG or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        C.Tax Withholding.    CEG or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by CEG or a Subsidiary. Subject to compliance with any requirements of applicable law, the Committee may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to CEG or a Subsidiary, the retention by CEG or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant's Stock, having a Fair Market Value equal to the withholding amount.

        D.Fractional Shares.    Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

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        E.Government and Other Regulations.    The obligation of CEG to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. CEG shall be under no obligation to register under the Securities Act of 1933, as amended ("Act"), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, CEG may restrict its transfer in such manner as it deems advisable to ensure such exempt status.

        F.Indemnification.    Each person who is or at any time serves as a member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be indemnified and held harmless by CEG against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give CEG an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of CEG or any of its Subsidiaries, as a matter of law, or otherwise, or any power that CEG may have to indemnify such person or hold such person harmless.

        G.Reliance on Reports.    Each member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of CEG and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

        H.Changes in Capital Structure.    In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued to a Participant as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

        I.CEG Successors.    In the event CEG becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which CEG will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of CEG under this Plan.

        J.Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

        K.Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

        L.Expenses.    The expenses of administering the Plan shall be borne by CEG and its Subsidiaries.

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        M.Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the 1995 Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Kathleen A. Chagnon,
Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

1995 Long-Term Incentive Plan
Appendix

Additional Information

        The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

        Participants may obtain additional information about the Plan by contacting:

Director—Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5^th Floor
Baltimore, MD 21202
(410) 783-2844

        After each grant is made, participants will be furnished with information about the amount of the grant. At least annually, participants will be furnished with information about their outstanding grants.

        In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse. Grants not subject to restrictions are taxable/deductible at fair market value on the grant date. Additionally, options are subject to other special tax provisions.

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Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (Plan)

EX-10.(C)

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Exhibit 10(c)

Constellation Energy Group, Inc.
Deferred Compensation Plan
For Non-Employee Directors

        1.    Objective.    The objective of this Plan is to offer a portion of the Compensation of non-employee Directors of Constellation Energy Group in the form of Stock Units, thereby promoting a greater identity of interest between Constellation Energy Group's non-employee Directors and its stockholders, and to enable such Directors to defer receipt of their Compensation that is payable in cash.

        2.    Definitions.    As used herein, the following terms will have the meaning specified below:

        "Annual Retainer" means the amount payable by Constellation Energy Group to a Director as annual compensation for performance of services as a Director, and includes Committee Chair retainers. All other amounts (including without limitation Board/committee meeting fees, and expense reimbursements) shall be excluded in calculating the amount of the Annual Retainer.

        "Board" means the Board of Directors of Constellation Energy Group.

        "Cash Account" means an account by that name established pursuant to Section 7. The maintenance of Cash Accounts is for bookkeeping purposes only.

        "Change in Control" means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the "Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)   any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph  (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)  Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of

the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        "Committee" means the Committee on Management of the Board.

        "Common Stock" means the common stock, without par value, of Constellation Energy Group.

        "Compensation" means any Annual Retainer and meeting fees payable by Constellation Energy Group to a participant in his/her capacity as a Director. Compensation excludes expense reimbursements paid by Constellation Energy Group to a participant in his/her capacity as a Director.

        "Constellation Energy Group" means Constellation Energy Group, Inc., a Maryland corporation, or its successor.

        "Deferred Cash Compensation" means any cash Compensation that is voluntarily deferred by a participant pursuant to Section 6.

        "Director" means a member of the Board who is not an employee of Constellation Energy Group or any of its subsidiaries/ affiliates.

        "Disability" or "Disabled" means that the Plan Administrator has determined that the participant is unable to fulfill his/her responsibilities of Board membership because of illness or injury. For purposes of this Plan, a participant's eligibility to participate shall be deemed to have terminated on the date he/she is determined by the Plan Administrator to be Disabled.

        "Earnings" means, with respect to the Cash Account, hypothetical interest credited to the Cash Account.

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        "Earnings" means, with respect to the Stock Account, hypothetical dividends credited to the Stock Account.

        "Fair Market Value" means, as of any specified date, the average closing price of a share of Common Stock, reported in "New York Stock Exchange Composite Transactions" as published in the Eastern Edition of The Wall Street Journal averaged for the most recent 20 days during which Common Stock was traded on the New York Stock Exchange (including such valuation date if a trading date).

        "Plan Accounts" means a participant's Cash Account and/or Stock Account. The maintenance of Plan Accounts is for bookkeeping purposes only.

        "Plan Administrator" means, as set forth in Section 3, the Board.

        "Stock Account" means an account by that name established pursuant to Section 8. The maintenance of Stock Accounts is for bookkeeping purposes only.

        "Stock Unit(s)" means the share equivalents credited to a Participant's Stock Account pursuant to Section 8. The use of Stock Units is for bookkeeping purposes only; the Stock Units are not actual shares of Common Stock. Constellation Energy Group will not reserve or otherwise set aside any Common Stock for or to any Stock Account.

        3.    Plan Administration.

        (i)    Plan Administrator—The Plan is administered by the Board, who has sole authority to interpret the Plan, and, in general, to make all other determinations advisable for the administration of the Plan to achieve its stated objective. Decisions by the Plan Administrator shall be final and binding upon all persons for all purposes. The Plan Administrator shall have the power to delegate all or any part of its non-discretionary duties to one or more designees, and to withdraw such authority, by written designation.

        (ii)    Amendment—This Plan may be amended from time to time or suspended or terminated at any time, at the written direction of the Plan Administrator. However, amendments required to keep the Plan in compliance with applicable laws and regulations may be made by the Vice President—Human Resources of Constellation Energy Group (or other vice president succeeding to that function) on advice of counsel. Nothing herein creates a vested right.

        (iii)    Indemnification—The Plan Administrator (and its designees), Chairman of the Board, Chief Executive Officer, President, and Vice President-Human Resources of Constellation Energy Group and all other employees of Constellation Energy Group or its subsidiaries/affiliates whose assigned duties include matters under the Plan, shall be indemnified by Constellation Energy Group or its subsidiaries /affiliates or from proceeds under insurance policies purchased by Constellation Energy Group or its subsidiaries/affiliates, against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any related claim.

        4.    Eligibility and Participation.

        (i)    Mandatory participation—A Director, at the discretion of the Board, may be required at such times designated by the Board to participate in this Plan with respect to the receipt of all or part of his/her Compensation in the form of Stock Units under Section 5 of the Plan.

        (ii)    Voluntary participation—A Director is eligible to participate in the Plan by electing to defer all or certain portions of the participant's Compensation, that is payable in cash, under Section 6 of the Plan, while so classified.

        (iii)    Termination of participation—Eligibility to participate shall terminate on the date the participant ceases to be a Director. Notwithstanding termination of eligibility, such person with

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Plan Accounts will remain a participant of the Plan, solely for purposes of the administration of existing Plan Accounts, and no additional Stock Units will be granted and no further deferrals of cash Compensation under the Plan will be permitted.

        5.    Mandatory Stock Units.    To the extent designated from time to time by the Board as set forth in Section 4(i), the Stock Account of a participant will be credited on January 1 of each applicable calendar year with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, with the applicable percentage (as designated by the Board) of the participant's Annual Retainer for such calendar year, at Fair Market Value on such January 1.

        If a participant initially becomes eligible to participate in the Plan during such applicable calendar year, the Stock Account of the participant for such calendar year will be credited, on the date that is the first day of the calendar month after the participant initially becomes eligible to participate in the Plan, with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased at Fair Market Value on such date, with an amount equal to (i) the applicable percentage (as designated by the Board) of the participant's Annual Retainer multiplied by (ii) a fraction the numerator of which is the number of full calendar months in the calendar year on and after such date, and the denominator of which is 12.

        The Stock Account will be maintained pursuant to Section 8.

        6.    Cash Compensation Deferral Election.    A participant may elect to defer none, all, fifty percent (50%), or seventy-five percent (75%) of his/her other Compensation that is payable in cash (i.e., one hundred percent (100%) of all other Compensation that is not subject to any mandatory Stock Units). A participant's cash Compensation deferral election with respect to the Annual Retainer shall specify whether the deferred Annual Retainer is to be credited to the Cash Account or to the Stock Account. All other Cash Compensation that a participant elects to defer will be credited to the Cash Account.

        Such election shall be made by written notification to the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function). Such election shall be made prior to the calendar year during which the applicable cash Compensation is payable, and shall be effective as of the first day of such calendar year. If a participant initially becomes eligible to participate in the Plan during a calendar year, the election for such calendar year must be made within thirty (30) calendar days after the date the participant initially becomes eligible to participate in the Plan, and shall be effective with respect to Compensation earned after the date the election is received by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function). Elections under this Section shall remain in effect for all succeeding calendar years until revoked. Elections may be revoked by written notification to the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function), and shall be effective as of the first day of the calendar year following the calendar year during which the revocation is received by such Vice President.

        Notwithstanding anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to permit a participant to defer other percentages of his/her Annual Retainer and/or other Compensation that is payable in cash.

        7.    Cash Accounts.    The Board may specify that cash Compensation that consists of the Annual Retainer that a participant has elected to defer into the Cash Account is credited to the participant's Cash Account on January 1 (or if later, the date the participant's initial election to participate in the Plan becomes effective). All other cash Compensation that a participant has elected to defer is credited to the participant's Cash Account on each date such cash Compensation would otherwise have been paid to the Director. A participant's Cash Account shall be credited with earnings at the rate earned by the Interest Income Fund under the Constellation Energy Group, Inc. Employee Savings Plan, and

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computed in the same manner as under such plan. Earnings are credited to the Cash Account commencing on the date the applicable Deferred Cash Compensation is credited to the Cash Account.

        8.    Stock Accounts.    The Board may specify that cash Compensation that consists of the Annual Retainer that a participant has elected to defer into the Stock Account is credited to the participant's Stock Account on January 1 (or if later, the date the participant's initial election to participate in the Plan becomes effective). All other cash Compensation that a participant has elected to defer into the Stock Account is credited to the participant's Stock Account on each date such cash Compensation would otherwise have been paid to the Director. A participant's Stock Account shall be credited with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with such Deferred Cash Compensation, at Fair Market Value on such date. Grants of mandatory Stock Units are credited to the Stock Account as set forth in Section 5.

        As of any dividend distribution date for the Common Stock, the participant's Stock Account shall be credited with additional Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, at the closing price of a share of Common Stock on such date as reported in "New York Stock Exchange Composite Transactions" as published in the Eastern Edition of The Wall Street Journal, with the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Stock Units then credited to the participant's Stock Account.

        In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Common Stock, then appropriate adjustments shall be made in the number of Stock Units in each participant's Stock Account. Such adjustments shall be made effective on the date of the change related to the Common Stock.

        9.    Distributions of Plan Accounts.    Distributions of Plan Accounts shall be made in cash only, from the general assets of Constellation Energy Group.

        A participant may elect (by notification in the form and manner established by the Vice President—Human Resources of Constellation Energy Group (or other Vice President succeeding to that function) from time to time) to begin distributions (i) in the calendar year following the calendar year that eligibility to participate terminates, (ii) in the calendar year following the calendar year in which a participant attains age 70, if later, or (iii) any calendar year between (i) and (ii). Such election must be made prior to the end of the calendar year in which eligibility to participate terminates. Alternatively, a participant who reaches age 70 while still eligible to participate may elect to begin distributions, in the calendar year following the calendar year that the participant reaches age 70, of amounts in his/her Plan Accounts as of the end of the calendar year the participant reaches age 70. Such election must be made prior to the end of the calendar year in which the participant reaches age 70, and a distribution election to receive any subsequently deferred amounts beginning in the calendar year following the calendar year that eligibility to participate terminates, must be made prior to the end of the calendar year in which eligibility to participate terminates.

        A participant may elect (by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice President succeeding to that function) from time to time) to receive distributions in a single payment or in annual installments during a period not to exceed fifteen years. The single payment or the first installment payment, whichever is applicable, shall be made within the first sixty (60) calendar days of the calendar year elected for distribution. Subsequent installments, if any, shall be made within the first sixty (60) calendar days of each succeeding calendar year until the participant's Cash Account has been paid out.

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        In the event applicable elections are not timely made, a participant shall receive a distribution in a single payment within the first sixty (60) calendar days of the calendar year following the calendar year that eligibility to participate terminates.

        The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date on which the participant's eligibility to participate terminates (or, the date that is the last day of the calendar year during which the participant reaches age 70, for a participant who elects to begin distributions while still eligible to participate), is transferred to the Cash Account on such date. Earnings are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited with Earnings. The value of the Cash Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution ("Distribution Valuation Date"). The amount of any cash distribution to be made in installments from the Cash Account will be determined by multiplying (i) the balance in such Cash Account on the Distribution Valuation Date by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution).

        If a participant dies or becomes Disabled, the entire unpaid balance of his/her Plan Accounts shall be paid to the beneficiary(ies) designated by the participant by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time or, if no designation was made, in the event of death, to the estate of the participant, and in the event of Disability, to the participant. Payment shall be made within sixty (60) calendar days after notice of death or Disability is received by such Vice President, unless prior to the participant's death or Disability, the participant elected (in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time) a delayed and/or installment distribution option for such beneficiary(ies); provided, however that (i) such a distribution option election shall be effective only if the value of the participant's Plan Accounts is more than $50,000 on the date of the participant's death or Disability; and (ii) the final distribution must be made to such beneficiary(ies) no later than 15 years after the participant's death or Disability. After the end of the calendar year that a participant's eligibility to participate terminates, a distribution option election for a particular beneficiary is irrevocable; provided, however, that the participant may make a distribution option election for a new beneficiary who is initially designated after the participant's eligibility to participate terminates, and such election is irrevocable with respect to the new beneficiary.

        The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date of the participant's death or Disability, is transferred to the Cash Account on such date. Earnings are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited with Earnings. The value of the Cash Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution ("Beneficiary Distribution Valuation Date"). The amount of any cash distribution to be made in installments from the Cash Account will be determined by multiplying (i) the balance in such Cash Account on the Beneficiary Distribution Valuation Date by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution).

        Upon the death of a participant's beneficiary for whom a delayed and/or installment distribution option was elected, the entire unpaid balance of the participant's Cash Account shall be paid to the beneficiary(ies) designated by the participant's beneficiary by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time or, if no designation was made, to the estate

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of the participant's beneficiary. Payment shall be made within sixty (60) calendar days after notice of death is received by such Vice President. The value of the Cash Account that is payable in cash is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution.

        Notwithstanding anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to (i) vary the manner and timing of distributions of a participant or beneficiary entitled to a distribution under this Section 9, and may make such distributions in a single payment or over a shorter or longer period of time than that elected by a participant; and (ii) vary the period during which the closing price of Common Stock is referenced to determine the value of the Stock Account that is transferred to the Cash Account on the date on which the participant's eligibility to participate terminates. Any affected participants will not participate in exercising such discretion.

        10.    Beneficiaries.    A participant shall have the right to designate, change or rescind a beneficiary(ies) who is to receive a distribution(s) pursuant to Section 9 in the event of the death or Disability of the participant. A participant's beneficiary(ies) for whom a delayed and/or installment distribution option was elected shall have the right to designate a beneficiary(ies) who is to receive a distribution pursuant to Section 9 in the event of the death of the participant's beneficiary(ies).

        Any designation, change or recision of the designation of beneficiary shall be made by notification in the form and manner established by the Vice President-Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time. The last designation of beneficiary received by such Vice President shall be controlling over any testamentary or purported disposition by the participant (or, if applicable, the participant's beneficiary(ies)), provided that no designation, recision or change thereof shall be effective unless received by such Vice President prior to the death or Disability (whichever is applicable) of the participant (or, if applicable, the death of the participant's beneficiary(ies)).

        If the designated beneficiary is the estate, or the executor or administrator of the estate, of the participant (or, if applicable, the participant's beneficiary(ies)), a distribution pursuant to Section 9 may be made to the person(s) or entity (including a trust) entitled thereto under the will of the participant (or, if applicable, the participant's beneficiary(ies)), or, in the case of intestacy, under the laws relating to intestacy.

        11.    Valuation of Plan Accounts.    The Plan Administrator shall cause the value of a participant's Plan Accounts to be determined and reported to Constellation Energy Group and the participant at least once per year as of the last business day of the calendar year. The value of the Stock Account will equal the number of Stock Units in the Stock Account multiplied by the closing price of a share of Common Stock on the last business day of the calendar year as reported in "New York Stock Exchange Composite Transactions" as published in the Eastern Edition of The Wall Street Journal. The value of the Cash Account will equal the balance in the Cash Account on the last business day of the calendar year.

        12.    Withdrawals.    No withdrawals of Plan Accounts may be made, except a participant may at any time request a hardship withdrawal from his/her Plan Accounts if he/she has incurred an unforeseeable financial emergency. An unforeseeable financial emergency is defined as severe financial hardship to the participant resulting from a sudden and unexpected illness or accident of the participant (or of his/her dependents), loss of the participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant. The need to send a child to college or the desire to purchase a home are not considered to be unforeseeable emergencies. The circumstance that will constitute an unforeseeable emergency will depend upon the facts of each case.

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        A hardship withdrawal will be permitted by the Plan Administrator only as necessary to satisfy an immediate and heavy financial need. A hardship withdrawal may be permitted only to the extent reasonably necessary to satisfy the financial need. Payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under the Plan.

        The request for hardship withdrawal shall be made by notification in the form and manner established by the Plan Administrator from time to time. Such hardship withdrawal will be permitted only with approval of the Plan Administrator. The participant will receive a lump sum payment after the Plan Administrator has had reasonable time to consider and then approve the request.

        The value of the Stock Account for purposes of processing a hardship cash withdrawal is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date on which the hardship withdrawal is processed. The value of the Cash Account for purposes of processing a hardship cash withdrawal is equal to the balance in the Cash Account on the date on which the hardship withdrawal is processed.

        13.    Change in Control.    The terms of this Section 13 shall immediately become operative, without further action or consent by any person or entity, upon a Change in Control, and once operative shall supersede and control over any other provisions of this Plan. Upon the occurrence of a Change in Control followed within one year of the date of such Change in Control by the participant's cessation of Board membership for any reason, such participant shall be paid the value of his/her Plan Accounts in a single, lump sum cash payment. The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date of the participant's cessation of Board membership, is transferred to the Cash Account on such date. Earnings are credited to the Cash Account through the date of distribution. The value of the Cash Account that is payable in cash on the date of the single lump sum cash payment is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to the day of such distribution. Such payment shall be made as soon as practicable, but in no event later than thirty (30) calendar days after the date of the participant's cessation of Board membership. On or after a Change in Control, no action, including, but not by way of limitation, the amendment, suspension or termination of the Plan, shall be taken which would affect the rights of any participant or the operation of this Plan with respect to the balance in the participant's Plan Accounts.

        14.    Withholding.    Constellation Energy Group may withhold to the extent required by law all applicable income and other taxes from amounts deferred or distributed under the Plan.

        15.    Copies of Plan Available.    Copies of the Plan and any and all amendments thereto shall be made available to all participants during normal business hours at the office of the Plan Administrator.

        16.    Miscellaneous.

        (i)    Inalienability of benefits—Except as may otherwise be required by law or court order, the interest of each participant or beneficiary under the Plan cannot be sold, pledged, assigned, alienated or transferred in any manner or be subject to attachment or other legal process of whatever nature; provided, however, that any applicable taxes may be withheld from any cash benefit payment made under this Plan.

        (ii)    Controlling law—The Plan and its administration shall be governed by the laws of the State of Maryland, except to the extent preempted by federal law.

        (iii)    Gender and number—A masculine pronoun when used herein refers to both men and women and words used in the singular are intended to include the plural, and vice versa, whenever appropriate.

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        (iv)    Titles and headings—Titles and headings to articles and sections in the Plan are placed herein solely for convenience of reference and in any case of conflict, the text of the Plan rather than such titles and headings shall control.

        (v)    References to law—All references to specific provisions of any federal or state law, rule or regulation shall be deemed to also include references to any successor provisions or amendments.

        (vi)    Funding and expenses—Benefits under the Plan are not vested or funded, and shall be paid out of the general assets of Constellation Energy Group. To the extent that any person acquires a right to receive payments from Constellation Energy Group under this Plan, such rights shall be no greater than the right of any unsecured general creditor of Constellation Energy Group. The expenses of administering the Plan will be borne by Constellation Energy Group.

        (vii)    Not a contract—Participation in this Plan shall not constitute a contract of employment or Board membership between Constellation Energy Group and any person and shall not be deemed to be consideration for, or a condition of, continued employment or Board membership of any person.

        (viii)    Successors—In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of Constellation Energy Group will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy Group under this Plan.

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EX-10.(D)

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Exhibit 10(d)

GRANTOR TRUST AGREEMENT

Dated as of April 25, 2003

between

CONSTELLATION ENERGY GROUP, INC.

and

CITIBANK, N.A.

GRANTOR TRUST AGREEMENT

CONTENTS

Section 1.		Establishment of Trust.	1
	1.1	Trust is established with Trustee.	1
	1.2	Trust is irrevocable.	1
	1.3	Trust is a grantor trust .	2
	1.4	Assets subject to claims of creditors.	2
	1.5	Due date of Trust contributions.	2
	1.6	Discretionary contributions.	2
	1.7	Eligibility for Trust benefits.	2
	1.8	Definition of "Required Contribution."	2
	1.9	Responsibility for Required Contribution calculation.	3
	1.10	Notification upon failure to made Required Contribution.	3
Section 2.		Payments to Plan Participants and Their Surviving Spouses.	3
	2.1	Constellation Energy required to provide Payment Schedule to Trustee.	3
	2.2	Failure by Constellation Energy to provide Payment Schedule.	4
	2.3	Tax withholding.	4
	2.4	Determination entitlement to benefits.	5
	2.5	Payment of benefits directly by Constellation Energy.	5
	2.6	Authorization for Trustee to defer payments.	5
	2.7	Determination of insufficient assets.	5
	2.8	Notification of insufficiency.	6
	2.9	Restoration of discontinued or reduced payments.	6
	2.10	Determination of immediate taxation.	6
	2.11	Reduction of future benefits following immediate taxation.	6
Section 3.		Trustee Responsibility Regarding Payments to Trust Beneficiary When Constellation Energy Is Insolvent.	6
	3.1	Payments cease when Constellation Energy is Insolvent.	6
	3.2	Assets subject to claims of creditors.	6
	3.2(a)	Duty to inform Trustee of Constellation Energy's Insolvency.	7
	3.2(b)	Trustee's responsibility to cease payments.	7
	3.2(c)	Trustee reliance on Insolvency evidence.	7
	3.2(d)	Trustee holds assets for general creditors.	7
	3.2(e)	Authority to resume payments.	7
	3.3	Restoration of discontinued payments.	7
Section 4.		Payments to Constellation Energy.	7
	4.1	Return or diversion of Trust assets.	7
	4.2	Distribution of excess Trust assets to Constellation Energy.	8
	4.3	Distribution of excess Trust assets following a Change of Control.	8
Section 5.		Investment Authority.	8
	5.1	No investment in Constellation Energy stock.	8
	5.2	Acknowledgement of investment guidelines.	8
	5.3	Constellation Energy may appoint investment advisor.	8
	5.4	Constellation Energy may transfer life insurance to Trust.	8
Section 6.		Disposition of Income.	9

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Section 7.		Accounting by Trustee.	9
	7.1	Trustee provides monthly accounting to Constellation Energy.	9
	7.2	Deemed approval of accounting by Constellation Energy.	9
	7.3	Tax returns.	9
	7.4	Right of Trustee to judicial settlement of accounts.	9
Section 8.		Responsibility of Trustee.	10
	8.1	Prudency standard for Trustee.	10
	8.2	Indemnification of Trustee.	10
	8.3	Powers of Trustee.	10
	8.4	Additional powers of Trustee.	10
	8.5	Trustee prohibited from carrying on business through Trust.	11
Section 9.		Compensation and Expenses of Trustee.	11
	9.1	Trustee's fees.	11
	9.2	Taxes on Trust income.	11
Section 10.		Resignation and Removal of Trustee.	11
	10.1	Resignation of Trustee.	11
	10.2	Removal of Trustee.	11
	10.3	Removal of Trustee after Change of Control.	12
	10.4	Resignation of Trustee after Change of Control.	12
	10.5	Transfer of assets after resignation or removal of Trustee.	12
	10.6	Appointment of successor Trustee.	12
Section 11.		Appointment of Successor.	12
	11.1	Appointment of successor after removal or resignation of Trustee.	12
	11.2	Appointment of successor Trustee following Change of Control.	12
	11.3	Responsibility of successor Trustee.	12
	11.4	Trustee provides written account after removal or resignation.	12
Section 12.		Amendment or Termination.	12
	12.1	Amendments to Trust.	12
	12.2	Termination date of Trust.	12
	12.3	Trust termination after participant approval.	13
	12.4	Amendment following Change of Control.	13
Section 13.		Miscellaneous.	13
	13.1	Provisions prohibited by law.	13
	13.2	Alienation clause.	13
	13.3	Trust under New York law.	13
	13.4	Definitions and plurals.	13
	13.5	Definition of Change of Control.	13
	13.6	Certification of authority to act.	14
	13.7	Indemnification of Trustee.	15
	13.8	Authority of Trust Agreement.	15
	13.9	Addresses for Trustee and Constellation Energy.	15
Section 14.		Effective Date.	16

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GRANTOR TRUST AGREEMENT
Dated as of April 25, 2003
between
Constellation Energy Group, Inc.
and
Citibank, N.A.

        THIS AGREEMENT dated as of April 25, 2003, by and between Constellation Energy Group, Inc., a Maryland corporation, or its successor ("Constellation Energy") and Citibank, N. A., a national banking association as trustee for the trust created hereby ("Trustee").

WITNESSETH THAT:

        WHEREAS, Constellation Energy has adopted and amended the Constellation Energy Group, Inc. Senior Executive Supplemental Plan and the Constellation Energy Group, Inc. Supplemental Pension Plan (formerly the Constellation Energy Group, Inc. Executive Benefits Plan) ("Plans"); and

        WHEREAS, Constellation Energy has incurred or expects to incur liability under the terms of such Plans for nonqualified supplemental pension retirement benefits with respect to the individuals participating in such Plans; and

        WHEREAS, Baltimore Gas and Electric Company adopted the trust ("Trust") effective July 31, 1994 for the purpose of contributing to the Trust assets to be held therein, subject to the claims of the company's creditors in the event of the company's Insolvency, as defined in Section 3.1 hereof, until paid to Plan participants and their surviving spouses, as defined in Section 6 of the Plans, in such manner and at such times as specified in the Plans; and

        WHEREAS, the Trust has been subsequently amended as follows: (i) effective April 30, 1999 to reflect the transfer of Baltimore Gas and Electric Company's rights and obligations under the Grantor Trust Agreement Dated as of July 31, 1994 between Baltimore Gas and Electric Company and Citibank, N.A. to Constellation Energy; (ii) effective January 1, 2001 to reflect the change in designation of Constellation Energy Group, Inc. from "CEG" to "Constellation Energy", to change the required contribution date from April 20^th to May 31^st, and to conform the names of the nonqualified plans funded under the Trust; and (iii) effective April 23, 2003 to conform the definition of Change in Control under the Trust to the definition under the Plans.

        WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as unfunded plans maintained for the purpose of providing nonqualified supplemental pension retirement benefits for a select group of management or highly compensated employees, for purposes of Title I of the Employee Retirement Income Security Act of 1974; and

        WHEREAS, it is the intention of Constellation Energy to make contributions to the Trust to provide a source of funds to assist in meeting Constellation Energy's liabilities under the Plans;

        NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:

Section 1.    Establishment of Trust.

        1.1    Constellation Energy hereby adopts and establishes with Trustee the Trust consisting of such sums of cash and other property, including collateral assignments of interests in certain split dollar life insurance policies, (the "principal"), that currently constitute the Trust and as from time to time shall be paid or delivered to Trustee to be held, administered, and disposed of by Trustee as provided in this Trust Agreement. The principal of the Trust and any earnings thereon (the "Trust assets") shall be held by Trustee and shall be dealt with in accordance with the provisions of this Trust Agreement until all payments required by this Trust Agreement have been made.

        1.2    The Trust hereby established shall be irrevocable.

        1.3    The Trust is intended to be a grantor trust, of which Constellation Energy is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.

        1.4    The Trust assets shall be held separate and apart from other funds of Constellation Energy and shall be used exclusively for the uses and purposes of Plan participants, their surviving spouses, and Constellation Energy's general creditors as herein set forth. Plan participants and their surviving spouses shall have no preferred claim on, or any beneficial ownership interest in, any Trust assets. Any rights created under the Plans and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their surviving spouses against Constellation Energy. Any Trust assets will be subject to the claims of Constellation Energy's general creditors under federal and state law in the event of Insolvency, as defined in Section 3.1 hereof.

        1.5    By August 31, 1994, for the Plan year 1993, BGE was required to irrevocably contribute cash or other property to the Trust in an amount equal to 50% of the Required Contribution, as defined in Section 1.9 hereof. By April 30 of the year following each of the Plan years 1994-1999, BGE was required to irrevocably contribute additional cash or other property to the Trust in an amount equal to 100% of the Required Contribution. By May 31st of the year following each of the Plan years 2000-2002, Constellation Energy shall be required to irrevocably contribute cash or other property to the Trust in an amount equal to 100% of the Required Contribution.

        1.6    Constellation Energy, in its sole discretion, may at any time, or from time to time, make additional contributions of cash or other property to the Trust to augment the Trust assets to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or surviving spouse shall have any right to compel such additional contributions.

        1.7    Plan participants or their surviving spouses shall be eligible to receive benefits under this Trust Agreement only if the Plan participant was an employee of Constellation Energy or a subsidiary in Constellation Energy's controlled group ("Employee") as well as a Plan participant as of the end of any Plan year for which a contribution was required pursuant to Section 1.5 hereof, or as of the end of any Plan year for which a contribution was made pursuant to Section 1.6, except that for the Plan year 1993, Plan participants or their surviving spouses shall be eligible to receive benefits under this Trust Agreement only if the Plan participant was an Employee as well as a Plan participant as of the first day of 1993.

        1.8    "Required Contribution," for purposes of the contribution requirements as set forth in Section 1.5 hereof, means the sum of (1), (2), (3), (4) and (5) below computed as indicated herein, less the fair market value of the Trust assets at the end of the Plan year for which the contribution is required.

        (1)    For Plan participants eligible to receive benefits under this Trust Agreement pursuant to Section 1.7 hereof, who were also Employees as of the end of the Plan year for which the contribution is required (except Employees entitled to lump sum payments as indicated under Section 1.8(4) hereof) and who were not eligible for early retirement under the Plans at the end of the Plan year for which the contribution is required, an amount equal to the present value of an annuity including the estimated present value of post retirement supplemental survivor annuity benefits under the Plans commencing effective with the month in which the participant becomes age 65 using (i) the net accrued benefit as computed under the Plans (without regard to age and Credited Service eligibility requirements), expressed as a monthly amount, (ii) an interest rate equal to the lesser of 8% or 95% of the Interest Rate under the Plans, and (iii) the Mortality Table.

        (2)    For Plan participants eligible to receive benefits under this Trust Agreement pursuant to Section 1.7 hereof, who were also Employees as of the end of the Plan year for which the

2

contribution is required (except Constellation Energy Employees entitled to lump sum payments as indicated under Section 1.8(4) hereof) and who were eligible for early retirement under the Plans as of the end of the Plan year for which the contribution is required, an amount equal to the present value of an annuity including the present value of post retirement supplemental survivor annuity benefits under the Plans commencing effective with the first month following the Plan year for which the contribution is required using (i) the net accrued benefit as computed under the Plans, expressed as a monthly amount, (ii) an interest rate equal to the lesser of 8% or 95% of the Interest Rate under the Plans, and (iii) the Mortality Table.

        (3)    For Plan participants or their surviving spouses who are eligible to receive benefits under this Trust Agreement pursuant to Section 1.7 hereof who were also receiving a retirement benefit under the Plans in the form of a monthly payment as of the end of the Plan year for which the contribution is required, an amount equal to the present value of an annuity as computed under (2)(i), (ii), and (iii) above except that the interest rate used to compute the present value under (ii) shall be 8%.

        (4)    For all Plan participants eligible to receive benefits under this Trust Agreement pursuant to Section 1.7 hereof who are also entitled under Section 5 of the Plans to receive a lump sum payment at the later of age 55 or upon separation from service as of the end of the Plan year for which the contribution is required, an amount equal to the present value of an annuity as computed under (1) above.

        (5)    In the event there has been a reduction or discontinuance of payments pursuant to Sections 2.6, 2.7, or Section 3 hereof, an amount equal to the total amount of any previously reduced or discontinued payments to Plan participants and their surviving spouses, less the aggregate amount of any payments made to Plan participants and their surviving spouses by Constellation Energy or BGE in lieu of such payments, plus interest computed pursuant to Section 2.9 hereof on the net aggregate amount.

        1.9    Constellation Energy shall have sole responsibility for providing to Trustee the determination and calculation of the Required Contribution which shall be determined and calculated by the actuary of the Pension Plan of Constellation Energy Group, Inc. Trustee shall have no responsibility with respect to such determination and calculation including the responsibility to verify (i) the accuracy of such calculation or (ii) compliance by Constellation Energy with the terms of Section 1 hereof, except as provided in Section 1.11 hereof. Trustee shall have no duty, obligation or responsibility to bring any action or proceeding to enforce the collection of the Required Contribution from Constellation Energy.

        1.10    In the event Constellation Energy fails to make the Required Contribution to the Trust by the dates specified in Section 1.5 hereof, Trustee shall notify Constellation Energy of such failure by the 15th day of the month following the month in which the contribution was required. Such notification shall stipulate that Constellation Energy may correct the failure to contribute by the last day of the month following the month in which the contribution was required (the "Required Contribution correction date"). Trustee shall notify the Plan participants or their surviving spouses shown on the most recent Payment Schedule, as defined in Section 2.1 hereof, provided by Constellation Energy to Trustee, in the event Constellation Energy fails to make the Required Contribution by the Required Contribution correction date. Trustee shall make such notification no later than 15 days following the Required Contribution correction date.

Section 2.    Payments to Plan Participants and Their Surviving Spouses.

        2.1    By May 31 of the year following each Plan year until termination of the Trust under the provisions of Section 12 hereof, and at other times as reasonably requested by Trustee including such times as Trustee is notified in writing of the death of a Plan participant or surviving spouse eligible to receive benefits under this Trust Agreement, Constellation Energy shall deliver to Trustee a schedule,

3

substantially in the format of Exhibit A hereof, and any other necessary documentation (such schedule and other documentation being referred to for this purpose as the "Payment Schedule") that indicates the Plan benefit amounts currently payable in respect of each Plan participant (and his or her surviving spouse), the form in which such amount is to be paid (as provided for or available under the Plans), the time of commencement for payment of such amounts, whether the Plan participant is receiving such payment as a result of an entitlement event (as defined in Section 5(c) of the Plans), the present value of the future benefits payable to Plan participants and their surviving spouses under the terms of this Trust Agreement computed as under Section 1.8 (1), (2), (3), and (4) hereof, and the Required Contribution computed pursuant to Section 1.8 hereof.

        Plan participants or their surviving spouses shall be included on the Payment Schedule and shall be eligible for benefits under this Trust Agreement pursuant to Section 1.7 hereof only to the extent contributions to the Trust were required under Section 1.5 hereof, or for which a contribution was made by Constellation Energy to the Trust pursuant to Section 1.6 hereof. A modified Payment Schedule shall be delivered by Constellation Energy to Trustee upon the occurrence of any event, such as early retirement of a Plan participant or an entitlement event, as defined in Section 5(c) of the Plans, requiring a modification of the Payment Schedule or a modified Payment Schedule.

        Constellation Energy shall cause the Payment Schedule which Constellation Energy shall provide to Trustee to be prepared by the actuary for the Pension Plan of Constellation Energy Group, Inc.

        Except as otherwise provided in Sections 2.5 through 2.11 hereof, Trustee shall make payments to Plan participants and their surviving spouses in accordance with such Payment Schedule, and shall act only upon such written direction and shall have no duty to determine the rights of any person under this Trust Agreement or under the Plans or to inquire into the right or power of Constellation Energy to direct or not direct any such payment and shall be authorized to rely on the Payment Schedule most recently provided to Trustee by Constellation Energy.

        2.2    In the event Constellation Energy fails to deliver the Payment Schedule to Trustee by the date specified in Section 2.1 hereof, Trustee shall notify Constellation Energy of such failure by the 15th day of the month following the month in which the Payment Schedule was required to be delivered to Trustee. Such notification shall stipulate that Constellation Energy may correct the failure by the last day of the month following the month in which the Payment Schedule was required to be delivered to Trustee (the "Payment Schedule correction date"). Trustee shall notify the Plan participants or their surviving spouses shown on the most recent Payment Schedule provided by Constellation Energy to Trustee in the event Constellation Energy fails to deliver the Payment Schedule to Trustee by the Payment Schedule correction date. Trustee shall make such notification no later than 15 days following the Payment Schedule correction date. If Constellation Energy fails to deliver the Payment Schedule to Trustee by the date specified in Section 2.1 hereof, Trustee shall make payments to Plan participants and their surviving spouses, except as otherwise provided in Sections 2.5 through 2.11 hereof, in accordance with the Payment Schedule most recently provided to Trustee by Constellation Energy (or prior to May 31, 2000, by BGE). Within a reasonable period of time after Constellation Energy delivers the updated Payment Schedule to Trustee, Trustee shall pay all amounts due to the Plan participants and their surviving spouses for the period during which Trustee relied on the previous Payment Schedule to the extent such amounts have not been paid by Trustee under the previous Payment Schedule or by Constellation Energy pursuant to Sections 2.5 through 2.11 hereof. Such amounts paid by Trustee shall include interest computed at an 8% per annum rate from the date the payments were due under the Plans to the first day of the month in which such amount was paid.

        2.3    Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits from the Trust and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Constellation Energy, provided, however, that Constellation

4

Energy shall be required to provide Trustee with all information reasonably necessary for Trustee to perform such withholding.

        2.4    The entitlement of Plan participants and their surviving spouses to benefits under the Plans shall be determined by Constellation Energy or such party as it shall designate under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans. Except as provided in Section 2.7 hereof, Trustee shall have no responsibility to determine such entitlements or to verify the accuracy of their determination or to review or supervise the review of claims for benefits.

        2.5    Constellation Energy may make payment of benefits directly to Plan participants and their surviving spouses as they become due in accordance with the most recent Payment Schedule provided by Constellation Energy to Trustee. Constellation Energy shall notify Trustee of its decision to make payment of benefits prior to the time amounts are payable to Plan participants and their surviving spouses by indicating such intent on the Payment Schedule provided by Constellation Energy to Trustee pursuant to Section 2.1 or by separate written notification. Constellation Energy shall provide Trustee with documentation substantiating that such payments were made no later than the last day of the month in which such payments were due in accordance with the most recent Payment Schedule provided by Constellation Energy to Trustee. If such documentation is not provided, Trustee is authorized to make such payments directly to Plan participants and their surviving spouses. In addition, if the Trust assets are insufficient to make payments of benefits in accordance with the most recent Payment Schedule provided by Constellation Energy to Trustee, or are not available to make such payments because all or part of the Trust assets are invested in collateral assignments of certain split dollar life insurance policies, Constellation Energy shall pay the balance of each such payment to the Plan participant or their surviving spouse as it falls due. Trustee shall notify Constellation Energy of such insufficiency or unavailability as specified in Sections 2.6 and 2.8 hereof.

        2.6    Where Trustee is required to make payments from the Trust according to the most recent Payment Schedule and Constellation Energy does not make payments in lieu of such payments as provided under Section 2.5 hereof, and Trustee is unable to make the required payments because all or part of the Trust assets are invested in the collateral assignment portion of certain split dollar life insurance policies, Trustee is authorized to defer the required payments until cash is available to make the required payments under the terms of this Trust Agreement.

        2.7    A determination of insufficiency of Trust assets shall be made with respect to the end of each Plan year after receipt by the Trustee of the Payment Schedule prepared with respect to such Plan year or the most recent Payment Schedule in the event Constellation Energy fails to deliver the Payment Schedule to Trustee by the date specified in Section 2.1 hereof. The Trust assets will be deemed to be insufficient to make payments of benefits in accordance with the terms of such Payment Schedule if the market value of the Trust assets at the end of the Plan year for which the determination is being made plus the Required Contribution actually made with respect to such Plan year is less than the present value of the future benefits as shown on the most recent Payment Schedule. In determining the market value of collateral assignments of interests in split dollar life insurance policies held by the Trust, Trustee may rely on the valuation provided by the insurance carrier who issued such policies, or the broker administering such policies.

        In the event of such insufficiency and to the extent Constellation Energy does not make payments directly to Plan participants or their surviving spouses as provided under Section 2.5 hereof, any payment made from the Trust will be reduced by multiplying such payment by a fraction, the numerator of which shall be the value of all cash and other property held by the Trust and the denominator of which shall be the aggregate present value of all benefits under the Plans as shown on the most recent Payment Schedule.

5

        2.8    If the Trust assets are insufficient to make payments of benefits in accordance with the most recent Payment Schedule, Trustee shall notify Constellation Energy of such insufficiency by May 15 of the year following the Plan year with respect to which the insufficiency has been determined. Such notification shall stipulate that Constellation Energy may correct the insufficiency by May 31 of the year following the Plan year with respect to which the insufficiency has been determined (the "insufficiency correction date"). Trustee shall notify the participants or their surviving spouses shown on the most recent Payment Schedule provided by Constellation Energy to Trustee in the event Constellation Energy fails to correct the insufficiency by the insufficiency correction date. Trustee shall make such notification no later than 15 days following the insufficiency correction date and shall proceed to reduce any payment made from the Trust in the manner specified in Section 2.7 hereof as soon as practicable.

        2.9    If Trustee reduces or discontinues the payment of benefits from the Trust pursuant to Section 2.6 and 2.7 hereof and the Trust assets subsequently become sufficient to pay all or part of the previously reduced or discontinued benefits, the first payment following thereafter shall include the aggregate of all payments due to Plan participants and their surviving spouses under the terms of this Trust Agreement for the period of such reduction or discontinuance to the extent Trust assets are available, less the aggregate amount of any payments made to Plan participants and their surviving spouses by Constellation Energy in lieu of the payments provided for hereunder during any such period of reduction or discontinuance. In such event where Trust assets are sufficient to pay only a part of the previously reduced or discontinued benefits, amounts relating to the earliest payments reduced or discontinued shall be paid before all other amounts due under this Trust Agreement. Such payments shall also include interest computed at an 8% per annum rate on the net aggregate amount of all payment reductions from the date the payments were due under the Plans to the first day of the month in which such net aggregate amount was paid.

        2.10    In the event there is a final judicial determination or a final determination by the Internal Revenue Service that the Plan participants and their surviving spouses are subject to any tax with respect to any amounts held under the terms of the Trust, then Trustee shall make payments from the Trust to such Plan participants and their surviving spouses in such amounts as set forth in such final determination for the purpose of paying federal taxes and interest and any penalties thereon which such Plan participants and their surviving spouses incur arising out of such determination. Trustee's decision as to whether a final determination has occurred shall be binding and conclusive on all Plan participants and their surviving spouses.

        2.11    Any payment from the Trust, as provided in Section 2.10 hereof, excluding interest and penalties paid with respect to federal taxes, shall reduce the benefits payable under the Plans of those participants and their surviving spouses on whose behalf such payments are made. It shall be the responsibility of Constellation Energy to determine or cause to be determined by the actuary for the Pension Plan of Constellation Energy Group, Inc. the amount of such reduction and to provide Trustee with an updated Payment Schedule to reflect any such reduction made hereunder. Trustee shall have no duty to verify any calculations provided by Constellation Energy under this Section 2.11.

Section 3.    Trustee Responsibility Regarding Payments to Trust Beneficiary When Constellation Energy Is Insolvent.

        3.1    Trustee shall cease payment of benefits to Plan participants and their surviving spouses if Constellation Energy is Insolvent. Constellation Energy shall be considered Insolvent for purposes of this Trust Agreement if (i) Constellation Energy makes a voluntary filing under the United States Bankruptcy Code, or (ii) Constellation Energy is subject to a pending involuntary proceeding as a debtor under the United States Bankruptcy Code.

        3.2    At all times during the continuance of this Trust, as provided in Section 1.4 hereof, the Trust assets shall be subject to claims of general creditors of Constellation Energy under federal and state law as set forth below.

6

        3.2(a)    The Board of Directors of Constellation Energy and the Chief Executive Officer of Constellation Energy shall have the duty to inform Trustee in writing of Constellation Energy's Insolvency. If a person claiming to be a creditor of Constellation Energy alleges in writing to Trustee that Constellation Energy has become Insolvent, Trustee shall determine whether Constellation Energy is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants and their surviving spouses.

        3.2(b)    Until receipt of a notice of Insolvency as set forth above, Trustee shall be under no obligation and shall have no responsibility to suspend payments hereunder and hold the Trust assets for the benefit of Constellation Energy's general creditors. Trustee shall not be deemed to have notice or knowledge of facts or events in public records or received by departments or divisions of Trustee bank other than the Investor Services division of Trustee bank. Trustee shall not have any liability to any party for making any payments or withholding any payments pursuant to court order or request from trustee in bankruptcy or receivership pursuant to notice of Insolvency as provided above.

        3.2(c)    Unless Trustee has actual knowledge of Constellation Energy's Insolvency, or has received notice from Constellation Energy or a person claiming to be a creditor alleging that Constellation Energy is Insolvent, Trustee shall have no duty to inquire whether Constellation Energy is Insolvent. Trustee may in all events rely on such evidence concerning Constellation Energy's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Constellation Energy's solvency.

        3.2(d)    If at any time Trustee has determined that Constellation Energy is Insolvent, Trustee shall discontinue payments to Plan participants and their surviving spouses and shall hold the Trust assets for the benefit of Constellation Energy's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants and their surviving spouses to pursue their rights as general creditors of Constellation Energy with respect to benefits due under the Plans or otherwise.

        3.2(e)    Trustee shall resume the payment of benefits to Plan participants and their surviving spouses in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Constellation Energy is not Insolvent (or is no longer Insolvent). Where Constellation Energy is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, Trustee shall resume payment when such proceeding is dismissed. In all other cases, Trustee shall have no obligation to so resume payment until it shall have received an unqualified opinion of a certified public accountant that Constellation Energy is no longer Insolvent and an opinion of counsel that there is no legal prohibition to resuming payment hereunder.

        3.3    If Trustee discontinues the payment of benefits from the Trust pursuant to Section 3.2 hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants and their surviving spouses under the terms of this Trust Agreement for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants and their surviving spouses by Constellation Energy or BGE in lieu of the payments provided for hereunder during any such period of discontinuance plus interest computed as under Section 2.9 hereof on the net aggregate amount of all payments from the date the payments were due under the Plans to the first day of the month in which such net aggregate amount was paid. Constellation Energy shall cause to be determined and calculated by the actuary of the Pension Plan of Constellation Energy Group, Inc. such net aggregate amount, which determination shall be conclusive for Constellation Energy, Trustee, and all Plan participants and their surviving spouses.

Section 4.    Payments to Constellation Energy.

        4.1    Except as provided in Sections 3.2 and 4.2 hereof, Constellation Energy shall have no right or power to direct Trustee to return to Constellation Energy or to divert to others any of the Trust assets

7

before all payments of benefits have been made to Plan participants and their surviving spouses in accordance with the most recent Payment Schedule provided by Constellation Energy to Trustee and the terms of this Trust Agreement.

        4.2    In the event the market value of Trust assets as of the end of a Plan year exceeds 120 percent of the present value of future benefits as shown on the Payment Schedule for such Plan year, plus the amount of any payments as computed under Section 1.9(5) hereof as of the end of such Plan year, then Constellation Energy may, in its sole discretion, direct Trustee in writing to distribute such excess Trust assets, in whole or in part, to Constellation Energy provided such distribution does not contravene any provision of law. Trustee shall have no responsibility to determine the propriety of any such direction.

        4.3    Notwithstanding Section 4.2 hereof, Constellation Energy may not direct Trustee to distribute such excess Trust assets for 2 years from the date a Change of Control is deemed to occur under Section 13.5 hereof.

Section 5.    Investment Authority.

        5.1    In no event may Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by Constellation Energy or BGE, other than a de minimis amount held in common investment vehicles in which Trustee invests. All rights associated with the Trust assets shall be exercised by Trustee, and shall in no event be exercisable by or rest with Plan participants and their surviving spouses; provided that Constellation Energy may at any time, upon delivery of written notice to Trustee, terminate Trustee's authority over the Trust assets.

        5.2    Constellation Energy shall submit to Trustee investment guidelines which shall be acknowledged by Trustee in writing. The Trust assets shall be held, invested and reinvested by Trustee upon written direction of Constellation Energy and only in accordance with the investment guidelines most recently acknowledged by Trustee. Constellation Energy shall direct Trustee to invest or reinvest from time to time the Trust assets (taking into account, among other things, anticipated cash requirements for benefits under the Plans); provided, however, that pending receipt of investment directions or guidelines from Constellation Energy or pending the acknowledgement by Trustee of such investment guidelines, the Trust assets may be held in interest bearing cash accounts maintained by Trustee; and provided, however, that Trustee shall not be liable for any failure to maximize the income earned on the Trust assets, or for any loss suffered by the Trust, as a result of its investment or reinvestment of the Trust assets in accordance with 1) directions received by Trustee from Constellation Energy, or 2) the investment guidelines as acknowledged by Trustee.

        5.3    Constellation Energy may, in its sole discretion, appoint an investment manager or managers to manage (including the power to acquire and dispose of) any Trust assets. Trustee may rely on direction of such investment manager upon receipt of written direction from Constellation Energy and shall be entitled to rely on such direction until revoked in writing by Constellation Energy. Trustee shall not be liable for the acts or omissions of such investment manager or managers, unless Trustee participates knowingly in, or knowingly undertakes to conceal, an act or omission of such investment manager, knowing that such act or omission is a breach of its or the investment manager's fiduciary duty. Trustee is under no obligation to review, inquire into or examine the acts or omissions of any such investment manager. Trustee shall have the duty to inform Constellation Energy in the event Trustee becomes aware of any such acts or omissions. Trustee shall not be under an obligation to invest or otherwise manage Trust assets which are subject to the management of the investment manager.

        5.4    Constellation Energy reserves the right to transfer to the Trust in satisfaction of the contribution requirements as set forth in Section 1.5 hereof, life insurance, annuity policies or contracts on or for the life of any Plan participant, or to direct Trustee to purchase any such policies or contracts on or for the life of any such Plan participant out of the Trust assets. Any such policy or contract shall be a Trust asset subject to the claims of Constellation Energy's creditors in the event of Insolvency, as

8

defined in Section 3.1 hereof. The proceeds, dividends, or distributions of cash value paid with respect to any life insurance policy or contract held in the Trust shall be paid to the Trust. Trustee shall be under no duty to question any direction of Constellation Energy or to review the form of any policies or contracts or the selection of the issuer thereof, or to make suggestions to Constellation Energy with respect to the form of such policies or contracts or to the issuer thereof.

Section 6.    Disposition of Income.

        During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested, until otherwise required for disbursement under the terms of this Trust Agreement.

Section 7.    Accounting by Trustee.

        7.1    Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Constellation Energy and Trustee. Within 15 days following the close of each calendar month and within 90 days after the removal or resignation of Trustee, Trustee shall deliver to Constellation Energy a written account of its administration of the Trust pursuant to terms of this Trust Agreement during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, and the cost and market value of all securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be.

        In the event the insurance carrier who issued the insurance policies which are held by or collaterally assigned to the Trust or the broker who administers such policies does not timely provide Trustee with the market value of such insurance policies or collateral assignments, Trustee shall provide to Constellation Energy written accounts under this Section 7.1 containing all valuations except such insurance valuations. As soon as practicable following the receipt of the market valuations from the carrier or the broker, Trustee shall provide Constellation Energy with written accounts containing such insurance valuations.

        7.2    Unless Constellation Energy shall have filed with Trustee written exceptions to any such statement or account delivered by Trustee pursuant to Section 7.1 hereof within 90 days after receipt of such statement or account, Constellation Energy shall be deemed to have approved such statement or account, and in such case or upon the written approval by Constellation Energy of any such statement or account, Trustee shall be forever released and discharged with respect to all matters and things embraced in such statement or account as though it had been settled by a decree of a court of competent jurisdiction in an action or proceeding to which Constellation Energy or persons having any beneficial interest in the Trust were parties.

        7.3    Constellation Energy shall prepare and file such tax returns and other reports as may be required for the Trust, with any taxing authority or any other government authority and shall provide Trustee with copies of such returns and reports as soon as practicable following the date of filing. Trustee shall provide to Constellation Energy such information, to the extent not already provided through written accounts delivered to Constellation Energy pursuant to Section 7.1, as is necessary for Constellation Energy to prepare and file such tax returns and other reports.

        7.4    Nothing contained in this Trust Agreement or in the Plans shall deprive Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlement of the accounts of Trustee or for instruction in connection with the Trust assets, the only necessary party thereto in

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addition to Trustee shall be Constellation Energy. If Trustee so elects, it may bring in as a party any other person or persons. No person interested in the Trust assets, other than Constellation Energy, shall have a right to compel an accounting, judicial or otherwise, by Trustee and each such person shall be bound by all accountings as herein provided, as if the account had been settled by decree of a court of competent jurisdiction in an action or proceeding to which such person was a party.

Section 8.    Responsibility of Trustee.

        8.1    Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Constellation Energy (or investment manager designated pursuant to terms hereof) which is contemplated by, and in conformity with, the terms of this Trust Agreement and is given in writing by Constellation Energy.

        8.2    Trustee need not engage in any litigation, arbitration or administrative proceeding related to this Trust Agreement unless first indemnified to its reasonable satisfaction by Constellation Energy unless such litigation, arbitration or administrative proceeding is prompted by an allegation that Trustee has breached its duties undertaken pursuant to this Trust Agreement. If Trustee proceeds to engage in any such litigation, arbitration or administrative proceeding and is not so indemnified, all reasonable costs of Trustee including reasonable attorney's fees incurred pursuant to such action shall be charged against and paid from the Trust assets, except when the claim relates to an allegation that Trustee has breached its duties in which case Trustee shall be responsible for such costs.

        Trustee may consult with any legal counsel, including, without limitation, counsel to Constellation Energy or Trustee's own independent counsel, to assist Trustee in the management and administration of the Trust or with respect to (a) the meaning or construction of the terms of this Trust Agreement, (b) its obligations or duties hereunder, (c) any act which Trustee should take or omit hereunder, (d) any action or proceeding, or (e) any question of law. In any action taken or omitted by Trustee in good faith pursuant to the advice of such counsel, Constellation Energy shall indemnify and hold Trustee harmless against reasonable litigation expenses and attorney's fees occasioned by such action; except when Trustee acted or omitted to act upon the advice of counsel other than counsel to Constellation Energy.

        8.3    Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. Trustee, as assignee under split dollar life insurance policies, may exercise the right to obtain policy loans in accordance with the terms of the collateral assignment document.

        8.4    In executing its duties, obligations and responsibilities as herein provided, and in addition to those powers given by law, Trustee shall have the power, in its sole discretion:

        (a)   to collect and receive any and all money and other property due to the Trust and to give full discharge therefor;

        (b)   to settle, compromise or submit to arbitration any claims, debts or damages due to or owing to or from the Trust; to commence or defend suits or legal proceedings to protect any interest of the Trust; and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal;

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        (c)   if specifically instructed by Constellation Energy, to provide benefits through the purchase of individual or group annuity or life insurance contracts issued by insurance companies licensed to do business in the State of New York;

        (d)   if specifically instructed by Constellation Energy, to act as agent for Constellation Energy to perform multiple services for the Plans, its participants and beneficiaries and to receive and withdraw from the Trust assets reasonable compensation therefor;

        (e)   to engage accountants or other advisors as Trustee may deem necessary to control and manage the Trust assets and to carry out the purposes of this Trust Agreement;

        (f)    subject to Section 5 hereof, to invest and reinvest the Trust assets without distinction between principal and income in any form of property not prohibited by law including, without limitation on the amount which may be invested therein, any common or group trust fund operated by Trustee or in demand deposits of Trustee;

        (g)   to hold cash uninvested in an amount considered necessary and practical for proper administration of the Trust and/or to deposit the same with any banking, savings or similar financial institution supervised by the United States or any State, including Trustee's own banking department; and

        (h)   to perform all such acts and exercise all such rights and privileges consistent with applicable law and the terms of this Trust Agreement, although not specifically mentioned herein, as Trustee may deem desirable or necessary to control and manage the Trust assets and to carry out the purposes of this Trust Agreement.

        Except as provided under Section 13.2, if all or any part of the Trust assets are at any time attached, garnished, or levied upon by any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by a court affecting such property or any part thereof, then and in any of such events Trustee is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree, and it shall not be liable to Constellation Energy (or any of its subsidiaries) or any participant by reason of such compliance even though such order, writ, judgment or decree subsequently may be reversed, modified, annulled, set aside or vacated.

        8.5    Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.

Section 9.    Compensation and Expenses of Trustee.

        9.1    Constellation Energy shall pay all administrative and Trustee's fees and expenses (including, without limitation, reasonable fees of agents and counsel). If not so paid, the fees and expenses shall be paid from the Trust; provided, however, that Constellation Energy may approve in writing the automatic payment of fees, compensation and expenses from the Trust. Trustee shall have a lien on the Trust in the amount of such fees, expenses and compensation until the same have been paid.

        9.2    Constellation Energy shall pay any federal, state, local or other taxes imposed or levied with respect to the Trust assets under the existing or future laws.

Section 10.    Resignation and Removal of Trustee.

        10.1    Trustee may resign at any time by written notice to Constellation Energy, which shall be effective 30 days after receipt of such notice unless Constellation Energy and Trustee agree otherwise in writing.

        10.2    Accept as provided in Section 10.3, Trustee may be removed by Constellation Energy on 30 days written notice or upon shorter notice accepted by Trustee.

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        10.3    Upon a Change of Control, as defined in Section 13.5 hereof, Trustee may not be removed by Constellation Energy for 2 years from the date a Change of Control is deemed to occur under Section 13.5 hereof.

        10.4    If Trustee resigns within 2 years of a Change of Control, Trustee shall select a successor Trustee in accordance with the provisions of Section 11.2 hereof prior to the effective date of Trustee's resignation.

        10.5    Upon resignation or removal of Trustee and appointment of a successor Trustee, all Trust assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed at the later of (i) 90 days after receipt of notice of resignation or removal of Trustee, or (ii) appointment of successor Trustee, unless Constellation Energy extends the time limit in writing.

        10.6    If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under Sections 10.1 or 10.2 hereof. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.

Section 11.    Appointment of Successor.

        11.1    If Trustee resigns or is removed in accordance with Sections 10.1 or 10.2 hereof, Constellation Energy may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the successor Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Constellation Energy or the successor Trustee (in which case Trustee shall have received a copy of successor Trustee's acceptance) to evidence the transfer of the Trust assets.

        11.2    If Trustee resigns pursuant to the provisions of Section 10.4 hereof, Trustee may appoint any third party such as a bank trust department or other party that may be granted corporate trustee powers under state law. The appointment of a successor Trustee shall be effective when accepted in writing by the successor Trustee. The successor Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer of the Trust assets.

        11.3    The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and Constellation Energy shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee.

        11.4    In the event of such removal or resignation, Trustee shall duly file with Constellation Energy a written account as provided in Section 7.1 hereof.

Section 12.    Amendment or Termination.

        12.1    Except as provided in Section 12.4, this Trust Agreement may be amended by a written instrument executed by Trustee and Constellation Energy. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable.

        12.2    The Trust shall not terminate until the earlier of the date on which Plan participants and their surviving spouses are no longer entitled to benefits pursuant to the terms of the Plan or have

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received payment of all benefits to which they are entitled under this Trust Agreement. Upon termination of the Trust any assets remaining in the Trust shall be returned to Constellation Energy.

        12.3    Upon written approval of all Plan participants and surviving spouses entitled to payment of benefits pursuant to the terms of the Plans and this Trust Agreement, Constellation Energy may terminate this Trust prior to the time all benefit payments under the Plans and this Trust Agreement have been made. All Trust assets at termination shall be returned to Constellation Energy.

        12.4    This Trust Agreement may not be amended by Constellation Energy for 2 years following a Change of Control, unless such amendment is by written agreement between Constellation Energy and Trustee and such amendment does not adversely affect the rights of the Plan participants and their surviving spouses entitled to payment of benefits pursuant to terms of the Plans on the date a Change of Control is deemed to occur.

Section 13.    Miscellaneous.

        13.1    Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

        13.2    Benefits payable to Plan participants and their surviving spouses under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levies, execution or other legal or equitable process, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void. The Trust shall be in no manner liable for or subject to the debts or liabilities of any participant.

        13.3    This Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York and Trustee shall be liable to account only in the courts of that state.

        13.4    All words beginning with an initial capital letter and not otherwise defined herein shall have the meaning set forth in the Plans. All singular terms defined in this Trust will include the plural and vice versa.

        13.5    For purposes of this Trust Agreement, Change of Control shall mean the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board of Directors of Constellation Energy (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of Constellation Energy (the "Board"), provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy (the "Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)   any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph  (ii) shall not be deemed to be a Change in Control by virtue of any of

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the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company,(C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)  Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        13.6    Constellation Energy shall certify to Trustee the name or names of any person or persons authorized to act for Constellation Energy under this Trust Agreement. Such certification shall be signed by a Vice President of Constellation Energy. Until Constellation Energy notifies Trustee, in a similarly signed notice or certification, that any such person is no longer authorized to act for Constellation Energy, Trustee may continue to rely upon the authority of such person.

        Trustee may rely upon any certificate, schedule, notice or direction of Constellation Energy which Trustee in good faith believes to be genuine, executed and delivered by a duly authorized officer or agent of Constellation Energy. Trustee shall have no duty to verify any calculations provided by Constellation Energy in connection with such certificate, schedule, notice or direction.

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        Communications to Trustee shall be sent in writing to Trustee at the address specified in Section 13.9 hereof or to such other address as the Trustee may specify in writing. No communication shall be binding upon the Trust or Trustee until it is received by Trustee and unless it is in writing and signed by an authorized person.

        Communications to Constellation Energy shall be sent in writing to Constellation Energy's principal offices at the address specified in Section 13.9 hereof or to such other address as Constellation Energy may specify in writing. No communication shall be binding upon Constellation Energy until it is received by Constellation Energy and unless it is in writing and signed by Trustee.

        13.7    Constellation Energy shall pay and shall protect, indemnify and save harmless Trustee and its officers, employees and agents from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, damages, costs and expenses of any nature arising from or relating to any action by or any failure to act by Trustee (and its officers, employees and agents) in accordance with the terms of this Trust Agreement, or the transactions contemplated by this Trust Agreement (including any action by Trustee on the direction or instruction of Constellation Energy or any failure to act on the part of Trustee in the absence of directions or instructions by Constellation Energy), except to the extent that any such loss, liability, action, suit, judgment, demand, damage or expense has been determined by final judgement of a court of competent jurisdiction to be the result of the negligence or willful misconduct of Trustee, its officers, employees or agents. To the extent that Constellation Energy has not fulfilled its obligations under the foregoing provisions of this Section 13.7, Trustee shall be reimbursed out of the Trust assets or may set up reasonable reserves for the payment of such obligations. To the maximum extent permitted by applicable law, no personal liability whatsoever shall attach to or be incurred by any employee, officer or director of Constellation Energy, as such, under or by reason of the terms or conditions contained in or implied from this Trust Agreement.

        Trustee assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of Constellation Energy and shall have those responsibilities only as expressly set forth herein.

        13.8    This Trust Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all prior agreements, arrangements and understandings relating thereto.

        13.9    Any notice, report, demand, waiver or communication required or permitted hereunder shall be in writing and shall be given personally or by prepaid registered or certified mail, return receipt requested, addressed as follows:

If to Constellation Energy Group, Inc.:

Constellation Energy Group, Inc.
750 East Pratt Street, 5^th Floor
Baltimore, MD 21202
Attention: Director—Compensation

If to Trustee:

Citibank, N. A.
Client Services Division
111 Wall Street, 24th Floor
New York, NY 10005
Attention: Ed Flannery

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If to a participant or to a
participant's surviving spouse:

To the address shown on the most recent Payment Schedule provided by Constellation Energy to Trustee.

Section 14.    Effective Date.

        The date of this Trust Agreement shall be July 31, 1994.

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        IN WITNESS WHEREOF, and intending to be legally bound hereby, Constellation Energy Group, Inc. and Trustee sign and seal this Trust Agreement the day and year first above written.

WITNESS:		CITIBANK, N.A.:
	By:	/s/	(Seal)
		Name:
		Title:
WITNESS:		CONSTELLATION ENERGY GROUP, INC.:
/s/	By:	/s/	(Seal)
		Name: Marc L. Ugol
		Title: Vice President Human Resources

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GRANTOR TRUST AGREEMENT CONTENTS
GRANTOR TRUST AGREEMENT Dated as of April 25, 2003 between Constellation Energy Group, Inc. and Citibank, N.A.

EX-10.(E)

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Exhibit 10(e)

GRANTOR TRUST AGREEMENT
DATED AS OF APRIL 25, 2003
BETWEEN
CONSTELLATION ENERGY GROUP, INC.
AND
T. ROWE PRICE TRUST COMPANY

        This Agreement made the 25^th day of April, 2003, by and between Constellation Energy Group, Inc., a Maryland Corporation, or its successor ("CEG") and T. Rowe Price Trust Company ("Trustee");

WITNESSETH THAT:

        WHEREAS, effective with the April 30, 1999 share exchange between CEG and the common stockholders of Baltimore Gas and Electric Company ("BGE"), BGE transferred to CEG the former BGE Nonqualified Deferred Compensation Plan and BGE's rights and obligations under the Grantor Trust Agreement dated as of June 1, 1996, between BGE and T. Rowe Price Trust Company.

        WHEREAS, this Agreement has been amended effective April 25, 2003, to conform the definition of Change in Control under this Agreement to the definition under CEG's management benefit plans.

        WHEREAS, CEG has adopted the Constellation Energy Group, Inc. Nonqualified Deferred Compensation Plan (formerly the Baltimore Gas and Electric Company Nonqualified Deferred Compensation Plan) ("Plan");

        WHEREAS, CEG has incurred or expects to incur liability under the terms of such Plan with respect to the individuals participating in such Plan;

        WHEREAS, CEG wishes to establish a trust ("Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of CEG's creditors in the event of CEG's Insolvency, as defined in Section 3(a) hereof, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan;

        WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974;

        WHEREAS, it is the intention of CEG to make contributions to the Trust to provide a source of funds to assist it in the meeting of its liabilities under the Plan; and

        NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:

        Section 1.    Establishment of Trust.

        (a)   CEG hereby adopts and establishes with Trustee the Trust consisting of such sums of cash (the "principal") that currently constitute the Trust and as from time to time shall be paid to Trustee to be held, administered, and disposed of by Trustee as provided in this Trust Agreement. The principal of the Trust and any earnings thereon (the "Trust Assets") shall be held by Trustee and shall be dealt with in accordance with the provisions of this Trust Agreement until all payments required by this Trust Agreement have been made.

        (b)   The Trust hereby established shall be irrevocable.

        (c)   The Trust is intended to be a grantor trust, of which CEG is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.

        (d)   The Trust Assets shall be held separate and apart from other funds of CEG and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any Trust Assets. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against CEG. Any Trust Assets will be subject to the claims of CEG's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.

        (e)   As soon as practicable, but no later than the last business day, which for purposes of this Trust Agreement shall be defined as any day the New York Stock Exchange is open for business ("Business Day"), of the month following the month in which a payment of compensation subject to a deferral election under the Plan would otherwise have been paid, CEG shall be required to irrevocably contribute cash to the Trust in an amount equal to such Deferred Compensation, plus any Matching Contributions related thereto, to the extent the Plan requires such funding. Trustee shall have no obligation to compute or compel such contribution(s).

        (f)    The Board of Directors of CEG may at any time by resolution amend the contribution requirements of Section 1(e) hereof such that CEG will not be required to make additional contributions of cash to the Trust or will be required to make only a stated percentage of the contributions otherwise required under Section 1(e) hereof. If Section 1(e) is so amended, contributions of cash to the Trust over and above the amounts required under Section 1(e) if amended, will be in the sole discretion of CEG pursuant to Section 1(g) hereof. Trustee shall have no obligation to compute or compel such contribution(s).

        (g)   CEG, in its sole discretion, may at any time or from time to time, make additional deposits of cash in trust with Trustee to augment the Trust Assets to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary shall have any right or obligation to compel such additional deposits.

        Section 2.    Payments to Plan Participants and Their Beneficiaries.

        (a)   CEG shall deliver or cause to be delivered to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (or his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. If so instructed by CEG, the Trustee shall withhold federal and state taxes from each payment under this agreement at the rate(s) designated by CEG and shall report and pay such amounts to the appropriate federal and state taxing authorities.

        (b)   The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by CEG or such party as it shall designate under the Plan and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. Trustee shall have no right or duty to inquire into CEG's decisions with respect to entitlement to benefits.

        (c)   CEG may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. CEG shall notify Trustee in writing of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. CEG shall provide to the Trustee documentation substantiating that such payments were made under the terms of the Plan. If such documentation is not provided, Trustee shall make such payments in accordance with the Payment Schedule directly to Plan participants and their beneficiaries. In addition, if the Trust Assets are not sufficient to make such payments of benefits in accordance with the terms of the Plan, CEG shall make the balance of each such payment as it falls due. Trustee shall notify CEG

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where Trust Assets are not sufficient to make benefit payments, however, Trustee shall have no duty to require any contributions to be made, or to determine that any of the contributions received comply with the conditions and limitations of the Plan.

        (d)   In the event there is a final judicial determination or a final determination by the Internal Revenue Service that the Plan participants or their beneficiaries are subject to any tax with respect to any amounts held under the terms of the Trust, then Trustee solely at the direction of CEG shall make payments from the Trust to such Plan participants or their beneficiaries in such amounts as set forth in such final determination for the purpose of paying all applicable taxes and interest and any penalties thereon which such Plan participants or their beneficiaries incur arising out of such determination. CEG's decision as to whether a final determination has occurred shall be binding and conclusive on all Plan participants and their beneficiaries.

        Section 3.    Trustee Responsibility Regarding Payments to Trust Beneficiary When CEG is Insolvent.

        (a)   Upon receipt of notification issued in accordance with Section 3(b)(1) hereof, Trustee shall cease payment of benefits to Plan participants and their beneficiaries if CEG is Insolvent. CEG shall be considered "Insolvent" for purposes of this Trust Agreement if (1) CEG makes a voluntary filing under the United States Bankruptcy Code, or (2) CEG is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

        (b)   At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the Trust Assets shall be subject to claims of general creditors of CEG under federal and state law as set forth below.

        (1)   The Board of Directors of CEG and the Chief Executive Officer of CEG shall have the duty to inform Trustee in writing of CEG's Insolvency. When so informed or when the Trustee is in receipt of a copy of a bankruptcy petition relating to CEG or a court order determining CEG to be Insolvent, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries.

        (2)   Unless Trustee has received written notification in accordance with Section 3(b)(1) of this Trust Agreement, Trustee may in all events rely on such evidence concerning CEG's solvency as may be furnished by CEG to Trustee.

        (3)   If at any time Trustee has received written notification in accordance with Section 3(b)(1), Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the Trust Assets for the benefit of CEG's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of CEG with respect to benefits due under the Plan or otherwise.

        (4)   Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has received a copy of a court order determining CEG to be no longer Insolvent or evidencing that such bankruptcy proceeding is dismissed in connection with any notification made in accordance with Section 3(b)(1).

        (c)   Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by CEG in lieu of the payments provided for hereunder during any period of discontinuance.

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        Section 4.    Payments to CEG.

        (a)   Except as provided in Section 3 and Section 4(b) hereof, CEG shall have no right or power to direct Trustee to return to CEG or to divert to others any of the Trust Assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan and of this Trust Agreement.

        (b)   In the event (1) CEG makes payment of benefits directly to Plan participants or their beneficiaries in accordance with Section 2(c) hereof, or (2) if for any other reason Trust Assets exceed the market value of the aggregate balances of Plan participant accounts, then CEG may in its sole discretion, direct Trustee in writing to distribute the amount of such payment or excess, in whole or in part, to CEG provided such distribution does not contravene any provision of law.

        (c)   Notwithstanding Section 4(b)(2) hereof, CEG may not direct Trustee to distribute such excess Trust Assets for 2 years from the date a Change of Control is deemed to occur under Section 13(e) hereof except to reimburse CEG for any payment it makes directly to participants in accordance with Section 2(c) hereof.

        Section 5.    Investment Authority.

        (a)   In no event may Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by CEG, other than a de minimis amount held in common investment vehicles in which Trustee invests. All rights associated with assets of the Trust shall be exercised, solely upon the direction of CEG, by Trustee or the person designated by Trustee and shall in no event be exercisable by or rest with Plan participants and their beneficiaries.

        (b)   Trustee shall invest and reinvest the Trust Assets and keep the Trust invested, without distinction between principal and income, in such investments as directed in writing by CEG or its designee, which instruction may be modified from time to time by CEG or its designee. Trustee shall have no duty to question any action or direction of CEG or its designee or any failure to give directions, or to make any suggestion to CEG as to the investment, reinvestment, disposition or distribution of, such assets.

        (c)   CEG shall have the right, at anytime, and from time to time in its sole discretion, and with Trustee's approval, to substitute assets of equal fair market value for any asset held by the Trust.

        Section 6.    Disposition of Income.

        During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested, until otherwise required for disbursement under the terms of this Trust Agreement.

        Section 7.    Accounting by Trustee.

        (a)   Trustee shall keep accurate, and detailed records of all investments, receipts, disbursements and all other transactions required to be made, including such specific records as shall be agreed upon in writing between CEG and Trustee. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of Trustee, Trustee shall deliver to CEG a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivables being shown separately), and showing all cash, cost and market value of all securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be.

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        (b)   CEG shall prepare and file such tax returns and other reports as may be required for the Trust, with any taxing authority or any other government authority except for IRS Form 1041 which shall be prepared and filed by the Trustee.

        Section 8.    Responsibility of Trustee.

        (a)   Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability, costs or expense to any person, for any action taken pursuant to a direction, request or approval given by CEG which is contemplated by, and in conformity with, the terms of this Trust Agreement and is given in writing by CEG. Trustee shall also be reimbursed by CEG for reasonable expenses or fees incurred in connection with governmental or regulatory inquiries related to this Trust.

        (b)   If Trustee undertakes or defends any litigation arising in connection with this Trust, unless such litigation results in a determination that Trustee breached its duties undertaken pursuant to this Trust Agreement, CEG agrees to indemnify Trustee against Trustee's reasonable costs, expenses and liabilities (including, without limitation, reasonable attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If CEG does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust.

        (c)   Trustee may consult with legal counsel (who may also be counsel for CEG generally) with respect to any of its duties or obligations hereunder. In the event that Trustee anticipates charging legal fees to the Trust, Trustee must obtain CEG's prior written consent for such legal counsel, which consent will not be unreasonably withheld.

        (d)   Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. In the event that Trustee anticipates charging fees for such services to the Trust, Trustee must obtain CEG's prior written consent for such legal counsel, which consent will not be unreasonably withheld.

        (e)   Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.

        Section 9.    Compensation and Expenses of Trustee.

        CEG shall pay all reasonable administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust.

        Section 10.    Resignation and Removal of Trustee.

        (a)   Trustee may resign at any time by written notice to CEG, which shall be effective 30 days after receipt of such notice unless CEG and Trustee agree otherwise.

        (b)   Except as provided in Section 10(c), Trustee may be removed by CEG on 30 days written notice unless CEG and Trustee agree otherwise.

        (c)   Upon written notification by CEG that a Change of Control, as defined in Section 13(e) hereof has occurred, Trustee may not be removed by CEG for 2 years from the date a Change of Control is deemed to occur under Section 13(e) hereof.

        (d)   If Trustee resigns within 2 years after a Change of Control, as defined herein, CEG shall apply to a court of competent jurisdiction for the appointment of successor Trustee or for instructions.

        (e)   Upon resignation or removal of Trustee and appointment of a successor Trustee, all Trust Assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed at the

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later of (1) 30 days after receipt of notice of resignation or removal of Trustee or (2) appointment of successor Trustee.

        (f)    If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All reasonable expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.

        Section 11.    Appointment of Successor.

        (a)   If Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof, CEG may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the successor Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust Assets. The former Trustee shall execute any instrument necessary or reasonably requested by CEG or the successor Trustee (in which case former Trustee shall have received a copy of successor Trustee's acceptance) to evidence the transfer of the Trust Assets.

        (b)   If Trustee resigns pursuant to the provisions of Section 10(d) hereof, the appointment of a successor Trustee shall be effective when accepted in writing by the successor Trustee. The successor Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust Assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer of the Trust Assets.

        (c)   The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust Assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and CEG shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee.

        (d)   In the event of such removal or resignation, Trustee shall duly file with CEG a written account as provided in Section 7(a) hereof.

        Section 12.    Amendment or Termination.

        (a)   Except as provided in Section 12(d), this Trust Agreement may be amended by a written instrument executed by Trustee and CEG. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable.

        (b)   The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan or have received payment of all benefits to which they are entitled under the terms of this Trust Agreement. Upon termination of the Trust any assets remaining in the Trust shall be returned to CEG.

        (c)   Upon written approval of all Plan participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan and this Trust Agreement, CEG may terminate this Trust prior to the time all benefit payments under the Plan and this Trust Agreement have been made. All Trust Assets at termination shall be returned to CEG.

        (d)   This Trust Agreement may not be amended by CEG for 2 years following a Change of Control, unless CEG determines that such amendment does not adversely affect the rights of the Plan participants and their beneficiaries entitled to payment of benefits pursuant to terms of the Plan on the date a Change of Control is deemed to occur.

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        Section 13.    Miscellaneous.

        (a)   Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

        (b)   Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void. The Trust shall be in no manner liable for or subject to the debts or liabilities of any participant.

        (c)   This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Maryland and applicable federal law.

        (d)   All words beginning with an initial capital letter and not otherwise defined herein shall have the meaning set forth in the Plan. All singular terms defined in this Trust will include the plural and vice versa.

        (e)   For a Change of Control to be effective with respect to this Trust Agreement, CEG must issue written notification of Change of Control to Trustee. Trustee has no obligation to make any independent determination or verification that a Change of Control has occurred. For purposes of this Trust Agreement, Change of Control shall mean the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board of Directors of CEG (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of CEG (the "Board"), provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of CEG in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of CEG as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of CEG representing 20% or more of the combined voting power of CEG's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by CEG or any corporation with respect to which CEG owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by CEG or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)    CEG shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving CEG or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"),

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unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of CEG approve a plan of complete liquidation or dissolution of CEG, or the consummation of a sale of all or substantially all of CEG's assets.

Notwithstanding the foregoing, a Change in Control of CEG shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by CEG which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by CEG such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of CEG shall then occur.

        (f)    CEG shall certify to Trustee the name or names of any person or persons authorized to act for CEG under this Trust Agreement. Such certification shall be signed by a Vice President of CEG. Until CEG notifies Trustee, in a similarly signed notice or certification, that any such person is no longer authorized to act for CEG, Trustee may continue to rely upon the authority of such person.

        Trustee may rely upon any certificate, schedule, notice or direction of CEG which Trustee in good faith believes to be genuine, executed and delivered by a duly authorized officer or agent of CEG.

        Communications to Trustee shall be sent in writing to Trustee at the address specified in Section 13(h) hereof or to such other address as the Trustee may specify in writing. No communication shall be binding upon the Trust or Trustee until it is received by Trustee and unless it is in writing and signed by an authorized person.

        Communications to CEG shall be sent in writing to CEG's principal offices at the address specified in Section 13(h) hereof or to such other address as CEG may specify in writing. No communication shall be binding upon CEG until it is received by CEG and unless it is in writing and signed by Trustee.

        (g)   In the event of any conflict between the provisions of the Plan document and this Trust Agreement, the provisions of this Trust Agreement shall prevail. This Trust Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all prior agreements, arrangements and understandings relating thereto.

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        (h)   Any notice, report, demand, waiver or communication required or permitted hereunder shall be in writing and shall be given personally or by prepaid registered or certified mail, return receipt requested, addressed as follows:

If to CEG:

Constellation Energy Group, Inc.
750 East Pratt Street, 5^th Floor
Baltimore, MD 21202

Attention:
Director—Compensation

If to Trustee:

T. Rowe Price Trust Company
4555 Painters Mill Road
Owings Mills, MD 21117
Attention: CEG Client Manager

If to a participant or beneficiary:

To the address shown on the most recent Payment Schedule provided by CEG to Trustee.

        (i)    In the event of insufficiency of Trust assets and to the extent CEG does not make payments directly to Plan participants or their beneficiaries, as provided in Section 2(c) hereof, or if CEG as provided in Section 1(f) hereof fails to contribute cash to the Trust to restore such insufficiency, such insufficiency shall be allocated by the record keeper among all Plan Accounts subject to funding on a proportionate basis according to the market value of the Plan Account subject to funding. Trustee shall have no obligation to determine or calculate such insufficiency, the amount of timing of any additional funding or the allocation of any insufficiency among Plan Accounts.

        Section 14.    Effective Date.

        The effective date of this Trust Agreement shall be April 25, 2003.

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        IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed by their respective officers thereunto duly authorized as of the Effective Date indicated above.

WITNESS:		T. ROWE PRICE TRUST COMPANY
/s/	By:	/s/	(Seal)
		Name:
		Title:
WITNESS:		CONSTELLATION ENERGY GROUP, INC.
/s/	By:	/s/	(Seal)
		Name: Marc L. Ugol
		Title: Vice President, Human Resources

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GRANTOR TRUST AGREEMENT DATED AS OF APRIL 25, 2003 BETWEEN CONSTELLATION ENERGY GROUP, INC. AND T. ROWE PRICE TRUST COMPANY

EX-10.(F)

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Exhibit 10(f)

CONSTELLATION ENERGY GROUP, INC.

SUPPLEMENTAL PENSION PLAN

        1.    Objective.    The objective of this Plan is to enhance the benefits provided to certain officers and key employees of Constellation Energy Group and its subsidiaries in order to attract and retain talented executive personnel.

        2.    Definitions.    All words beginning with an initial capital letter and not otherwise defined herein shall have the meaning set forth in the Pension Plan. All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

        "Annual Base Salary" means an amount determined by adding the monthly base rate of pay amounts (i.e., the types of such pay that are includable in the computation of Pension Plan benefits) earned over the twelve calendar months immediately preceding the month that includes the date of the computation.

        "Average Incentive Award" (or "Average Award") means generally the product of the percentage equal to an average of the two highest of the participant's five immediately prior year award percentages earned under Constellation Energy Group's Executive Annual Incentive Plan, Constellation Energy Group's Senior Management Annual Incentive Plan and/or other Incentive Awards Program multiplied by the participant's annualized base rate of pay amount (i.e., the types of such pay that are includable in the computation of Pension Plan benefits) in effect at the end of the prior year.

        "Benefit Start Date" means the date as of which the participant's benefits, if any, under this Plan commence.

        "Cause" means the participant's (a) failure to comply with Constellation Energy Group policy, (b) deliberate and continual refusal to satisfactorily perform employment duties on substantially a full-time basis, (c) deliberate and continual refusal to act in accordance with any specific instructions of a majority of Constellation Energy Group's Board of Directors, (d) disclosure, without the consent of a majority of Constellation Energy Group's Board of Directors, of confidential information or trade secrets concerning Constellation Energy Group which could be materially damaging to Constellation Energy Group, or (e) deliberate misconduct which could be materially damaging to Constellation Energy Group without reasonable good faith belief by the participant that such conduct was in the best interest of Constellation Energy Group.

        "Change in Control" means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board of Directors of Constellation Energy Group (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of Constellation Energy Group (the "Board"), provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the "Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the

combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        "Committee" means the Committee on Management of the Board of Directors of Constellation Energy Group.

        "Constellation Energy Group" means Constellation Energy Group, Inc., a Maryland corporation, or its successor.

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        "Constellation Energy Group's Executive Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator.

        "Constellation Energy Group's Senior Management Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator.

        "Demotion" means a transfer to a position with Constellation Energy Group or a subsidiary of Constellation Energy Group that either (a) is substantially below the position in which the participant was employed on the date of transfer, or (b) results in a substantial reduction in pay when compared to the participant's pay on the date of the transfer. Whether a position is a substantially below another position shall be determined in the reasonable discretion of the Committee, with reference to factors including whether the participant retains principal responsibility for a department or division, and whether the participant remains eligible for the perquisites enjoyed by the participant before the position change.

        "Early Receipt Reduction Factor" means 100% less .25% for each month that the participant is less than age 62 on the participant's Benefit Start Date.

        "Interest Rate" means the rate equal to the average monthly 30-year Treasury bond rate for the second calendar quarter preceding the computation date, less 50 basis points.

        "Internal Revenue Code Limitations" means the limitations under Sections 415 and/or 401(a)(17) of the Internal Revenue Code.

        "LTD Plan" means the Constellation Energy Group, Inc. Disability Insurance Plan as may be amended from time to time, or any successor plan.

        "Mortality Table" means the mortality table used to convert annuities to lump sums in the Pension Plan.

        "Nonqualified Deferred Compensation Plan" means the Constellation Energy Group, Inc. Nonqualified Deferred Compensation Plan.

        "Other Incentive Awards Program" means the program(s) designated in writing by the Plan Administrator applicable to certain employees that provides awards; but includes only the types of awards that are includable in the computation of Pension Plan benefits.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time, or any successor plan.

        "Plan" means this Constellation Energy Group, Inc. Supplemental Pension Plan.

        "Plan Administrator" means, as set forth in Section 3, the Committee.

        "Rabbi Trust" means the trust adopted by Constellation Energy Group pursuant to the Grantor Trust Agreement Dated as of January 1, 2001, between Constellation Energy Group and Citibank, N.A.

        "Survivor Annuity Percentage" means 50%, unless the participant elects in the timing and manner established by the Plan Administrator, a higher percentage (in multiples of 5% to a total percentage not to exceed 100%).

        "Termination From Employment With Constellation Energy Group" means a participant's separation from service with Constellation Energy Group or a subsidiary of Constellation Energy Group; however, a participant's retirement, disability, or transfer of employment to or from a subsidiary of Constellation Energy Group shall not constitute a Termination From Employment With Constellation Energy Group.

        3.    Plan Administration.    The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to interpret the Plan and, in general, to make all other

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determinations advisable for the administration of the Plan to achieve its stated objective. Appeals of written decisions by the Plan Administrator may be made to the Board of Directors of Constellation Energy Group. Decisions by the Board shall be final and not subject to further appeal. The Plan Administrator shall have the power to delegate all or any part of its duties to one or more designees, and to withdraw such authority, by written designation.

        4.    Eligibility.    The officers or key employees of Constellation Energy Group or its subsidiaries designated in Appendix A are participants under the Plan. Participation shall continue until such designation is withdrawn at the discretion and by written order of the Plan Administrator, provided, however, that such withdrawal may not be made for benefits provided pursuant to Sections 5 and 6 with respect to a participant who has satisfied the eligibility requirements to retire (as set forth in Section 5(b)(i)). Notwithstanding the foregoing, any participant while classified as disabled under the LTD Plan shall continue to participate in this Plan while classified as disabled and, for purposes of the supplemental pension benefit provided by this Plan, while classified as disabled, shall be deemed to continue to accrue Credited Service until no later than his/her Normal Retirement Date.

        5.    Supplemental Pension Benefit.

        (a)    Generally.    A participant shall be eligible for supplemental pension benefits and supplemental survivor annuity benefits under this Plan only if the participant's supplemental pension benefits under this Plan are greater than the supplemental pension benefits computed under the Senior Executive Supplemental Plan based on the participant's age, service, and eligible compensation on the date as of which benefits become payable.

        (b)    Retirement benefits.

        (i)    Eligibility for retirement benefits.    A participant shall be eligible to retire under this Plan on or after the participant's Normal Retirement Date, or on the first day of any month preceding his/her Normal Retirement Date, if on his/her Severance From Service Date and while a participant he/she has attained (1) age 55 and has accumulated at least 10 years of Credited Service; or (2) age 60 and has accumulated at least one year of Credited Service.

        (ii)    Computation of retirement benefits.    A participant who is eligible to retire under this Plan will be entitled to supplemental pension retirement benefits under this Plan, which will be calculated as set forth below on the participant's Benefit Start Date:

        (1)    add the Annual Base Salary and the Average Incentive Award,

        (2)    divide the sum by 12,

        (3)    multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board of Constellation Energy Group - 60%; all other participants (by completed years of Credited Service) 1 through 9 - 3% per year; 10 through 19 - 40%; 20 through 24 - 45%; 25 through 29 - 50%; and 30 or more - 55%,

        (4)    multiply this dollar amount by the Early Receipt Reduction Factor; provided, however, if the participant is age 62 or older, such factor shall be one (1),

        (5)    subtract from this dollar amount the charges relating to coverage for a preretirement survivor annuity in excess of 50%, and for a post-retirement survivor annuity in excess of 50%, and

        (6)    subtract from the remainder the net amount payable to the participant under the Pension Plan on the participant's Benefit Start Date, assuming a 50% spousal joint and survivor annuity for a married participant(if the participant is not eligible to commence monthly Pension Plan payments on the participant's Benefit Start Date, the participant's benefit will be unreduced for Pension Plan payments until the date the participant is first

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eligible to commence monthly Pension Plan payments), or, if the participant elects a lump sum under the PEP provisions of the Pension Plan, the monthly amount that would have been payable under the Pension Plan as a life annuity for a single participant or as a 50% spousal joint and survivor annuity for a married participant, as of the Benefit Start Date under this Plan.

        (iii)    Form of payout of retirement benefits.    Each participant entitled to supplemental pension retirement benefits will receive his/her supplemental pension retirement benefits payout in the form of a monthly payment, unless the participant makes a valid election to receive his/her supplemental pension retirement benefits payout in the form of a lump sum.

        A participant may elect to receive his/her supplemental pension retirement benefits payout in the form of a lump sum by submitting to the Plan Administrator a signed Lump Sum Election Form. On such Form, the participant may elect to rollover such payout directly to the Nonqualified Deferred Compensation Plan. The Form must be received by the Plan Administrator before the beginning of the calendar year during which the participant's Severance From Service Date occurs. The election to receive a payout in the form of a lump sum, or to rollover such payment to the Nonqualified Deferred Compensation Plan, may be revoked at any time before the beginning of the calendar year during which the participant's Severance From Service Date occurs, by submitting to the Plan Administrator a signed Lump Sum Revocation Form.

        (iv)    Amount, timing, and source of monthly retirement benefit payout.    A participant entitled to monthly supplemental pension retirement benefits will receive monthly payments equal to the amount determined under paragraph (b)(ii). Such payments shall commence effective with the first of the month following the participant's Severance From Service Date. If such participant receives (or would have received but for the Internal Revenue Code Limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments hereunder shall permanently cease upon the death of the participant, effective with the monthly payment for the month following the month of the participant's death. Monthly payments hereunder shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets.

        (v)    Amount, timing, and source of lump sum retirement benefit payout.    A participant entitled to a lump sum supplemental pension retirement benefit will receive a lump sum payment. This lump sum payment will be calculated by a certified actuary and will be equal to the present value of an immediate annuity including the estimated present value of post-retirement supplemental survivor annuity benefits described in Section 6, and reflecting the present value of any deferred Pension Plan payments using (1) the supplemental pension retirement benefit amount calculated under paragraph (b)(ii), which is expressed as a monthly amount, (2) the Interest Rate computed on the participant's Benefit Start Date, and (3) the Mortality Table. Such lump sum payment shall be made within 60 days after the participant's Severance From Service Date, and shall either be paid to the participant, or rolled over to the Nonqualified Deferred Compensation Plan pursuant to the participant's election under (b)(iii). The lump sum payment shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives or rolls over a lump sum payment shall not be entitled to any cost of living or other pension payment adjustments or to post-retirement survivor annuity coverage under the Plan.

        (vi)    Death of participant entitled to lump sum payout.    In the event of the death of a participant after his/her Severance From Service Date and before the participant receives or rolls over the lump sum payment under paragraph (b)(v), such lump sum payment shall be made to the participant's surviving spouse (as defined in Section 6(i)). The lump sum payment shall be the

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same amount and made at the same time and from the same sources as set forth in paragraph (b)(v). If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 6. A surviving spouse who receives a lump sum benefit under this paragraph (b)(vi) shall not be entitled to any cost of living or other pension payment adjustments or to post-retirement survivor annuity coverage under the Plan.

        (c)    Entitlement to benefit upon happening of certain events.

        (i)    Computation of gross accrued benefit.    The computation of the gross accrued supplemental pension benefit for a participant as of the date of the computation will be made as follows:

        (1)    add the Annual Base Salary and the Average Incentive Award,

        (2)    divide the sum by 12, and

        (3)    multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board of Constellation Energy Group - 60%; all other participants (by completed years of Credited Service as of the date of the computation) 1 through 9 - 3% per year; 10 through 19 - 40%; 20 through 24 - 45%; 25 through 29 - 50%; and 30 or more - 55%.

        (ii)    Computation of net accrued benefit.    The computation of the net accrued supplemental pension benefit for a participant as of the date of the computation will be made by subtracting from the gross accrued benefit determined under paragraph (c)(i) the amount of the participant's Gross Pension under the Pension Plan determined as of the date of the computation and assuming that monthly payments of such Gross Pension begin on the first of the month after the later of reaching age 62 or the date of the computation. If the participant is not eligible for payment of a Gross Pension under the Pension Plan, the participant's Accrued Gross Pension determined as of the date of the computation shall be substituted for the Gross Pension described above, with the appropriate reduction for early receipt applied as if the participant were eligible to begin payment of his Accrued Gross Pension on the first of the month after the later of reaching age 62 or the date of the computation.

        (iii)    Satisfaction of requirements.    A participant who has satisfied the age and Credited Service requirements set forth in Section 5(b)(i) while eligible as set forth in Section 4, but who the Committee determines does not retire under the Plan due to Demotion, Termination From Employment With Constellation Energy Group, or the withdrawal of a participant's eligibility to participate under Section 5, shall be entitled to his/her net accrued supplemental pension benefit. The effective date of the Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal event shall be the date of such Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal.

        (iv)    Other events.    A participant, regardless of his/her age and years of Credited Service, shall be entitled to his/her net accrued supplemental pension benefit upon the happening of any of the following entitlement events, but only if such entitlement event occurs while a participant and before a participant retires under this Plan:

        (1)    Change in Control.    A Change in Control, followed within two years by the participant's Demotion, a participant's Termination From Employment With Constellation Energy Group, or the withdrawal of the participant's eligibility to participate under the Plan, is an entitlement event. The effective date of the entitlement event shall be the date of the Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal.

        (2)    Plan amendment.    A Plan amendment that has the effect of reducing a participant's gross accrued supplemental pension benefit is an entitlement event. In determining whether

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such a reduction has occurred, the participant's gross accrued supplemental pension benefit calculated on the day immediately preceding the effective date of the amendment shall be compared to the participant's gross accrued supplemental pension benefit calculated on the effective date of the amendment. An amendment that has the effect of reducing future benefit accruals is not an entitlement event. It is intended that an entitlement event under this paragraph (c)(iv)(2) will occur only with respect to those amendments that are substantially similar to amendments that are prohibited by Internal Revenue Code section 411(d)(6) with respect to qualified pension plans. The effective date of the entitlement event shall be the effective date of the Plan amendment.

        (3)    Involuntary Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal without Cause.    A participant's involuntary Demotion or involuntary Termination From Employment With Constellation Energy Group without Cause, or the withdrawal of a participant's eligibility to participate under Sections 5 or 6 of the Plan without Cause, is an entitlement event. The effective date of the entitlement event shall be the effective date of the participant's involuntary Demotion or involuntary Termination From Employment With Constellation Energy Group without Cause, or the eligibility withdrawal without Cause.

        (v)    Form of benefit payout.    Each participant entitled to a payout under this paragraph (c) will receive such payout in the form of a lump sum payment.

        (vi)    Amount, timing, and source of benefit payout.    A participant entitled to a payout of his/her net accrued benefit, as a result of the occurrence of an event described in paragraphs (c)(iii), (c)(iv)(1), (2), or (3) will be entitled to a lump sum benefit. This lump sum benefit will be calculated by a certified actuary as the present value, determined as of the date of payment, of an annuity beginning at age 62 (or the participant's actual age, if the participant is older than age 62 on the date the lump sum benefit is payable), including the estimated present value of post-retirement survivor annuity benefits described in Section 7, using (1) the net accrued benefit amount calculated under paragraph (d)(ii) on the effective date of the entitlement event, which is expressed as a monthly amount, (2) the Interest Rate computed on the date the lump sum benefit is payable, and (3) the Mortality Table. The lump sum benefit shall be payable as of the participant's Severance From service Date, and shall be made within 60 days after such date in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives a lump sum benefit under this paragraph (c)(vi) shall not be entitled to any cost of living or other pension payment adjustments or to preretirement or post-retirement survivor annuity coverage.

        (vii)    Death of participant entitled to lump sum payout.    In the event of the death of a participant after the occurrence of an event described in paragraphs (c)(iii), (c)(iv)(1), (2), or (3) and before the participant receives the lump sum payment under paragraph (c)(v), such lump sum payment shall be made to the participant's surviving spouse (as defined in Section 6(i)). The lump sum payment will be calculated by a certified actuary and will be equal to 100% of the lump sum that would have been paid to the participant under paragraph (vi), as of the date on which the lump sum is payable under this paragraph (vii), provided that the participant's date of death is on or after his/her Severance From Service Date. If the participant's date of death is before his/her Severance From Service Date, 50% shall be substituted for 100% in the preceding sentence. The lump sum benefit shall be payable as of the earlier of the participant's Severance From Service Date or date of death, and shall be made within 60 days after such date in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 6. A surviving spouse who receives a lump sum benefit under this paragraph (c) (vii) shall not be entitled to any cost of living or other pension

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payment adjustments or to preretirement or post-retirement survivor annuity coverage under the Plan.

        6.    Supplemental Survivor Annuity Benefit.

        (a)    Survivor annuity benefit.

        (i)    Eligibility for survivor annuity benefit.    Following the death of a participant who is fully vested under the Pension Plan, a supplemental survivor annuity may be paid to the participant's surviving spouse until the death of that spouse, using the Survivor Annuity Percentage. The participant will not bear the cost of up to a 50% survivor annuity benefit, but will bear the cost of a survivor annuity benefit in excess of 50%. For purposes of this Section 6(a), a participant's surviving spouse is the individual married to the participant on the date of the participant's death. If there is no surviving spouse, or if the participant or the participant's spouse previously received or is entitled to receive either a lump sum payment under Section 5, or a benefit under the Senior Executive Supplemental Plan, no supplemental survivor annuity will be payable.

        (ii)    Computation of survivor annuity benefit.    The amount of the supplemental survivor annuity will be determined as follows:

        (1)    if the participant's Benefit Start Date occurred prior to the date of death:

        (a)    begin with the monthly pension benefit (under Section 5(b) of this Plan) that the participant was receiving prior to the date of death, and

        (b)    multiply this dollar amount by the Survivor Annuity Percentage.

        (2)    otherwise:

        (a)    Unless the participant elected the alternative in-service death benefit in section (b) below:

        (1)    begin with the monthly Early Retirement pension benefit (under both the Pension Plan and Section 5(b) of this Plan) to which the participant would have been entitled to receive if:

the participant had been retired at the later of age 60 or his/her actual age on the date of death for purposes of computing the Early Receipt Reduction Factor,

        (2)    multiply this dollar amount by the Survivor Annuity Percentage,

        (3)    subtract from the product the net amount, if any, of the survivor annuity provided on behalf of the participant under the Pension Plan if the participant is participating in the Traditional Pension Plan, or the monthly annuity that would have been provided to the participant's spouse assuming that he or she had been designated as the participant's beneficiary and had chosen to receive a survivor benefit in the form of a monthly annuity, if the participant is participating in the PEP, and

        (4)    subtract from this dollar amount the charges relating to coverage (under both the Pension Plan and this Plan) for a preretirement survivor annuity in excess of 50%.

        (b)    If the participant was a participant in the Pension Equity Plan option of the Pension Plan and elected this alternative in-service death benefit by December 31 of the year prior to his/her death or during the 2001 initial election period established by the Plan Administrator

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        (1)    calculate the benefit under the Constellation Energy Group Benefits Restoration Plan that would have been payable to the surviving spouse if the participant were a participant in that plan and

        (2)    that dollar amount will be paid to the surviving spouse only in the form of a lump sum from this Plan.

        (iii)    Form of payout of survivor annuity benefits.    Unless the participant made a valid election by December 31 of the year prior to his/her death or during the 2001 initial election period established by the Plan Administrator, to have the survivor benefits paid in a lump sum, each surviving spouse entitled to a supplemental survivor annuity benefit will receive his/her survivor annuity benefit payout in the form of a monthly payment.

        (iv)    Amount, timing, and source of monthly survivor annuity benefit payout.    A surviving spouse entitled to monthly supplemental survivor annuity benefits will receive a monthly payment equal to the amount determined under (ii) above. Such payments shall commence effective with the first day of the month following the month of the participant's death. If such surviving spouse receives (or would have received but for the Internal Revenue Code Limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments hereunder shall permanently cease upon the death of the surviving spouse, effective with the monthly payment for the month following the month of the surviving spouse's death. Monthly payments hereunder shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets.

        (v)    Amount, timing, and source of lump sum survivor benefit payout.    A surviving spouse entitled to a lump sum supplemental survivor benefit will receive a lump sum payment. This lump sum payment will be calculated by a certified actuary and will be equal to the present value of an immediate annuity. Such lump sum payment shall be made within 60 days after the participant's death. The lump sum payment shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A surviving spouse who receives a lump sum payment shall not be entitled to any cost of living or other pension payment adjustments.

        (vi)    Death of surviving spouse entitled to lump sum payout.    In the event of the death of a surviving spouse before the spouse receives the lump sum payment under section 6(a)(v) no payment shall be made.

        7.    Miscellaneous.    None of the benefits provided under this Plan shall be subject to alienation or assignment by any participant or beneficiary nor shall any of them be subject to attachment or garnishment or other legal process except (i) to the extent specially mandated and directed by applicable State or Federal statute; or (ii) as requested by the participant or beneficiary to satisfy income tax withholding or liability.

        This Plan may be amended from time to time, or suspended or terminated at any time, provided, however, that no amendment or termination shall reduce any previously accrued supplemental pension benefit under this Plan or impair the rights of any participant or beneficiary entitled to receive current or future payment hereunder at the time of such action. All amendments to this Plan may be made at the written direction of the Committee. Notwithstanding anything else in this Plan to the contrary, the Constellation Energy Group Board of Directors may authorize a Participant to be eligible for benefits or may increase benefit payments.

        Participation in this Plan shall not constitute a contract of employment between Constellation Energy Group or any of its subsidiaries and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

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        The Plan, notwithstanding the creation of the Rabbi Trust, is intended to be unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974. Constellation Energy Group shall make contributions to the Rabbi Trust in accordance with the terms of the Rabbi Trust. Any funds which may be invested and any assets which may be held to provide benefits under this Plan shall continue for all purposes to be a part of the general funds and assets of Constellation Energy Group and no person other than Constellation Energy Group shall by virtue of the provisions of this Plan have any interest in such funds and assets. To the extent that any person acquires a right to receive payments from Constellation Energy Group under this Plan, such rights shall be no greater than the right of any unsecured general creditor of Constellation Energy Group.

        In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of Constellation Energy Group will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy Group under this Plan.

        This Plan shall be governed in all respects by Maryland law.

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Amendments to the Constellation Energy Group, Inc.
Supplemental Pension Plan (Plan)

        1.    Notwithstanding anything in Section 5(b)(iii) of the Plan to the contrary, any participant who terminates employment in connection with the management restructuring announced late in 2001, and who wants to receive a lump sum payout of his/her Plan benefit in 2002, must irrevocably elect by December 31, 2001 to rollover the present value of his/her accrued benefit under the Plan to the Nonqualified Deferred Compensation Plan effective December 31, 2001. Any additional benefit accruals under the Plan during 2002 and prior to employment termination will automatically be paid in a lump sum from the Plan within 60 days after employment termination.

        2.    Notwithstanding anything in Section 5(b)(ii) to the contrary, participants designated by the Plan Administrator who are at least age 55 with 10 or more years of service as of January 31, 2002 and who make an irrevocable election in the time and manner established by the Plan Administrator to voluntarily retire on February 1, 2002 (or such later date on or before July 1, 2002 as required in the sole discretion of management), is entitled to an enhanced early retirement benefit conditioned on such participants' execution of a waiver releasing Constellation Energy Group, Inc. and its affiliates from certain claims. The enhanced benefit is expressed as a lump sum amount equal to three weeks of pay (using Average Annual Base Salary and Average Incentive Award) per year of Credited Service (as defined under the Pension Plan). Participants who receive such enhanced benefits are not eligible for benefits under any severance plan or arrangement.

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CONSTELLATION ENERGY GROUP, INC. SUPPLEMENTAL PENSION PLAN
Amendments to the Constellation Energy Group, Inc. Supplemental Pension Plan (Plan)

EX-10.(G)

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Exhibit 10(g)

CONSTELLATION ENERGY GROUP, INC.

SENIOR EXECUTIVE SUPPLEMENTAL PLAN

        1.    Objective. The objective of this Plan is to enhance the benefits provided to certain senior executives of Constellation Energy Group and its subsidiaries in order to attract and retain talented executive personnel.

        2.    Definitions. All words beginning with an initial capital letter and not otherwise defined herein shall have the meaning set forth in the Pension Plan. All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

        "Average Annual Base Salary" means an amount determined by (a) computing the monthly base rate of pay amounts (i.e., the types of such pay that are includable in the computation of Pension Plan benefits) paid during the prior five consecutive twelve month periods immediately preceding the month that includes the date of the computation, and (b) averaging the two twelve month periods during which the highest amounts were paid.

        "Average Incentive Award" (or "Average Award") means the average of the two highest of the participant's five immediately prior year awards earned under Constellation Energy Group's Executive Annual Incentive Plan, Constellation Energy Group's Senior Management Annual Incentive Plan and/or Other Incentive Awards Programs.

        "Benefit Start Date" means the date as of which the participant's benefits, if any, under this Plan commence.

        "Cause" means the participant's (a) failure to comply with Constellation Energy Group policy, (b) deliberate and continual refusal to satisfactorily perform employment duties on substantially a full-time basis, (c) deliberate and continual refusal to act in accordance with any specific instructions of a majority of Constellation Energy Group's Board of Directors, (d) disclosure, without the consent of a majority of Constellation Energy Group's Board of Directors, of confidential information or trade secrets concerning Constellation Energy Group which could be materially damaging to Constellation Energy Group, or (e) deliberate misconduct which could be materially damaging to Constellation Energy Group without reasonable good faith belief by the participant that such conduct was in the best interest of Constellation Energy Group.

        "Change in Control" means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board of Directors of Constellation Energy Group (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of Constellation Energy Group (the "Board"), provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the "Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the

election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any entity controlled by Plan participant or any group of persons including Plan participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        "Committee" means the Committee on Management of the Board of Directors of Constellation Energy Group.

        "Constellation Energy Group" means Constellation Energy Group, Inc., a Maryland corporation, or its successor.

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        "Constellation Energy Group's Executive Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator.

        "Constellation Energy Group's Senior Management Annual Incentive Plan" means such plan or other incentive plan or arrangement designated in writing by the Plan Administrator.

        "Demotion" means a transfer to a position with Constellation Energy Group or a subsidiary of Constellation Energy Group that either (a) is substantially below the position in which the participant was employed on the date of transfer, or (b) results in a substantial reduction in pay when compared to the participant's pay on the date of the transfer. Whether a position is substantially below another position shall be determined in the reasonable discretion of the Committee, with reference to factors including whether the participant retains principal responsibility for a department or division, and whether the participant remains eligible for the perquisites enjoyed by the participant before the position change.

        "Early Receipt Reduction Factor" means 100% less ¹/3 of 1% for each month that the participant is less than age 62 on the participant's Benefit Start Date.

        "Interest Rate" means the rate equal to the average monthly 30-year Treasury bond rate for the second calendar quarter preceding the computation date, less 50 basis points.

        "Internal Revenue Code Limitations" means the limitations under Section 415 and/or 401(a)(17) of the Internal Revenue Code.

        "LTD Plan" means the Constellation Energy Group, Inc. Disability Insurance Plan as may be amended from time to time, or any successor plan.

        "Mortality Table" means the mortality table used to convert annuities to lump sums in the Pension Plan.

        "Nonqualified Deferred Compensation Plan" means the Constellation Energy Group, Inc. Nonqualified Deferred Compensation Plan.

        "Other Incentive Awards Program" means the program(s) designated in writing by the Plan Administrator applicable to certain employees that provides awards; but includes only the types of awards that are includable in the computation of Pension Plan benefits.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time, or any successor plan.

        "Plan" means this Constellation Energy Group, Inc. Senior Executive Supplemental Plan.

        "Plan Administrator" means, as set forth in Section 3, the Committee.

        "Rabbi Trust" means the trust adopted by Constellation Energy Group pursuant to the Grantor Trust Agreement Dated as of January 1, 2001, between Constellation Energy Group and Citibank, N.A.

        "Survivor Annuity Percentage" means 50%, unless the participant elects, in the timing and manner established by the Plan Administrator, a higher percentage (in multiples of 5% to a total percentage not to exceed 100%).

        "Termination From Employment With Constellation Energy Group" means a participant's separation from service with Constellation Energy Group or a subsidiary of Constellation Energy Group; however, a participant's retirement, disability, or transfer of employment to or from a subsidiary of Constellation Energy Group shall not constitute a Termination From Employment With Constellation Energy Group.

        "Total SERP Service" means (a) Credited Service accumulated while designated as a participant with respect to supplemental pension benefits under this Plan or while a participant under the

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Constellation Energy Group Supplemental Pension Plan, or while a participant under any predecessor executive supplemental pension benefit plan, plus (b) one fourth of Credited Service accumulated while not such a participant.

        3.    Plan Administration.    The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to interpret the Plan and, in general, to make all other determinations advisable for the administration of the Plan to achieve its stated objective. Appeals of written decisions by the Plan Administrator may be made to the Board of Directors of Constellation Energy Group. Decisions by the Board shall be final and not subject to further appeal. The Plan Administrator shall have the power to delegate all or any part of its duties to one or more designees, and to withdraw such authority, by written designation.

        4.    Eligibility.    Each senior executive of Constellation Energy Group or its subsidiaries may be designated in writing by the Plan Administrator as a participant with respect to one or more benefits under the Plan. Once designated, participation shall continue until such designation is withdrawn at the discretion and by written order of the Plan Administrator, provided, however, that such withdrawal may not be made with respect to a participant who has satisfied the eligibility requirements to retire (as set forth in Section 5(b)(i)). Notwithstanding the foregoing, any participant while classified as disabled under the LTD Plan shall continue to participate in this Plan while classified as disabled and, for purposes of the supplemental pension benefit provided by this Plan, while classified as disabled, shall be deemed to continue to accrue Credited Service until no later than his/her Normal Retirement Date.

        5.    Supplemental Pension Benefit.

        (a)    Generally.

        (i)    A Plan participant who was a participant in the Constellation Energy Group Supplemental Pension Plan on January 1, 2000, shall be eligible for supplemental pension benefits under this Plan only if the participant's supplemental pension benefits under this Plan are greater than the supplemental pension benefits computed under the Constellation Energy Group Supplemental Pension Plan based on the participant's age, service, and eligible compensation on the date as of which benefits become payable. If a participant or a participant's surviving spouse receives benefits from this Plan, he/she cannot also receive benefits from the Constellation Energy Group Supplemental Pension Plan.

        (ii)    Any other participant in the Plan shall be eligible for benefits under this Plan without regard to any computation under the Constellation Energy Group Supplemental Pension Plan.

        (b)    Retirement benefits.

        (i)    Eligibility for retirement benefits.    A participant shall be eligible to retire under this Plan on or after the participant's Normal Retirement Date, or on the first day of any month preceding his/her Normal Retirement Date, if on his/her Severance From Service Date and while a participant he/she has attained (1) age 55 and has accumulated at least 10 years of Credited Service; or (2) age 62 and has accumulated at least five years of Credited Service.

        (ii)    Computation of retirement benefits.    A participant who is eligible to retire under this Plan will be entitled to supplemental pension retirement benefits under this Plan, which will be calculated as set forth below on the participant's Benefit Start Date:

        (1)    add the Average Annual Base Salary and the Average Incentive Award,

        (2)    divide the sum by 12,

        (3)    multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board and President of Constellation Energy Group—60%; all other

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participants (the product of 5.5% multiplied by the number of full and fractional years of Total SERP Service), (maximum is 55%).

        (4)    multiply this dollar amount by the Early Receipt Reduction Factor; provided, however, if the participant is age 62 or older on his/her Benefit Start Date, such factor shall be one (1),

        (5)    subtract from this dollar amount the charges relating to coverage for a pre-retirement survivor annuity in excess of 50%, and for a post-retirement survivor annuity in excess of 50%, and

        (6)    subtract from the remainder the net monthly amount payable to the participant under the Pension Plan on the participant's Benefit Start Date (assuming a 50% spousal joint and survivor annuity for a married participant), (if the participant is not eligible to commence monthly Pension Plan payments on the participant's Benefit Start Date, the participant's benefit will be unreduced for Pension Plan payments until the date the participant is first eligible to commence monthly Pension Plan payments), or, if the participant elects a lump sum under the PEP provisions of the Pension Plan, the monthly amount that would have been payable under the Pension Plan as a life annuity for a single participant or as a 50% spousal joint and survivor annuity for a married participant, as of the Benefit Start Date under this Plan.

        (iii)    Form of payout of retirement benefits.    Each participant entitled to supplemental pension retirement benefits will receive his/her supplemental pension retirement benefits payout in the form of a monthly payment, unless the participant makes a valid election to receive his/her supplemental pension retirement benefits payout in the form of a lump sum.

        A participant may elect to receive his/her supplemental pension retirement benefits payout in the form of a lump sum by submitting to the Plan Administrator a signed Lump Sum Election Form. On such Form, the participant may elect to rollover such payout directly to the Nonqualified Deferred Compensation Plan. The Form must be received by the Plan Administrator before the beginning of the calendar year during which the participant's Severance From Service Date occurs. The election to receive a payout in the form of a lump sum, or to rollover such payment to the Nonqualified Deferred Compensation Plan, may be revoked at any time before the beginning of the calendar year during which the participant's Severance From Service Date occurs, by submitting to the Plan Administrator a signed Lump Sum Revocation Form.

        (iv)    Amount, timing, and source of monthly retirement benefit payout.    A participant entitled to monthly supplemental pension retirement benefits will receive monthly payments equal to the amount determined under paragraph (b)(ii). Such payments shall commence effective with the first of the month following the Participant's Severance From Service Date. If such participant receives (or would have received but for the Internal Revenue Code Limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments hereunder shall permanently cease upon the death of the participant, effective with the monthly payment for the month following the month of the participant's death. Monthly payments hereunder shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets.

        (v)    Amount, timing, and source of lump sum retirement benefit payout.    A participant entitled to a lump sum supplemental pension retirement benefit will receive a lump sum payment. This lump sum payment will be calculated by a certified actuary and will be equal to the present value of an immediate annuity including the estimated present value of post-retirement supplemental survivor annuity benefits described in Section 6, and reflecting the present value of

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any deferred Pension Plan payments using (1) the supplemental pension retirement benefit amount calculated under paragraph (b)(ii), which is expressed as a monthly amount, (2) the Interest Rate computed on the participant's Benefit Start Date, and (3) the Mortality Table. Such lump sum payment shall be made within 60 days after the participant's Severance From Service Date, and shall either be paid to the participant, or rolled over to the Nonqualified Deferred Compensation Plan pursuant to the participant's election under (b)(iii). The lump sum payment shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives or rolls over a lump sum payment shall not be entitled to any cost of living or other pension payment adjustments or to post-retirement survivor annuity coverage under the Plan.

        (vi)    Death of participant entitled to lump sum payout.    In the event of the death of a participant after his/her Severance From Service Date and before the participant receives or rolls over the lump sum payment under paragraph (b)(v), such lump sum payment shall be made to the participant's surviving spouse (as defined in Section 6(i)). The lump sum payment shall be the same amount and made at the same time and from the same sources as set forth in paragraph (b)(v). If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 6. A surviving spouse who receives a lump sum benefit under this paragraph (b)(vi) shall not be entitled to any cost of living or other pension payment adjustments or to post-retirement survivor annuity coverage under the Plan.

        (c)    Entitlement to benefit upon happening of certain events.

        (i)    Computation of gross accrued benefit.    The computation of the gross accrued supplemental pension benefit for a participant as of the date of the computation will be made as follows:

        (1)    add the Average Annual Base Salary and the Average Incentive Award,

        (2)    divide the sum by 12, and

        (3)    multiply this dollar amount by the appropriate percentage, determined as follows: Chairman of the Board and President of Constellation Energy Group—60%; all other participants (by the product of 5.5% multiplied by the number of full and fractional years of Total SERP Service as of the date of the computation) (maximum is 55%).

        (ii)    Computation of net accrued benefit.    The computation of the net accrued supplemental pension benefit for a participant as of the date of the computation will be made by subtracting from the gross accrued benefit determined under paragraph (c)(i) the amount of the participant's Gross Pension under the Pension Plan determined as of the date of the computation and assuming that monthly payments of such Gross Pension begin on the first of the month after the later of reaching age 62 or the date of the computation. If the participant is not eligible for payment of a Gross Pension under the Pension Plan, the participant's Accrued Gross Pension determined as of the date of the computation shall be substituted for the Gross Pension described above, with the appropriate reduction for early receipt applied as if the participant were eligible to begin payment of his Accrued Gross Pension on the first of the month after the later of reaching age 62 or the date of the computation.

        (iii)    Satisfaction of requirements.    A participant who has satisfied the age and Credited Service requirements set forth in Section 5(b)(i) while eligible as set forth in Section 4, but who does not retire under the Plan due to Demotion, Termination From Employment With Constellation Energy Group, or the withdrawal of a participant's eligibility to participate under Section 5, shall be entitled to his/her net accrued supplemental pension benefit. The effective date of the Demotion, Termination From Employment With Constellation Energy Group, or eligibility

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withdrawal event shall be the date of such Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal.

        (iv)    Other events.    A participant, regardless of his/her age and years of Credited Service, shall be entitled to his/her net accrued supplemental pension benefit upon the happening of any of the following entitlement events, but only if such entitlement event occurs while a participant and before a participant retires under this Plan:

        (1)    Change in Control.    A Change in Control, followed within two years by the participant's Demotion, a participant's Termination From Employment With Constellation Energy Group, or the withdrawal of the participant's eligibility to participate under the Plan, is an entitlement event. The effective date of the entitlement event shall be the date of the Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal.

        (2)    Plan amendment.    A Plan amendment that has the effect of reducing a participant's gross accrued supplemental pension benefit is an entitlement event. In determining whether such a reduction has occurred, the participant's gross accrued supplemental pension benefit calculated on the day immediately preceding the effective date of the amendment shall be compared to the participant's gross accrued supplemental pension benefit calculated on the effective date of the amendment. An amendment that has the effect of reducing future benefit accruals is not an entitlement event. It is intended that an entitlement event under this paragraph (c)(iii)(2) will occur only with respect to those amendments that are substantially similar to amendments that are prohibited by Internal Revenue Code section 411(d)(6) with respect to qualified pension plans. The effective date of the entitlement event shall be the effective date of the Plan amendment.

        (3)    Involuntary Demotion, Termination From Employment With Constellation Energy Group, or eligibility withdrawal without Cause.    A participant's involuntary Demotion or involuntary Termination From Employment With Constellation Energy Group without Cause, or the withdrawal of a participant's eligibility to participate under Sections 5 or 6 of the Plan without Cause, is an entitlement event. The effective date of the entitlement event shall be the effective date of the participant's involuntary Demotion or involuntary Termination From Employment With Constellation Energy Group without Cause, or the eligibility withdrawal without Cause.

        (v)    Form of benefit payout.    Each participant entitled to a payout under this paragraph (c) will receive such payout in the form of a lump sum payment.

        (vi)    Amount, timing, and source of benefit payout.    A participant entitled to a payout of his/her net accrued benefit, as a result of the occurrence of an event described in paragraphs (c)(iii), (c)(iv)(1), (2), or (3) will be entitled to a lump sum benefit. This lump sum benefit will be calculated by a certified actuary as the present value, determined as of the date of payment, of an annuity beginning at age 62 (or the participant's actual age, if the participant is older than age 62 on the date the lump sum benefit is payable), including the estimated present value of post-retirement survivor annuity benefits described in Section 6, using (1) the net accrued benefit amount calculated under paragraph (d)(ii) on the effective date of the entitlement event, which is expressed as a monthly amount, (2) the Interest Rate computed on the date the lump sum benefit is payable, and (3) the Mortality Table. The lump sum benefit shall be payable as of the participant's Severance From Service Date, and shall be made within 60 days after such date in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A participant who receives a lump sum benefit under this paragraph (c)(vi) shall not be entitled to any cost of living or other pension payment adjustments or to pre-retirement or post-retirement survivor annuity coverage.

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        (vii)    Death of participant entitled to lump sum payout.    In the event of the death of a participant after the occurrence of an event described in paragraphs (c)(iii), (c)(iv)(1), (2), or (3) and before the participant receives the lump sum payment under paragraph (c)(vi), a lump sum payment shall be made to the participant's surviving spouse (as defined in Section 6(i)). The lump sum payment will be calculated by a certified actuary and will be equal to 100% of the lump sum that would have been paid to the participant under paragraph (vi), as of the date on which the lump sum is payable under this paragraph (vii), provided that the participant's date of death is on or after his/her Severance From Service Date. If the participant's date of death is before his/her Severance From Service Date, 50% shall be substituted for 100% in the preceding sentence. The lump sum benefit shall be payable as of the earlier of the participant's Severance From Service Date or date of death, and shall be made within 60 days after such date in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. If there is no surviving spouse at the date of the participant's death, no payments shall be made pursuant to Sections 5 or 6. A surviving spouse who receives a lump sum benefit under this paragraph (c) (vii) shall not be entitled to any cost of living or other pension payment adjustments or to pre-retirement or post-retirement survivor annuity coverage under the Plan.

        6.    Supplemental Survivor Annuity Benefit.

        (a)    Survivor annuity benefit.

        (i)    Eligibility for survivor annuity benefit.    Following the death of a participant who is fully vested under the Pension Plan, a supplemental survivor annuity may be paid to the participant's surviving spouse until the death of that spouse, using the Survivor Annuity Percentage. The participant will not bear the cost of up to a 50% survivor annuity benefit, but will bear the cost of a survivor annuity benefit in excess of 50%. For purposes of this Section 6(a), a participant's surviving spouse is the individual married to the participant on the date of the participant's death. If there is no surviving spouse, or if the participant or the participant's spouse previously received or is entitled to receive a lump sum payment under Section 5, no supplemental survivor annuity will be payable.

        (ii)    Computation of survivor annuity benefit.    The amount of the supplemental survivor annuity will be determined as follows:

        (1)    if the participant's Benefit Start Date occurred prior to the date of death:

        (a)    begin with the monthly pension benefit (under Section 5(b) of this Plan) that the participant was receiving prior to the date of death, and

        (b)    multiply this dollar amount by the Survivor Annuity Percentage.

        (2)    otherwise:

        (a)    Unless the participant elected the alternative in-service death benefit in section (b) below:

        (1)    begin with the monthly Early Retirement pension benefit (under both the Pension Plan and Section 5(b) of this Plan) to which the participant would have been entitled if the participant had been retired at the later of age 60 or his/her actual age on the date of death for purposes of computing the Early Receipt Reduction Factor,

        (2)    multiply this dollar amount by the Survivor Annuity Percentage,

        (3)    subtract from the product the net amount, if any, of the survivor annuity provided on behalf of the participant under the Pension Plan if the participant is participating in the Traditional Pension Plan, or the monthly annuity that would have

8

been provided to the participant's spouse assuming that he or she had been designated as the participant's beneficiary and had chosen to receive a survivor benefit in the form of a monthly annuity, if the participant is participating in the PEP, and

        (4)    subtract from this dollar amount the charges relating to coverage (under both the Pension Plan and this Plan) for a pre-retirement survivor annuity in excess of 50%.

        (b)    If the participant was a participant in the Pension Equity Plan option of the Pension Plan and elected this alternative in-service death benefit by December 31 of the year prior to his/her death or during the 2001 initial election period established by the Plan Administrator

        (1)    calculate the benefit under the Constellation Energy Group Benefits Restoration Plan that would have been payable to the surviving spouse if the participant were a participant in that plan and

        (2)    that dollar amount will be paid to the surviving spouse only in the form of a lump sum from this Plan.

        (iii)    Form of payout of survivor annuity benefits.    Unless the participant made a valid election by December 31 of the year prior to his/her death or during the 2001 initial election period established by the Plan Administrator, to have the survivor benefits paid in a lump sum, each surviving spouse entitled to a supplemental survivor annuity benefit will receive his/her survivor annuity benefit payout in the form of a monthly payment.

        (iv)    Amount, timing, and source of monthly survivor annuity benefit payout.    A surviving spouse entitled to monthly supplemental survivor annuity benefits will receive a monthly payment equal to the amount determined under (ii) above. Such payments shall commence effective with the first day of the month following the month of the participant's death. If such surviving spouse receives (or would have received but for the Internal Revenue Code Limitations) cost of living adjustment(s) under the Pension Plan, the monthly payments hereunder will be automatically increased based on the percentage of, and at the same time as, such adjustment(s). Monthly payments hereunder shall permanently cease upon the death of the surviving spouse, effective with the monthly payment for the month following the month of the surviving spouse's death. Monthly payments hereunder shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets.

        (v)    Amount, timing, and source of lump sum survivor benefit payout.    A surviving spouse entitled to lump sum supplemental survivor benefit will receive a lump sum payment. This lump sum payment will be calculated by a certified actuary and will be equal to the present value of an immediate annuity. Such lump sum payment shall be made within 60 days after the participant's death. The lump sum payment shall be made in accordance with the provisions of the Rabbi Trust and, to the extent not paid under the terms of the Rabbi Trust, from general corporate assets. A surviving spouse who receives a lump sum payment shall not be entitled to any cost of living or other pension payment adjustments.

        (vi)    Death of surviving spouse entitled to lump sum payout.    In the event of the death of a surviving spouse before the spouse receives the lump sum payment under section 6(a)(v) no payment shall be made.

        7.    Death Benefit.    Constellation Energy Group shall make arrangements, through its split-dollar life insurance program or otherwise, for life insurance coverage for each designated participant providing that the participant's beneficiary shall receive, as a pre-retirement (or pre-rollout benefit for

9

participants as of April 1, 2000) death benefit, an amount which is approximately equal to three times the participant's base salary control point plus target annual incentive (as determined in the sole discretion of the Plan Administrator), and as a post-retirement death benefit(or post-rollout benefit for participants as of April 1, 2000), an amount which is approximately equal to two times the participant's base salary control point plus target annual incentive (as determined in the sole discretion of the Plan Administrator), as set forth in a separate agreement between the participant and his/her employer.

        As determined in the sole discretion of the Plan Administrator, in the event that either (i) a participant is ineligible to receive the type of life insurance coverage provided to other participants under this Plan, or (ii) such coverage is not available on reasonably cost-effective terms as a result of any penalty for smoking or other factors that are reflected in the insurance carrier's rates, then Constellation Energy Group shall provide a benefit that, in the discretion of the Plan Administrator, is substantially equivalent to the cost of the benefit provided to other participants under this Plan.

        8.    Dependent Death Benefit.    For a participant with a split-dollar policy under Section 7, in the event of the death of a participant's qualified dependent while the participant is an active employee of Constellation Energy Group or a subsidiary of Constellation Energy Group, Constellation Energy Group shall make a death benefit payment to the participant, from general corporate assets. For purposes of this Section 8, qualified dependent shall have the same meaning as set forth in Constellation Energy Group's Family Life Insurance Plan. For purposes of this Section 8, the amount of death benefit payment shall be the highest amount of insurance that would have been payable with respect to such qualified dependent if coverage had been provided under Constellation Energy Group's Family Life Insurance Plan. The dependent death benefit payment under this Plan shall be grossed-up for income tax withholding.

        9.    Miscellaneous.    None of the benefits provided under this Plan shall be subject to alienation or assignment by any participant or beneficiary nor shall any of them be subject to attachment or garnishment or other legal process except (i) to the extent specially mandated and directed by applicable State or Federal statute; (ii) as requested by the participant or beneficiary to satisfy income tax withholding or liability; and (iii) any policy of insurance written by a commercial carrier on a split-dollar basis shall be assignable.

        This Plan may be amended from time to time, or suspended or terminated at any time, provided, however, that no amendment or termination shall reduce any previously accrued supplemental pension benefit under this Plan or impair the rights of any participant or beneficiary entitled to receive current or future payment hereunder at the time of such action. All amendments to this Plan may be made at the written direction of the Committee. Notwithstanding anything else in this Plan to the contrary, the Constellation Energy Group Board of Directors may authorize a Participant to be eligible for benefits or may increase benefit payments.

        Participation in this Plan shall not constitute a contract of employment between Constellation Energy Group or any of its subsidiaries and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        The Plan, notwithstanding the creation of the Rabbi Trust, is intended to be unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974. Constellation Energy Group shall make contributions to the Rabbi Trust in accordance with the terms of the Rabbi Trust. Any funds which may be invested and any assets which may be held to provide benefits under this Plan shall continue for all purposes to be a part of the general funds and assets of Constellation Energy Group and no person other than Constellation Energy Group shall by virtue of the provisions of this Plan have any interest in such funds and assets. To the extent that any person acquires a right to receive payments from Constellation Energy Group under this Plan, such rights shall be no greater than the right of any unsecured general creditor of Constellation Energy Group.

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        In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of Constellation Energy Group will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy Group under this Plan.

        This Plan shall be governed in all respects by Maryland law.

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Amendments to the Constellation Energy Group, Inc.
Senior Executive Supplemental Plan (Plan)

        1.    Notwithstanding anything in Section 5(b)(iii) of the Plan to the contrary, any participant who terminates employment in connection with the management restructuring announced late in 2001, and who wants to receive a lump sum payout of his/her Plan benefit in 2002, must irrevocably elect by December 31, 2001 to rollover the present value of his/her accrued benefit under the Plan to the Nonqualified Deferred Compensation Plan effective December 31, 2001. Any additional benefit accruals under the Plan during 2002 and prior to employment termination will automatically be paid in a lump sum from the Plan within 60 days after employment termination.

        2.    Notwithstanding anything in Section 5(b)(ii) to the contrary, participants designated by the Plan Administrator who are at least age 55 with 10 or more years of service as of January 31, 2002 and who make an irrevocable election in the time and manner established by the Plan Administrator to voluntarily retire on February 1, 2002 (or such later date on or before July 1, 2002 as required in the sole discretion of management), is entitled to an enhanced early retirement benefit conditioned on such participants' execution of a waiver releasing Constellation Energy Group, Inc. and its affiliates from certain claims. The enhanced benefit is expressed as a lump sum amount equal to three weeks of pay (using Average Annual Base Salary and Average Incentive Award) per year of Credited Service (as defined under the Pension Plan). Participants who receive such enhanced benefits are not eligible for benefits under any severance plan or arrangement.

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CONSTELLATION ENERGY GROUP, INC. SENIOR EXECUTIVE SUPPLEMENTAL PLAN
Amendments to the Constellation Energy Group, Inc. Senior Executive Supplemental Plan (Plan)

EX-10.(H)

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Exhibit 10(h)

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
Executive Long-Term Incentive Plan
(Plan)

        1.    Purpose.    The purpose of this Plan is to increase shareholder value by providing a long-term incentive to reward officers and key employees of the Company and its Subsidiaries, who are mainly responsible for the continued growth, development, and financial success of the Company and its Subsidiaries, and for the continued profitable performance of the Company and its Subsidiaries. The Plan is also designed to permit the Company and its Subsidiaries to attract and retain talented and motivated directors, officers and key employees and to increase their ownership of Company common stock. The Plan also provides the ability to award long-term incentives that qualify for federal income tax deduction.

        2.    Definitions.    All singular terms defined in this Plan will include the plural and vice versa.    As used herein, the following terms will have the meaning specified below:

        "Adjusted EBIT" means EBIT, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted EPS" means EPS, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Net Income" means Net Income, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Return on Assets" means Return on Assets subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Return on Equity" means Return on Equity, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 9A(iv) at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Award" means individually or collectively, Restricted Stock, Options, Performance Units, Stock Appreciation Rights, Dividend Equivalents, or Equity granted under this Plan.

        "Board" means the Board of Directors of the Company.

        "Book Value" means the book value of a share of Stock determined in accordance with the Company's regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

        "Business Criteria" means any one or any combination of Net Income, Adjusted Net Income, Return on Equity, Adjusted Return on Equity, Return on Assets, Adjusted Return on Assets, Total Shareholder Return, Stock Fair Market Value, EBIT, Adjusted EBIT, EPS or Adjusted EPS.

        "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

        "Committee" means the Committee on Management of the Board; provided, however, that if such Committee fails to satisfy the disinterested administration provisions of Section 16b-3 of the 1934 Act

or the outside director provisions of Section 162(m)(4)(C) of the Code, "Committee" shall mean a committee of directors of the Company who satisfy the requirements of such Sections.

        "Company" means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any "New Company" as provided in Section 15I.

        "Date of Grant" means the date on which the granting of an Award is authorized by the Committee or such later date as may be specified by the Committee in such authorization.

        "Date of Retirement" means the date of Retirement.

        "Disability" means the determination that a Participant is "disabled" under the Company disability plan in effect at that time.

        "Dividend Equivalent" means an Award granted under Section 11.

        "EBIT" for any Year means the consolidated earnings before income taxes of the Company, as reported in the consolidated financial statements of the Company for the Year.

        "Eligible Person" means any person who satisfies all of the requirements of Section 5.

        "EPS" for any Year means diluted earnings per share of the Company, as reported in the Company's consolidated financial statements for the Year.

        "Equity" means an Award granted under Section 12.

        "Exercise Period" means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

        "Fair Market Value" means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date.

        "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code.

        "Net Income" for any Year means the consolidated net income of the Company, as reported in the consolidated financial statements of the Company for the Year.

        "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

        "Option" or "Stock Option" means either a nonqualified stock option or an incentive stock option granted under Section 8.

        "Option Period" or "Option Periods" means the period or periods during which an Option is exercisable as described in Section 8.

        "Participant" means an individual who has been granted an Award under this Plan.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

        "Performance-Based Restricted Stock" means that in determining the amount of a Restricted Stock Award payout, the Committee will take into account the Performance Targets.

        "Performance Period" means the taxable year of the Company or any other period designated by the Committee with respect to which an Award may be granted.

        "Performance Target(s)" means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 9A(ii) for each Participant for the applicable Performance Period in respect of any one or more of the Business Criteria.

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        "Performance Unit" means a unit of measurement equivalent to such amount or measure as defined by the Committee which may include, but is not limited to, dollars, market value shares, or book value shares.

        "Plan Administrator" means, as set forth in Section 4, the Committee.

        "Restricted Stock" means Stock issued in the name of a Participant that bears a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Stock until the expiration of the restriction period.

        "Retirement" means retirement on or after the "Early Retirement Date" (as such term is defined in the Pension Plan or a Subsidiary's retirement or pension plan).

        "Return on Assets" means Net Income divided by the average of the total assets of the Company at the end of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

        "Return on Equity" means the Net Income divided by the average of the common shareholders equity of the Company at the end of each of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

        "Service-Based Restricted Stock" means that in determining the amount of a Restricted Stock Award payout, the Committee will take into account only the period of time that the Participant performed services for the Company or its Subsidiaries since the Date of Grant.

        "Stock" means the common stock, without par value, of the Company.

        "Stock Appreciation Right" means an Award granted under Section 10.

        "Subsidiary(ies)" means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Committee, in its discretion.

        "Termination" means resignation or discharge from employment with the Company or any of its Subsidiaries except in the event of death, Disability, or Retirement.

        "Total Shareholder Return" means the sum of the change in the Fair Market Value of the Stock plus the value of reinvested dividends and cash equivalents, over the Performance Period.

        "Year" means a fiscal year of the Company commencing on or after January 1, 2002 that constitutes all or part of the applicable Performance Period.

        3.    Effective Date, Duration and Stockholder Approval.

        A.    Effective Date and Stockholder Approval.    Subject to the approval of the Plan by a majority of the outstanding shares of Stock voted at the 2002 Annual Meeting of Stockholders, the Plan will be effective as of January 1, 2002.

        B.    Period for Grants of Awards.    Awards may be made as provided herein for a period of 10 years after January 1, 2002.

        C.    Termination.    The Plan will continue in effect until all matters relating to the payment of outstanding Awards and administration of the Plan have been settled.

        4.    Plan Administration.    The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated purpose. Without limiting the generality of the foregoing, the Plan

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Administrator may modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided, however, that, except as provided in Section 15H of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the Participant, and provided, further, that no modification, amendment or substitution that results in repricing a Stock Option to a lower exercise price, other than to reflect an adjustment made pursuant to Section 15H, shall be made without prior stockholder approval).

        The Plan Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and any agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Such determinations shall be final and not subject to further appeal.

        The Committee may delegate its authority under the Plan with respect to Participants who are not directors or executive officers.

        5.    Eligibility.    Each officer, key employee or director of the Company and its Subsidiaries may be designated by the Committee as a Participant, from time to time, with respect to one or more Awards. No officer, employee or director of the Company or its Subsidiaries shall have any right to be granted an Award under this Plan. The Plan Administrator may also grant Awards to individuals in connection with hiring (as an officer, key employee or director), retention or otherwise, prior to the date the individual first performs services for the Company or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable prior to the date the individual first commences performance of such services.

        6.    Grant of Awards and Limitation of Number of Shares Awarded.    The Committee may, from time to time, grant Awards to one or more Eligible Persons, provided that subject to any adjustment pursuant to Section 15H, the aggregate number of shares of Stock subject to Awards that may be delivered under this Plan may not exceed eight million (8,000,000) shares. Shares delivered by the Company under the Plan may be authorized and unissued Stock, Stock held in the treasury of the Company, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

        Any shares of Stock covered by an Award (or portion of an Award) granted under the Plan that is forfeited or canceled, expires or is settled in cash, including the settlement of tax withholding obligations using shares, shall be deemed not to have been delivered for purposes of determining the maximum number of shares available for delivery under the Plan. Likewise, if any Option granted under the Plan is exercised by tendering shares of Stock to the Company as full or partial payment for such exercise under the Plan, only the number of shares issued net of the shares tendered shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan.

        The maximum number of shares of Stock that may be issued in conjunction with Service-Based Restricted Stock Awards under Section 7 of the Plan, Performance-Based Restricted Stock or Performance Unit Awards under Section 9 of the Plan and Equity Awards under Section 12 of the Plan shall in the aggregate be eight hundred thousand (800,000). The maximum number of shares of Stock subject to Awards of any combination that may be granted during any calendar year under the Plan to any one person is two million (2,000,000); provided, however, that to the extent the maximum permissible award is not made in a year, such amount may be carried over to subsequent years. Such per-individual limit shall not be adjusted to effect a restoration of shares of Stock with respect to which the related Award is terminated, surrendered or canceled.

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        The Plan Administrator may permit or require a recipient of an Award to defer all or part of such individual's receipt of the payment of cash or the delivery of Stock that would otherwise be due to such individual by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Plan Administrator shall, in its sole discretion, establish rules and procedures for such payment deferrals.

        7.    Service-Based Restricted Stock Awards.

        A.    Grants of Service-Based Restricted Shares.    One or more shares of Restricted Stock may be granted to any Eligible Person. The Service-Based Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Service-Based Restricted Stock will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Service-Based Restricted Stock until the expiration of the restriction period.

        The Committee may also impose such other restrictions and conditions on the Service-Based Restricted Stock as it deems appropriate.

        Upon issuance to the Participant of the Service-Based Restricted Stock, the Participant will have the right to vote the Service-Based Restricted Stock, and subject to the Committee's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Committee, in its sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Committee.

        B.    Restriction Period.    At the time a Service-Based Restricted Stock Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Committee.

        C.    Forfeiture or Payout of Award.    In the event a Participant ceases employment (or ceases Board membership in the case of a director) during a restriction period, a Service-Based Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock Award is prorated for service during the period; provided, however, that the Committee may modify the above if it determines at its sole discretion that special circumstances warrant such modification.

        Any shares of Service-Based Restricted Stock which are forfeited will be transferred to the Company.

        Upon completion of the restriction period, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

        D.    Waiver of Section 83(b) Election.    Unless otherwise directed by the Committee, as a condition of receiving an Award of Service-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Service-Based Restricted Stock as income on the Date of Grant.

        8.    Stock Options.

        A.    Grants of Options.    One or more Options may be granted to any Eligible Person on the Date of Grant without the payment of consideration by the Participant.

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        B.    Stock Option Agreement.    Each Option granted under the Plan will be evidenced by a "Stock Option Agreement" between the Company and the Participant containing provisions determined by the Committee, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Committee at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant's purchase of the Stock to which the Option relates, (b) the Participant's exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Committee, in its sole discretion, may declare any previously granted Options to be immediately exercisable.

        C.    Option Price.    The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

        D.    Form of Payment.    At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Committee in its sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the applicable date.

        E.    Other Terms and Conditions.    The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

        F.    Lapse of Option.    An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment (or ceases Board membership in the case of a director) within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—any unvested Option will lapse on the effective date of the Termination and any vested Option will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Option will lapse on the effective date of the Retirement, Disability or death and any vested Option will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Option Period set by the Grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

        G.    Individual Limitation.    In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

        9.    Performance-Based Restricted Stock/Performance Units.

        A.    Provision for Awards.

        (i)    General.    For Awards under this Section 9, the Committee will establish (a) Performance Target(s) relative to the applicable Business Criteria, (b) the applicable Performance Period and (c) the applicable number of shares of Performance-Based Restricted Stock or Performance Units

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that are the subject of the Award. The applicable Performance Period and Performance Target(s) shall be determined by the Committee consistent with the terms of the Plan and Section 162(m) of the Code. Notwithstanding the fact that the Performance Target(s) have been attained, the Committee may pay an Award under this Section 9 of less than the amount determined by the formula or standard established pursuant to Section 9A(ii) or may pay no Award at all.

        (ii)    Selection of Performance Target(s).    The specific Performance Target(s) with respect to the Business Criteria must be established by the Committee in advance of the deadlines applicable under Section 162(m) of the Code and while the performance relating to the Performance Target(s) remains substantially uncertain within the meaning of Section 162(m) of the Code. The Performance Target(s) with respect to any Performance Period may be established on a cumulative basis or in the alternative, and may be established on a stand-alone basis with respect to the Company or on a relative basis with respect to any peer companies or index selected by the Committee. At the time the Performance Target(s) are selected, the Committee shall provide, in terms of an objective formula or standard for each Participant, the method of computing the specific amount that will represent the maximum amount of Award payable to the Participant if the Performance Target(s) are attained. The objective formula or standard shall preclude the use of discretion to increase the amount of any Award earned pursuant to the terms of the Award.

        (iii)    Effect of Mid-Year Commencement of Service.    If services as an executive officer or director commence after the adoption of the Plan and the Performance Target(s) are established for a Performance Period, the Committee may grant an Award that is proportionately adjusted based on the period of actual service during the Year, and the amount of any Award paid to such person shall not exceed that proportionate amount of the applicable maximum individual Award under Section 6.

        (iv)    Adjustments.    To preserve the intended incentives and benefits of an Award based on Adjusted EPS, Adjusted Net Income, Adjusted Return on Assets or Adjusted Return on Equity, the Committee may determine at the time the Performance Targets are established that certain adjustments shall apply to the objective formula or standard with respect to the applicable Performance Target to take into account, in whole or in part, in any manner specified by the Committee, any one or more of the following with respect to the Performance Period: (i) the gain, loss, income or expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported publicly by the Company with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence, excluding gains or losses on the early extinguishment of debt; (iii) the gains or losses resulting from, and the direct expenses incurred in connection with, the disposition of a business, in whole or in part or the sale of investments or non-core assets; (iv) gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation; (v) the impact of impairment of tangible or intangible assets; (vi) the impact of restructuring or business recharacterization activities, including but not limited to reductions in force, that are reported publicly by the Company; and (vii) the impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. Each of the adjustments described in this Section 9A(iv) may relate to the Company as a whole or any part of the Company's business or operations, as determined by the Committee at the time the Performance Targets are established. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee. In addition to the foregoing, the Committee shall adjust any Business Criteria, Performance Targets or other features of an Award that relate to or are wholly or partially based on the number of, or the value of, any stock of the Company, to reflect any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in such stock.

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        (v)    Committee Discretion to Determine Award.    The Committee has the sole discretion to determine the standard or formula pursuant to which each Participant's Award shall be calculated, whether all or any portion of the amount so calculated will be paid, and the specific amount (if any) to be paid to each Participant, subject in all cases to the terms, conditions and limits of the Plan. To this same extent, the Committee may at any time establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of Awards (including but not limited to the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the Plan. The Committee may not, however, increase the maximum amount permitted to be paid to any individual under the Plan or pay Awards under this Section 9 if the applicable Performance Target(s) have not been satisfied.

        B.    Performance-Based Restricted Stock Awards.

        (i)    Grants of Performance-Based Restricted Stock.    Subject to Section 9A, one or more shares of Performance-Based Restricted Stock may be granted to any Eligible Person. The Performance-Based Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Performance-Based Restricted Stock until the expiration of the restriction period.

        The Committee may also impose such other restrictions and conditions on the Performance-Based Restricted Stock as it deems appropriate.

        Upon issuance to the Participant of the Performance-Based Restricted Stock, the Participant will have the right to vote the Performance-Based Restricted Stock, and subject to the Committee's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Committee, in its sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Committee.

        (ii)    Restriction Period.    At the time a Performance-Based Restricted Stock Award is granted, the Committee will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Performance-Based Restricted Stock Award may have a different restriction period, at the discretion of the Committee.

        (iii)    Waiver of Section 83(b) Election.    Unless otherwise directed by the Committee, as a condition of receiving an Award of Performance-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Performance-Based Restricted Stock as income on the Date of Grant.

        C.    Performance Units.    Subject to Section 9A, one or more Performance Units may be earned by an Eligible Person based on the achievement of preestablished performance objectives during a Performance Period.

        D.    Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Committee will determine whether the Performance Targets and other material terms of the Award were satisfied. The Committee's determination of all such matters will be final and conclusive.

        As soon as practicable after the date the Committee makes the above determination, the Committee will determine the Award payment for each Participant. Before any payments are made under this Section 9, the Committee shall be responsible for certifying in writing to the Company that the applicable Performance Targets have been met.

        In the event a Participant ceases employment (or ceases Board membership in the case of a director) during a Performance Period, the Performance-Based Restricted Stock or Performance Unit

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Award is subject to forfeiture or payout as follows: (a) Termination—the Performance—Based Restricted Stock or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock or Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

        Any shares of Performance-Based Restricted Stock which are forfeited will be transferred to the Company.

        E.    Form and Timing of Payment.    With respect to shares of Performance-Based Restricted Stock for which restrictions lapse, new certificates will be issued (the payout) without the restrictive legend described in Section 9B(i). Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Committee in its sole discretion. Such payment will be made as soon as practicable after the Award payment is determined.

        10.    Stock Appreciation Rights.

        A.    Grants of Stock Appreciation Rights.    Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Committee may impose.

        B.    Right to Exercise; Exercise Period.    A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant's Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Committee, in its sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

        C.    Failure to Exercise.    If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

        D.    Payment.    An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Committee at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one

9

share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

        The Committee may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Committee may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Committee must consent to or disapprove such election and (ii) unless the Committee directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

        E.    Nontransferable.    A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative.

        F.    Lapse of a Stock Appreciation Right.    A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment (or ceases Board membership in the case of a director) within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—any unvested Stock Appreciation Right will lapse on the effective date of the Termination and any vested Stock Appreciation Right will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Stock Appreciation Right will lapse on the effective date of the Retirement, Disability or death and any vested Stock Appreciation Right will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Exercise Period set by the grant; provided, however, that the Committee may modify the above if it determines in its sole discretion that special circumstances warrant such modification.

        11.    Dividend Equivalents.

        A.    Grants of Dividend Equivalents.    Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance-Based Restricted Stock or Performance Units, at any time during the Performance Period, without consideration by the Participant.

        B.    Payment.    Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Committee, in its sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Committee.

        C.    Nontransferable.    A Dividend Equivalent will not be transferable by the Participant.

        D.    Lapse of a Dividend Equivalent.    Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-

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Based Restricted Stock Award; or (iv) the lapse date established by the Committee on the Date of Grant of the Dividend Equivalent.

        12.    Equity.    One or more shares of Stock may be granted to any Eligible Person, in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Committee shall determine. An Equity Award may be denominated in Stock or other securities, stock-equivalent units, securities or debentures convertible into Stock, or any combination of the foregoing and may be paid in Stock or other securities, in cash, or in a combination of Stock or other securities and cash, all as determined in the sole discretion of the Committee. Unless the Committee determines otherwise, the vesting period for Equity Awards shall be at least three years.

        13.    Accelerated Award Payout/Exercise.

        A.    Change in Control.    Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout or accelerated Option or Exercise Period (as set forth in Section 13B) with respect to any previously granted Award, upon the happening of a change in control.

        A change in control for purposes of this Section 13 means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided,however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the

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"Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        B.    Amount of Award Subject to Accelerated Payout/Option Period/Exercise Period.    The amount of a Participant's previously granted Award that will be paid or exercisable upon the happening of a change in control will be determined as follows:

        Service-Based Restricted Stock Awards.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Service-Based Restricted Stock that were issued on the Date of Grant.

        Stock Option Awards and Stock Appreciation Rights.    Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately vested, any gain will be immediately paid in cash, and the Stock Option Awards and/or Stock Appreciation Rights will then lapse.

        Performance-Based Restricted Stock/Performance Units.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Performance-Based Restricted Stock/Performance Units subject to the Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

        Equity Awards.    Any previously granted Equity Award will be immediately vested.

        C.    Timing of Accelerated Payout/Option Period/Exercise Period.    The accelerated payout set forth in Section 13B will be made in cash within 30 days after the date of the change in control. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout date.

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        14.    Amendment of Plan.

        The Committee may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except (i) no such action may be taken without stockholder approval which materially increases the number of securities which may be issued pursuant to the Plan (except as provided in Section 15H), extends the period for granting Options under the Plan or materially modifies the requirements as to eligibility for participation in the Plan; (ii) no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder; and (iii) no such action that would require the consent of the Board and/or the stockholders of the Company pursuant to Section 162(m) of the Code or the 1934 Act, or any other applicable law, rule, or regulation, shall be effective without such consent. Notwithstanding the foregoing, the Committee may amend the Plan as desirable at the discretion of the Committee to address any issues concerning (i) Section 162(m) of the Code, or (ii) maintaining an exemption under rule 16b-3 of the 1934 Act.

        15.    Miscellaneous Provisions.

        A.    Nontransferability.    No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute; (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Committee, to satisfy income tax withholding; and (iii) as requested by the Participant and approved by the Committee, to members of the Participant's family, or a trust established by the Participant for the benefit of family members.

        B.    No Employment Right.    Participation in this Plan shall not constitute a contract of employment between the Company or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        C.    Tax Withholding.    the Company or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by the Company or a Subsidiary. Subject to compliance with any requirements of applicable law, the Committee may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to the Company or a Subsidiary, the retention by the Company or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant's Stock, having a Fair Market Value equal to the withholding amount.

        D.    Fractional Shares.    Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

        E.    Government and Other Regulations.    The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended ("Act"), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status.

        F.    Indemnification.    Each person who is or at any time serves as a member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of

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its authority or power under this Plan) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

        G.    Reliance on Reports.    Each member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

        H.    Changes in Capital Structure.    In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued to a Participant as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

        I.    Company Successors.    In the event the Company becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of the Company under this Plan.

        J.    Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

        K.    Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

        L.    Expenses.    The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

        M.    Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining

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to the securities offered under the Executive Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Kathleen A. Chagnon,
Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

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Executive Long-Term Incentive Plan
Appendix

Additional Information

        The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

        Participants may obtain additional information about the Plan by contacting:

Director—Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5^th Floor
Baltimore, MD 21202
(410) 783-2844

        After each grant is made, participants will be furnished with information about the amount of the grant. At least annually, participants will be furnished with information about their outstanding grants.

        In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse. Grants not subject to restrictions are taxable/deductible at fair market value on the grant date. Additionally, options are subject to other special tax provisions.

May 24, 2002

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Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (Plan)
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EX-10.(I)

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Exhibit 10(i)

Constellation Energy Group, Inc.
Executive Annual Incentive Plan
(Plan)

        1.    Purpose.    The purpose of the Plan is to permit the Company, through awards of annual incentive compensation qualifying for federal income tax deductions, to attract and retain executives and to motivate these executives to promote the profitability and growth of the Company.

        2.    Definitions.    All singular terms defined in this Plan will include the plural and vice versa.    As used herein, the following terms will have the meaning specified below:

        "Adjusted EBIT" means EBIT, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 5E at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted EPS" means EPS, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 5E at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Net Income" means Net Income, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 5E at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Return on Assets" means Return on Assets subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 5E at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Adjusted Return on Equity" means Return on Equity, subject to, and/or after giving effect to, any adjustments applicable pursuant to Section 5E at the time Business Criteria and Performance Target(s) are established for any Year or Years.

        "Award" means the amount granted to a Participant by the Committee for a Performance Period under the Plan, whether paid in cash, stock, restricted stock, stock options, other stock-based or stock-denominated units or any other form of consideration.

        "Board" means the Board of Directors of the Company.

        "Business Criteria" means any one or any combination of Net Income, Adjusted Net Income, Return on Equity, Adjusted Return on Equity, Return on Assets, Adjusted Return on Assets, EBIT, Adjusted EBIT, EPS or Adjusted EPS.

        "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

        "Committee" means the Committee on Management of the Board; provided, however, that if such Committee fails to satisfy the outside director provisions of Section 162(m)(4)(C) of the Code, "Committee" shall mean a committee of directors of the Company who satisfy the requirements of such Section.

        "Company" means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any "New Company" as provided in Section 10G.

        "Deferred Compensation Plan" means the Constellation Energy Group, Inc. Nonqualified Deferred Compensation Plan or any successor or future similar plans.

        "EBIT" for any Year means the consolidated earnings before income taxes of the Company, as reported in the consolidated financial statements of the Company for the Year.

        "EPS" for any Year means diluted earnings per share of the Company, as reported in the Company's consolidated financial statements for the Year.

        "Executive" means any executive officer of the Company as defined in Section 16 of the 1934 Act.

        "Net Income" for any Year means the consolidated net income of the Company, as reported in the consolidated financial statements of the Company for the Year.

        "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

        "Participant" means an individual who has been granted a conditional opportunity to earn an Award under the Plan.

        "Performance Period" means the taxable year of the Company or any other period designated by the Committee with respect to which an Award may be granted.

        "Performance Target(s)" means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 5B for the applicable Performance Period in respect of any one or more of the Business Criteria.

        "Return on Assets" means Net Income divided by the average of the total assets of the Company at the end of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

        "Return on Equity" means the Net Income divided by the average of the common shareholders equity of the Company at the end of each of the four fiscal quarters of the Year, as reported by the Company in its consolidated financial statements.

        "Stock Plans" means the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan, the Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan, and/or any successor stock plans adopted or assumed by the Company.

        "Subsidiary" means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Committee, in its discretion.

        "Year" means a fiscal year of the Company commencing on or after January 1, 2002 that constitutes all or part of the applicable Performance Period.

        3.    Administration.    The Committee is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated purpose. The Plan Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and any agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Such determinations shall be final and not subject to further appeal.

        4.    Eligibility.    For a Performance Period, each Executive may be designated by the Committee as a Participant.

        5.    Awards.

        A.    Provision for Awards.    Each Participant may receive an Award if the Performance Target(s) established by the Committee, relative to the applicable Business Criteria, are attained in the applicable

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Performance Period established by the Committee. The applicable Performance Period and Performance Target(s) shall be determined by the Committee consistent with the terms of the Plan and Section 162(m) of the Code. Notwithstanding the fact that the Performance Target(s) have been attained, the Committee may pay an Award of less than the amount determined by the formula or standard established pursuant to Section 5B or may pay no Award at all.

        B.    Selection of Performance Target(s).    The specific Performance Target(s) with respect to the Business Criteria must be established by the Committee in advance of the deadlines applicable under Section 162(m) of the Code and while the performance relating to the Performance Target(s) remains substantially uncertain within the meaning of Section 162(m) of the Code. The Performance Target(s) with respect to any Performance Period may be established on a cumulative basis or in the alternative, and may be established on a stand-alone basis with respect to the Company or on a relative basis with respect to any peer companies or index selected by the Committee. At the time the Performance Target(s) are selected, the Committee shall provide, in terms of an objective formula or standard for each Participant, the method of computing the specific amount that will represent the maximum amount of Award payable to the Participant if the Performance Target(s) are attained. The objective formula or standard shall preclude the use of discretion to increase the amount of any Award earned pursuant to the terms of the Award.

        C.    Maximum Individual Award.    Notwithstanding any other provision hereof, no Executive shall receive an Award under the Plan for any one Performance Period in excess of $5,000,000.

        D.    Effect of Mid-Year Commencement of Service; Termination of Employment. If services as an Executive commence after the adoption of the Plan and the Performance Target(s) are established for a Performance Period, the Committee may grant an Award that is proportionately adjusted based on the period of actual service during the Year, and the amount of any Award paid to such person shall not exceed that proportionate amount of the applicable maximum individual Award under Section 5C. In the event of the termination of employment of a Participant prior to the payment of an Award, the Participant shall not be entitled to any payment in respect of the Award unless otherwise expressly provided by the Committee.

        E.    Adjustments.    To preserve the intended incentives and benefits of an Award based on Adjusted EBIT, Adjusted EPS, Adjusted Net Income, Adjusted Return on Assets or Adjusted Return on Equity, the Committee may determine at the time the Performance Targets are established that certain adjustments shall apply to the objective formula or standard with respect to the applicable Performance Target to take into account, in whole or in part, in any manner specified by the Committee, any one or more of the following with respect to the Performance Period: (i) the gain, loss, income or expense resulting from changes in accounting principles that become effective during the Performance Period; (ii) the gain, loss, income or expense reported publicly by the Company with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence, excluding gains or losses on the early extinguishment of debt; (iii) the gains or losses resulting from, and the direct expenses incurred in connection with, the disposition of a business, in whole or in part, or the sale of investments or non-core assets; (iv) gain or loss from all or certain claims and/or litigation and all or certain insurance recoveries relating to claims or litigation; (v) the impact of impairment of tangible or intangible assets; (vi) the impact of restructuring or business recharacterization activities, including but not limited to reductions in force, that are reported publicly by the Company; and (vii) the impact of investments or acquisitions made during the year or, to the extent provided by the Committee, any prior year. Each of the adjustments described in this Section 5E may relate to the Company as a whole or any part of the Company's business or operations, as determined by the Committee at the time the Performance Targets are established. The adjustments are to be determined in accordance with generally accepted accounting principles and standards, unless another objective method of measurement is designated by the Committee. In addition to the foregoing, the Committee shall adjust any Business Criteria, Performance Targets or other features of

3

an Award that relate to or are wholly or partially based on the number of, or the value of, any stock of the Company, to reflect any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in such stock.

        F.    Committee Discretion to Determine Award.    The Committee has the sole discretion to determine the standard or formula pursuant to which each Participant's Award shall be calculated, whether all or any portion of the amount so calculated will be paid, and the specific amount (if any) to be paid to each Participant, subject in all cases to the terms, conditions and limits of the Plan. To this same extent, the Committee may at any time establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of Awards (including but not limited to the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the Plan and may take into account such other factors as it deems appropriate in administering any aspect of the Plan. The Committee may not, however, increase the maximum amount permitted to be paid to any individual under the Plan or pay Awards under this Plan if the applicable Performance Target(s) have not been satisfied.

        6.    Payment of Awards.    Before any payments are made under the Plan, the Committee shall be responsible for certifying in writing to the Company that the applicable Performance Targets have been met. Each Participant shall be eligible to receive, as soon as practicable after the amount of such Participant's Award for a Performance Period has been determined, all or a portion of that Award. Awards may be paid in cash, stock, restricted stock, stock options, other stock-based or stock-denominated units or any other form of consideration or any combination thereof determined by the Committee. Equity or equity-based awards may be granted under the terms and conditions of the applicable Stock Plans. Payment of the Award may be deferred at the discretion of the Committee. A Participant may elect to defer the receipt of all or a portion of the Award for the Performance Year. Any such deferral and investment of any such amounts deferred pursuant to this Plan shall be made in accordance with the provisions of the Deferred Compensation Plan.

        7.    Designation of Beneficiary. A Participant shall have the right to designate a beneficiary or beneficiaries who are to receive in a lump sum any undistributed Award to the extent a Participant has chosen not to defer all or a portion of the Award pursuant to Section 6 hereof, should the Participant die during the Performance Period and be entitled to an incentive award for that Performance Period. Such designation shall apply only to the portion of the undistributed Award not subject to a deferral election. Any designation, change or rescission of the designation shall be made in writing by completing and furnishing to the Vice President—Human Resources of the Company a notice on an appropriate form designated by the Vice President—Human Resources of the Company. The last designation of beneficiary received by the Vice President—Human Resources of the Company shall be controlling over any testamentary or purported disposition by the Participant, provided that no designation, rescission or change thereof shall be effective unless received prior to death of the Participant. Distribution of any Awards previously deferred pursuant to Section 6 of the Plan shall be paid to the beneficiary or beneficiaries designated under the Deferred Compensation Plan.

        8.    Change in Control. Notwithstanding any other provisions of this Plan to the contrary, if a Participant separates from service with the Company or a Subsidiary (except due to a Participant's transfer of employment to or from a Subsidiary), within 2 years following a change in control, such Participant is eligible for an Award for the Performance Year during which the separation from service occurs. The Award is calculated assuming maximum performance achievement and based on the Participant's position at the time of termination and is pro-rated for the period of active employment during the Performance Year. The Committee, in its discretion, may grant a total, rather than pro-rated award. Payment of the award will be made within 60 days after the Participant's separation from service. Payment may not be deferred.

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        A change in control for purposes of this Section 8 shall mean the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph  (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which

5

satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        Notwithstanding any provision in the Plan to the contrary, on or within 2 years after a Change in Control, no action, including, but not by way of limitation, the amendment, suspension or termination of the Plan, shall be taken which would adversely affect the rights of any Participant without such Participant's prior written consent.

        9.    Amendment of Plan.    Subject to any restrictions imposed under Section 162(m) of the Code, the Committee may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, provided that no such amendment that would require the consent of the Board and/or stockholders of the Company pursuant to Section 162(m) of the Code or the 1934 Act, or any other applicable law, rule or regulation, shall be effective without such consent. No such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder.

        10.    Miscellaneous Provisions.

        A.    Nontransferability.    No benefit provided under the Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute; (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of the Plan), and approved by the Committee, to satisfy income tax withholding; and (iii) as requested by the Participant and approved by the Committee, to members of the Participant's family, or a trust established by the Participant for the benefit of family members.

        B.    No Employment Right.    Participation in this Plan shall not constitute a contract of employment between the Company or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        C.    Tax Withholding.    The Company or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by the Company or a Subsidiary.

        D.    Indemnification.    Each person who is or at any time serves as a member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall

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give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

        E.    Reliance on Reports.    Each member of the Committee (and each person or Committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

        F.    Severability.    If any provision of this Plan would cause Awards not to constitute "other performance-based compensation" under Section 162(m) of the Code, that provision shall be severed from, and shall be deemed not to be a part of, the Plan, but the other provisions hereof shall remain in full force and effect. Any specific action by the Committee that would be violative of Section 162(m) of the Code and the regulations thereunder shall be void.

        G.    Company Successors.    In the event the Company becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the common stock of the Company will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of the Company under this Plan.

        H.    Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

        I.    Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program, unless expressly considered as compensation under the terms of such plan or program.

        J.    Expenses.    The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

        K.    Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

        11.    Effective Date.    The Plan shall be effective beginning on January 1, 2002, subject to approval by the stockholders of the Company in accordance with Maryland law and Section 162(m) of the Code, until December 31, 2006.

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Constellation Energy Group, Inc. Executive Annual Incentive Plan (Plan)

EX-10.(J)

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Exhibit 10(j)

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
2002 Senior Management Long-Term Incentive Plan
(Plan)

        1.    Purpose.    The purpose of this Plan is to increase shareholder value by providing a long-term incentive to reward certain executives, senior management level and key employees of the Company and its Subsidiaries, whose responsibilities include the continued growth, development, and financial success of the Company and its Subsidiaries, and the continued profitable performance of the Company and its Subsidiaries. The Plan is also designed to permit the Company and its Subsidiaries to attract and retain talented and motivated executive, senior management and key employees and to increase their ownership of Company common stock.

        2.    Definitions.    All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

        "Award" means individually or collectively, Restricted Stock, Options, Performance Units, Stock Appreciation Rights, Dividend Equivalents, or Equity granted under this Plan.

        "Board" means the Board of Directors of the Company.

        "Book Value" means the book value of a share of Stock determined in accordance with the Company's regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

        "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

        "Company" means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any "New Company" as provided in Section 15I.

        "Date of Grant" means the date on which the granting of an Award is authorized by the Plan Administrator or such later date as may be specified by the Plan Administrator in such authorization.

        "Date of Retirement" means the date of Retirement.

        "Disability" means the determination that a Participant is "disabled" under the Company disability plan in effect at that time.

        "Dividend Equivalent" means an Award granted under Section 11.

        "Eligible Person" means any person who satisfies all of the requirements of Section 5.

        "Equity" means an Award granted under Section 12.

        "Exercise Period" means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

        "Fair Market Value" means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date.

        "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code.

        "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

        "Option" or "Stock Option" means either a nonqualified stock option or an incentive stock option granted under Section 8.

        "Option Period" or "Option Periods" means the period or periods during which an Option is exercisable as described in Section 8.

        "Participant" means an individual who has been granted an Award under this Plan.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

        "Performance-Based Restricted Stock" means that in determining the amount of a Restricted Stock Award payout, the Plan Administrator will take into account the performance of the Participant, the Company, one or more Subsidiaries, or any combination thereof.

        "Performance Period" means the taxable year of the Company or any other period designated by the Plan Administrator with respect to which an Award may be granted.

        "Performance Unit" means a unit of measurement equivalent to such amount or measure as defined by the Plan Administrator which may include, but is not limited to, dollars, market value shares, or book value shares.

        "Plan Administrator" means, as set forth in Section 4, the Chief Executive Officer of the Company.

        "Restricted Stock" means Stock issued in the name of a Participant that bears a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Stock until the expiration of the restriction period.

        "Retirement" means retirement on or after the "Early Retirement Date" (as such term is defined in the Pension Plan or a Subsidiary's retirement or pension plan).

        "Service-Based Restricted Stock" means that in determining the amount of a Restricted Stock Award payout, the Plan Administrator will take into account only the period of time that the Participant performed services for the Company or its Subsidiaries since the Date of Grant.

        "Stock" means the common stock, without par value, of the Company.

        "Stock Appreciation Right" means an Award granted under Section 10.

        "Subsidiary(ies)" means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Plan Administrator, in his/her discretion.

        "Termination" means resignation or discharge from employment with the Company or any of its Subsidiaries except in the event of death, Disability, or Retirement.

        "Year" means a fiscal year of the Company commencing on or after January 1, 2002 that constitutes all or part of the applicable Performance Period.

        3.    Effective Date, Duration and Stockholder Approval.

        A.    Effective Date and Stockholder Approval.    The Plan became effective as of May 24, 2002.

        B.    Period for Grants of Awards.    Awards may be made as provided herein for a period of 10 years after May 24, 2002.

        C.    Termination.    The Plan will continue in effect until all matters relating to the payment of outstanding Awards and administration of the Plan have been settled.

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        4.    Plan Administration.    The Chief Executive Officer is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated purpose. Without limiting the generality of the foregoing, the Plan Administrator may modify, amend, extend or renew outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards (provided, however, that, except as provided in Section 15H of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the Participant, and provided, further, that no modification, amendment or substitution that results in repricing a Stock Option to a lower exercise price, other than to reflect an adjustment made pursuant to Section 15H, shall be made without prior stockholder approval).

        The Plan Administrator's determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and any agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Such determinations shall be final and not subject to further appeal.

        The Plan Administrator may delegate his/her authority under the Plan.

        5.    Eligibility.    Each officer (who is not a participant under the Company's Executive Long-Term Incentive Plan), senior management level or key employee of the Company and its Subsidiaries may be designated by the Plan Administrator as a Participant, from time to time, with respect to one or more Awards. No employee of the Company or its Subsidiaries shall have any right to be granted an Award under this Plan. The Plan Administrator may also grant Awards to individuals in connection with hiring (as an officer, senior management level or key employee), retention or otherwise, prior to the date the individual first performs services for the Company or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable prior to the date the individual first commences performance of such services.

        6.    Grant of Awards and Limitation of Number of Shares Awarded.    The Plan Administrator may, from time to time, grant Awards to one or more Eligible Persons, provided that subject to any adjustment pursuant to Section 15H, the aggregate number of shares of Stock subject to Awards that may be delivered under this Plan may not exceed five million (5,000,000) shares. Shares delivered by the Company under the Plan may be authorized and unissued Stock, Stock held in the treasury of the Company, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

        Any shares of Stock covered by an Award (or portion of an Award) granted under the Plan that is forfeited or canceled, expires or is settled in cash, including the settlement of tax withholding obligations using shares, shall be deemed not to have been delivered for purposes of determining the maximum number of shares available for delivery under the Plan. Likewise, if any Option granted under the Plan is exercised by tendering shares of Stock to the Company as full or partial payment for such exercise under the Plan, only the number of shares issued net of the shares tendered shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan.

        The Plan Administrator may permit or require a recipient of an Award to defer all or part of such individual's receipt of the payment of cash or the delivery of Stock that would otherwise be due to such individual by virtue of the exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or permitted, the Plan Administrator shall, in his/her sole discretion, establish rules and procedures for such payment deferrals.

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        7.    Service-Based Restricted Stock Awards.

        A.    Grants of Service-Based Restricted Shares.    One or more shares of Restricted Stock may be granted to any Eligible Person. The Service-Based Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Service-Based Restricted Stock will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Service-Based Restricted Stock until the expiration of the restriction period.

        The Plan Administrator may also impose such other restrictions and conditions on the Service-Based Restricted Stock as he/she deems appropriate.

        Upon issuance to the Participant of the Service-Based Restricted Stock, the Participant will have the right to vote the Service-Based Restricted Stock, and subject to the Plan Administrator's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Plan Administrator, in his/her sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

        B.    Restriction Period.    At the time a Service-Based Restricted Stock Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Plan Administrator.

        C.    Forfeiture or Payout of Award.    In the event a Participant ceases employment during a restriction period, a Service-Based Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock Award is prorated for service during the period; provided, however, that the Plan Administrator may modify the above if he/she determines at his/her sole discretion that special circumstances warrant such modification.

        Any shares of Service-Based Restricted Stock which are forfeited will be transferred to the Company.

        Upon completion of the restriction period, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

        D.    Waiver of Section 83(b) Election.    Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Service-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Service-Based Restricted Stock as income on the Date of Grant.

        8.    Stock Options.

        A.    Grants of Options.    One or more Options may be granted to any Eligible Person on the Date of Grant without the payment of consideration by the Participant.

        B.    Stock Option Agreement.    Each Option granted under the Plan will be evidenced by a "Stock Option Agreement" between the Company and the Participant containing provisions determined by the Plan Administrator, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Plan Administrator at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of

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an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant's purchase of the Stock to which the Option relates, (b) the Participant's exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Options to be immediately exercisable.

        C.    Option Price.    The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

        D.    Form of Payment.    At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Plan Administrator in his/her sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the applicable date.

        E.    Other Terms and Conditions.    The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

        F.    Lapse of Option.    An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—any unvested Option will lapse on the effective date of the Termination and any vested Option will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Option will lapse on the effective date of the Retirement, Disability or death and any vested Option will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Option Period set by the Grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

        G.    Individual Limitation.    In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

        9.    Performance-Based Restricted Stock/Performance Units.

        A.    Provision for Awards.    The Plan Administrator will determine a Performance Period and will determine the performance objectives for each Participant's target performance award and the number of shares of Performance-Based Restricted Stock or Performance Units subject to each target performance award. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, the Company, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Units or Performance-Based Restricted Stock for which different Performance Periods are prescribed.

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        If during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective

        B.    Performance-Based Restricted Stock Awards.

        (i)    Grants of Performance-Based Restricted Stock.    Subject to Section 9A, one or more shares of Performance-Based Restricted Stock may be granted to any Eligible Person. The Performance-Based Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock will be issued in the name of the Participant and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Performance-Based Restricted Stock until the expiration of the restriction period.

        The Plan Administrator may also impose such other restrictions and conditions on the Performance-Based Restricted Stock as he/she deems appropriate.

        Upon issuance to the Participant of the Performance-Based Restricted Stock, the Participant will have the right to vote the Performance-Based Restricted Stock, and subject to the Plan Administrator's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Plan Administrator, in his/her sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

        (ii)    Restriction Period.    At the time a Performance-Based Restricted Stock Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Performance-Based Restricted Stock Award may have a different restriction period, at the discretion of the Plan Administrator.

        (iii)    Waiver of Section 83(b) Election.    Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Performance-Based Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Performance-Based Restricted Stock as income on the Date of Grant.

        C.    Performance Units.    Subject to Section 9A, one or more Performance Units may be earned by an Eligible Person based on the achievement of preestablished performance objectives during a Performance Period.

        D.    Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied. The Plan Administrator's determination of all such matters will be final and conclusive.

        As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Award payment for each Participant.

        In the event a Participant ceases employment during a Performance Period, the Performance-Based Restricted Stock or Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance—Based Restricted Stock or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock or Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

        Any shares of Performance-Based Restricted Stock which are forfeited will be transferred to the Company.

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        E.    Form and Timing of Payment.    With respect to shares of Performance-Based Restricted Stock for which restrictions lapse, new certificates will be issued (the payout) without the restrictive legend described in Section 9B(i). Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in his/her sole discretion. Such payment will be made as soon as practicable after the Award payment is determined.

        10.    Stock Appreciation Rights.

        A.    Grants of Stock Appreciation Rights.    Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Plan Administrator may impose.

        B.    Right to Exercise; Exercise Period.    A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant's Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate the Company with another company is submitted to the stockholders of the Company for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

        C.    Failure to Exercise.    If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

        D.    Payment.    An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

        The Plan Administrator may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Plan Administrator may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Plan Administrator must consent to or disapprove such election and (ii) unless the Plan Administrator directs otherwise, the election and the exercise must be made during the period

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beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

        E.    Nontransferable.    A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative.

        F.    Lapse of a Stock Appreciation Right.    A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—any unvested Stock Appreciation Right will lapse on the effective date of the Termination and any vested Stock Appreciation Right will lapse 90 days after the effective date of the Termination; or (b) Retirement, Disability or death—any unvested Stock Appreciation Right will lapse on the effective date of the Retirement, Disability or death and any vested Stock Appreciation Right will lapse on the earlier of 60 months after the effective date of the Retirement, Disability or death or at the expiration of the Exercise Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification.

        11.    Dividend Equivalents.

        A.    Grants of Dividend Equivalents.    Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance-Based Restricted Stock or Performance Units, at any time during the Performance Period, without consideration by the Participant.

        B.    Payment.    Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Plan Administrator, in his/her sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Plan Administrator.

        C.    Nontransferable.    A Dividend Equivalent will not be transferable by the Participant.

        D.    Lapse of a Dividend Equivalent.    Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock Award; or (iv) the lapse date established by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

        12.    Equity.    One or more shares of Stock may be granted to any Eligible Person, in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Plan Administrator shall determine. An Equity Award may be denominated in Stock or other securities, stock-equivalent units, securities or debentures convertible into Stock, or any combination of the foregoing and may be paid in Stock or other securities, in cash, or in a combination of Stock or other securities and cash, all as determined in

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the sole discretion of the Plan Administrator. Unless the Plan Administrator determines otherwise, the vesting period for Equity Awards shall be at least three years.

        13.    Accelerated Award Payout/Exercise.

        A.    Change in Control.    Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout or accelerated Option or Exercise Period (as set forth in Section 13B) with respect to any previously granted Award, upon the happening of a change in control.

        A change in control for purposes of this Section 13 means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph  (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent

9

Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        B.    Amount of Award Subject to Accelerated Payout/Option Period/Exercise Period.    The amount of a Participant's previously granted Award that will be paid or exercisable upon the happening of a change in control will be determined as follows:

        Service-Based Restricted Stock Awards.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Service-Based Restricted Stock that were issued on the Date of Grant.

        Stock Option Awards and Stock Appreciation Rights.    Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately vested, any gain will be immediately paid in cash, and the Stock Option Awards and/or Stock Appreciation Rights will then lapse.

        Performance-Based Restricted Stock/Performance Units.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Performance-Based Restricted Stock/Performance Units subject to the Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

        Equity Awards.    Any previously granted Equity Award will be immediately vested.

        C.    Timing of Accelerated Payout/Option Period/Exercise Period.    The accelerated payout set forth in Section 13B will be made in cash within 30 days after the date of the change in control. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout date.

        14.    Amendment of Plan.    The Plan Administrator may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder.

        15.    Miscellaneous Provisions.

        A.    Nontransferability.    No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this

10

Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute; (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Plan Administrator, to satisfy income tax withholding; and (iii) as requested by the Participant and approved by the Plan Administrator, to members of the Participant's family, or a trust established by the Participant for the benefit of family members.

        B.    No Employment Right.    Participation in this Plan shall not constitute a contract of employment between the Company or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        C.    Tax Withholding.    the Company or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by the Company or a Subsidiary. Subject to compliance with any requirements of applicable law, the Plan Administrator may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to the Company or a Subsidiary, the retention by the Company or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant's Stock, having a Fair Market Value equal to the withholding amount.

        D.    Fractional Shares.    Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

        E.    Government and Other Regulations.    The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended ("Act"), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status.

        F.    Indemnification.    The Plan Administrator (and his/her designees) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan. Each person covered by this indemnification shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Charter or By-Laws of the Company or any of its Subsidiaries, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless.

        G.    Reliance on Reports.    The Plan Administrator (and each person to whom the Plan Administrator has delegated any of his/her authority or power under this Plan) shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan. In no event shall the Plan Administrator (or each person to whom the Plan Administrator has delegated any of his/her authority or power under this Plan) be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

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        H.    Changes in Capital Structure.    In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued to a Participant as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

        I.    Company Successors.    In the event the Company becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which the Company will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of the Company under this Plan.

        J.    Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

        K.    Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

        L.    Expenses.    The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

        M.    Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the 2002 Senior Management Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Kathleen A. Chagnon,
Corporate Secretary
750 East Pratt Street
18^th Floor
Baltimore, Maryland 21202
(410) 783-3600

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2002 Senior Management Long-Term Incentive Plan
Appendix

Additional Information

        The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

        Participants may obtain additional information about the Plan by contacting:

Director—Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5th Floor
Baltimore, MD 21202
(410) 783-2844

        After each grant is made, participants will be furnished with information about the amount of the grant. At least annually, participants will be furnished with information about their outstanding grants.

        In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse. Grants not subject to restrictions are taxable/deductible at fair market value on the grant date. Additionally, options are subject to other special tax provisions.

May 24, 2002

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Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (Plan)
2002 Senior Management Long-Term Incentive Plan Appendix

EX-10.(K)

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Exhibit 10(k)

This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.
Management Long-Term Incentive Plan
(Plan)

        1.    Objective.    The objective of this Plan is to increase shareholder value by providing a long-term incentive to reward management level and other designated employees of Constellation Energy and its Subsidiaries, whose responsibilities include the continued growth, development, and financial success of Constellation Energy and its Subsidiaries, for the continued profitable performance of Constellation Energy and its Subsidiaries. The Plan is also designed to assist Constellation Energy and its Subsidiaries to retain talented and motivated management level and other designated employees and to increase their ownership of Constellation Energy common stock.

        2.    Definitions.    All singular terms defined in this Plan will include the plural and vice versa. As used herein, the following terms will have the meaning specified below:

        "Award" means individually or collectively, Restricted Stock, Options, Performance Units, Stock Appreciation Rights, or Dividend Equivalents granted under this Plan.

        "Board" means the Board of Directors of Constellation Energy.

        "Book Value" means the book value of a share of Stock determined in accordance with Constellation Energy's regular accounting practices as of the last business day of the month immediately preceding the month in which a Stock Appreciation Right is exercised as provided in Section 10.

        "Constellation Energy" means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any "New Company" as provided in Section 14I.

        "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code will be deemed to include any amendments or successor provisions to such section and any regulations promulgated thereunder.

        "Date of Grant" means the date on which the granting of an Award is authorized by the Plan Administrator or such later date as may be specified by the Plan Administrator in such authorization.

        "Date of Retirement" means the date of Retirement or Early Retirement.

        "Disability" means the determination that a Participant is "disabled" under the Constellation Energy disability plan in effect at that time.

        "Dividend Equivalent" means an award granted under Section 11.

        "Early Retirement" means retirement prior to the Normal Retirement Date.

        "Earned Performance Award" means an actual award of a specified number of Performance Units (or shares of Restricted Stock, as the context requires) which the Plan Administrator has determined have been earned and are payable (or, in the case of Restricted Stock, earned and with respect to which restrictions will lapse) for a particular Performance Period.

        "Eligible Employee" means any person employed by Constellation Energy or a Subsidiary on a regularly scheduled basis who satisfies all of the requirements of Section 5.

        "Exercise Period" means the period or periods during which a Stock Appreciation Right is exercisable as described in Section 10.

        "Fair Market Value" means the average of the highest and lowest price at which the Stock was sold regular way on the New York Stock Exchange-Composite Transactions on a specified date.

        "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code.

        "1934 Act" means the Securities Exchange Act of 1934, as amended.

        "Normal Retirement Date" is the retirement date as described in the Pension Plan or a Subsidiary's retirement or pension plan.

        "Option" or "Stock Option" means either a nonqualified stock option or an incentive stock option granted under Section 8.

        "Option Period" or "Option Periods" means the period or periods during which an Option is exercisable as described in Section 8.

        "Participant" means an employee of Constellation Energy or a Subsidiary who has been granted an Award under this Plan.

        "Pension Plan" means the Pension Plan of Constellation Energy Group, Inc. as may be amended from time to time.

        "Performance-Based" means that in determining the amount of a Restricted Stock Award payout, the Plan Administrator will take into account the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof.

        "Performance Period" means a period of time, established by the Plan Administrator at the time an Award is granted, during which corporate and/or individual performance is measured.

        "Performance Unit" means a unit of measurement equivalent to such amount or measure as defined by the Plan Administrator which may include, but is not limited to, dollars, market value shares, or book value shares.

        "Plan Administrator" means, as set forth in Section 4, the Chief Executive Officer of Constellation Energy.

        "Restricted Stock" means an Award granted under Section 7.

        "Retirement" means retirement on or after the "Normal Retirement Date" (as such term is defined in the Pension Plan or a Subsidiary's retirement or pension plan).

        "Service-Based" means that in determining the amount of a Restricted Stock Award payout, the Plan Administrator will take into account only the period of time that the Participant performed services for Constellation Energy or its Subsidiaries since the Date of Grant.

        "Stock" means the common stock, without par value, of Constellation Energy.

        "Stock Appreciation Right" means an Award granted under Section 10.

        "Subsidiary(ies)" means any corporation of which 20% or more of its outstanding voting stock or voting power is beneficially owned, directly or indirectly, by Constellation Energy.

        "Target Performance Award" means a targeted award of a specified number of Performance Units (or shares of Restricted Stock, as the context requires) which may be earned and payable (or, in the case of Restricted Stock, earned and with respect to which restrictions will lapse) based upon the performance objectives for a particular Performance Period, all as determined by the Plan Administrator. The Target Performance Award will be a factor in the Plan Administrator's ultimate determination of the Earned Performance Award.

        "Termination" means resignation or discharge from employment with Constellation Energy or any of its Subsidiaries except in the event of death, Disability, Retirement or Early Retirement.

2

        3.    Effective Date and Duration.

        A.    Effective Date.    The Plan became effective as of February 1, 1998.

        B.    Period for Grants of Awards.    Awards may be made as provided herein for a period of 10 years after February 1, 1998.

        C.    Grants Outstanding.    Grants outstanding at the effective time of the share exchange between Constellation Energy and the common stockholders of Baltimore Gas and Electric Company (BGE) were converted from BGE common stock-based grants to Constellation Energy common stock-based grants.

        4.    Plan Administration.    The Chief Executive Officer of Constellation Energy is the Plan Administrator and has sole authority (except as specified otherwise herein) to determine all questions of interpretation and application of the Plan, or of the terms and conditions pursuant to which Awards are granted, exercised or forfeited under the Plan provisions, and, in general, to make all determinations advisable for the administration of the Plan to achieve its stated objective. Such determinations shall be final and not subject to further appeal. The Plan Administrator shall have the power to delegate all or any part of his/her duties to one or more designees, and to withdraw such authority, by written designation.

        5.    Eligibility.    Each employee of Constellation Energy who holds a management level position, and other employees of Constellation Energy and its Subsidiaries, may be designated by the Plan Administrator as a Participant, from time to time, with respect to one or more Awards. No employee of Constellation Energy or its Subsidiaries shall have any right to be granted an Award under this Plan.

        6.    Grant of Awards and Limitation of Number of Shares Awarded.    The Plan Administrator may, from time to time, grant Awards to one or more Eligible Employees, provided that (i) subject to any adjustment pursuant to Section 14H, the aggregate number of shares of Stock subject to Awards under this Plan may not exceed three million (3,000,000) shares; (ii) to the extent that an Award lapses or the rights of the Participant to whom it was granted terminate, any shares of Stock subject to such Award shall again be available for the grant of an Award under the Plan; and (iii) shares delivered by Constellation Energy under the Plan may be authorized and unissued Stock, Stock held in the treasury of Constellation Energy, or Stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

        7.    Restricted Stock Awards.

        A.    Grants of Restricted Shares.    One or more shares of Restricted Stock may be granted to any Eligible Employee. The Restricted Stock will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Restricted Stock will be issued either in the name of the Participant or in an agent account on behalf of one or more Participants, and will bear a restrictive legend prohibiting sale, transfer, pledge or hypothecation of the Restricted Stock until the expiration of the restriction period.

        The Plan Administrator may also impose such other restrictions and conditions on the Restricted Stock as it deems appropriate, and will designate the grant as either a Service-Based or Performance-Based Award.

        Upon issuance to the Participant of the Restricted Stock, the Participant will have the right to vote the Restricted Stock, and subject to the Plan Administrator's discretion, to receive the cash dividends distributable with respect to such shares, with such dividends treated as compensation to the Participant. The Plan Administrator, in his/her sole discretion, may direct the accumulation and payment of distributable dividends to the Participant at such times, and in such form and manner, as determined by the Plan Administrator.

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        B.    Service-Based Award.

        i.    Restriction Period.    At the time a Service-Based Restricted Stock Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Plan Administrator.

        ii.    Forfeiture or Payout of Award.    In the event a Participant ceases employment during a restriction period, a Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock Award is prorated for service during the period; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Restricted Stock Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy's request, payout of the Restricted Stock Award is prorated for service during the period; provided, however, that the Plan Administrator may modify the above if it determines at his/her sole discretion that special circumstances warrant such modification.

        Any shares of Restricted Stock which are forfeited will be transferred to Constellation Energy.

        Upon completion of the restriction period, all Award restrictions will expire and certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.

        C.    Performance-Based Award.

        i.    Restriction Period.    At the time a Performance-Based Restricted Stock Award is granted, the Plan Administrator will establish a restriction period applicable to such Award which will be not less than one year and not more than ten years. Each Restricted Stock Award may have a different restriction period, at the discretion of the Plan Administrator. The Plan Administrator will also establish a Performance Period.

        ii.    Performance Objectives.    The Plan Administrator will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant's Target Performance Award and the number of shares of Restricted Stock for each Target Performance Award that will be issued on the Date of Grant. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance-Based Restricted Stock Awards for which different Performance Periods are prescribed.

        If, during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator, which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective.

        iii.    Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied. The Plan Administrator's determination of all such matters will be final and conclusive.

        As soon as practicable after the later of (i) the date the Plan Administrator makes the above determination, or (ii) the completion of the restriction period, the Plan Administrator will determine the Earned Performance Award for each Participant. Such determination may result in forfeiture of all or some shares of Restricted Stock (if Target Performance Award performance objectives were not

4

attained), or the issuance of additional shares of Stock (if Target Performance Award performance objectives were exceeded), and will be based upon such factors as the Plan Administrator determines at his/her sole discretion, but including the Target Performance Award performance objectives.

        In the event a Participant ceases employment during a restriction period, the Restricted Stock Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock Award is prorated taking into account factors including, but not limited to, service during the period; and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Restricted Stock Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy's request, payout of the Restricted Stock Award is prorated taking into account factors including, but not limited to, service during the period and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if it determines at his/her sole discretion that special circumstances warrant such modification.

        Any shares of Restricted Stock which are forfeited will be transferred to Constellation Energy.

        With respect to shares of Restricted Stock for which restrictions lapse, certificates will be issued (the payout) without the restrictive legend described in Section 7A. Certificates will also be issued for additional Stock, if any, awarded to the Participant because Target Performance Award performance objectives were exceeded.

        D.    Waiver of Section 83(b) Election.    Unless otherwise directed by the Plan Administrator, as a condition of receiving an Award of Restricted Stock, a Participant must waive in writing the right to make an election under Section 83(b) of the Code to report the value of the Restricted Stock as income on the Date of Grant.

        8.    Stock Options

        A.    Grants of Options.    One or more Options may be granted to any Eligible Employee on the Date of Grant without the payment of consideration by the Participant.

        B.    Stock Option Agreement.    Each Option granted under the Plan will be evidenced by a "Stock Option Agreement" between Constellation Energy and the Participant containing provisions determined by the Plan Administrator, including, without limitation, provisions to qualify Incentive Stock Options as such under Section 422 of the Code if directed by the Plan Administrator at the Date of Grant; provided, however, that each Incentive Stock Option Agreement must include the following terms and conditions: (i) that the Options are exercisable, either in total or in part, with a partial exercise not affecting the exercisability of the balance of the Option; (ii) every share of Stock purchased through the exercise of an Option will be paid for in full at the time of the exercise; (iii) each Option will cease to be exercisable, as to any share of Stock, at the earliest of (a) the Participant's purchase of the Stock to which the Option relates, (b) the Participant's exercise of a related Stock Appreciation Right, or (c) the lapse of the Option; (iv) Options will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative; and (v) notwithstanding any other provision, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate Constellation Energy with another company is submitted to the stockholders of Constellation Energy for a vote, the Plan Administrator, in his\her sole discretion, may declare any previously granted Option to be immediately exercisable.

        C.    Option Price.    The Option price per share of Stock will be set by the grant, but will be not less than 100% of the Fair Market Value at the Date of Grant.

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        D.    Form of Payment.    At the time of the exercise of the Option, the Option price will be payable in cash or in other shares of Stock or in a combination of cash and other shares of Stock, in a form and manner as required by the Plan Administrator in his/her sole discretion. When Stock is used in full or partial payment of the Option price, it will be valued at the Fair Market Value on the date the Option is exercised.

        E.    Other Terms and Conditions.    The Option will become exercisable in such manner and within such Option Period or Periods, not to exceed 10 years from its Date of Grant, as set forth in the Stock Option Agreement upon payment in full. Except as otherwise provided in this Plan or in the Stock Option Agreement, any Option may be exercised in whole or in part at any time.

        F.    Lapse of Option.    An Option will lapse upon the earlier of: (i) 10 years from the Date of Grant, or (ii) at the expiration of the Option Period set by the grant. If the Participant ceases employment within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Termination—the Option will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Option will lapse at the expiration of the Option Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification. If the Participant dies within the Option Period and prior to the lapse of the Option, the Option will lapse at the expiration of the Option Period set by the grant unless it is exercised before such time by the Participant's legal representative(s) or by the person(s) entitled to do so under the Participant's Will or, if the Participant fails to make testamentary disposition of the Option or dies intestate, by the person(s) entitled to receive the Option under the applicable laws of descent and distribution.

        G.    Individual Limitation.    In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Stock for which Incentive Stock Options (whether under this Plan or another arrangement) in any calendar year are first exercisable will not exceed $100,000 with respect to such calendar year (or such other individual limit as may be in effect under the Code on the Date of Grant) plus any unused portion of such limit as the Code may permit to be carried over.

        9.    Performance Units.

        A.    Performance Units.    One or more Performance Units may be earned by an Eligible Employee based on the achievement of preestablished performance objectives during a Performance Period.

        B.    Performance Period and Performance Objectives.    The Plan Administrator will determine a Performance Period and will determine, no later than 90 days after the beginning of each Performance Period, the performance objectives for each Participant's Target Performance Award and the number of Performance Units subject to each Target Performance Award. Performance objectives may vary from Participant to Participant and will be based upon such performance criteria or combination of factors as the Plan Administrator deems appropriate, which may include, but not be limited to, the performance of the Participant, Constellation Energy, one or more Subsidiaries, or any combination thereof. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Units for which different Performance Periods are prescribed.

        If during the course of a Performance Period significant events occur as determined in the sole discretion of the Plan Administrator which the Plan Administrator expects to have a substantial effect on a performance objective during such period, the Plan Administrator may revise such objective.

        C.    Forfeiture or Payout of Award.    As soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied. The Plan Administrator's determination of all such matters will be final and conclusive.

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        As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Earned Performance Award for each Participant. Such determination may result in an increase or decrease in the number of Performance Units payable based upon such Participant's Target Performance Award, and will be based upon such factors as the Plan Administrator determines in his/her sole discretion, but including the Target Performance Award performance objectives.

        In the event a Participant ceases employment during a Performance Period, the Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; or (c) Early Retirement—if at the Participant's request, the payout or forfeiture of the Performance Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy's request, payout of the Performance Unit Award is prorated taking into account factors including, but not limited to, service and the performance of the Participant during the portion of the Performance Period before employment ceased; provided, however, that the Plan Administrator may modify the above if it determines in his/her sole discretion that special circumstances warrant such modification.

        D.    Form and Timing of Payment.    Each Performance Unit is payable in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in his/her sole discretion. Such payment will be made as soon as practicable after the Earned Performance Award is determined.

        10.    Stock Appreciation Rights.

        A.    Grants of Stock Appreciation Rights.    Stock Appreciation Rights may be granted under the Plan in conjunction with an Option either at the Date of Grant or by amendment or may be separately granted. Stock Appreciation Rights will be subject to such terms and conditions not inconsistent with the Plan as the Plan Administrator may impose.

        B.    Right to Exercise; Exercise Period.    A Stock Appreciation Right issued pursuant to an Option will be exercisable to the extent the Option is exercisable; both such Stock Appreciation Right and the Option to which it relates will not be exercisable during the six months following their respective Dates of Grant except in the event of the Participant's Disability or death. A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the grant. Notwithstanding such terms and conditions, in the event of a public tender for all or any portion of the Stock or in the event that any proposal to merge or consolidate Constellation Energy with another company is submitted to the stockholders of Constellation Energy for a vote, the Plan Administrator, in his/her sole discretion, may declare any previously granted Stock Appreciation Right immediately exercisable.

        C.    Failure to Exercise.    If on the last day of the Option Period, in the case of a Stock Appreciation Right granted pursuant to an Option, or the specified Exercise Period, in the case of a Stock Appreciation Right issued independent of an Option, the Participant has not exercised a Stock Appreciation Right, then such Stock Appreciation Right will be deemed to have been exercised by the Participant on the last day of the Option Period or Exercise Period.

        D.    Payment.    An exercisable Stock Appreciation Right granted pursuant to an Option will entitle the Participant to surrender unexercised the Option or any portion thereof to which the Stock Appreciation Right is attached, and to receive in exchange for the Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Option price,

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times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess of the Book Value of one share of Stock at the date of exercise over the Book Value of one share of Stock at the Date of Grant of the related Option, times the number of shares called for by the Stock Appreciation Right. Upon exercise of a Stock Appreciation Right not granted pursuant to an Option, the Participant will receive for each Stock Appreciation Right payment (in cash or Stock or a combination thereof as described below) equal to either of the following amounts, determined in the sole discretion of the Plan Administrator at the Date of Grant: (1) the excess of the Fair Market Value of one share of Stock at the date of exercise over the Fair Market Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right, or (2) the excess of the Book Value of one share of Stock at the date of exercise of the Stock Appreciation Right over the Book Value of one share of Stock at the Date of Grant of the Stock Appreciation Right, times the number of shares called for by the Stock Appreciation Right.

        The Plan Administrator may direct the payment in settlement of the Stock Appreciation Right to be in cash or Stock or a combination thereof. Alternatively, the Plan Administrator may permit the Participant to elect to receive cash in full or partial settlement of the Stock Appreciation Right, provided that (i) the Plan Administrator must consent to or disapprove such election and (ii) unless the Plan Administrator directs otherwise, the election and the exercise must be made during the period beginning on the 3rd business day following the date of public release of quarterly or year-end earnings and ending on the 12th business day following the date of public release of quarterly or year-end earnings. The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised. To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

        E.    Nontransferable.    A Stock Appreciation Right will not be transferable by the Participant except by Will or the laws of descent and distribution and will be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or legal representative.

        F.    Lapse of a Stock Appreciation Right.    A Stock Appreciation Right will lapse upon the earlier of: (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant. If the Participant ceases employment within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) Termination—the Stock Appreciation Right will lapse on the effective date of the Termination; or (b) Retirement, Early Retirement, or Disability—the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant; provided, however, that the Plan Administrator may modify the above if he/she determines in his/her sole discretion that special circumstances warrant such modification. If the Participant dies within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse at the expiration of the Exercise Period set by the grant unless it is exercised before such time by the Participant's legal representative(s) or by the person(s) entitled to do so under the Participant's Will or, if the Participant fails to make testamentary disposition of the Stock Appreciation Right or dies intestate, by the person(s) entitled to receive the Stock Appreciation Right under the applicable laws of descent and distribution.

        11.    Dividend Equivalents.

        A.    Grants of Dividend Equivalents.    Dividend Equivalents may be granted under the Plan in conjunction with an Option or a separately awarded Stock Appreciation Right, at the Date of Grant or by amendment, without consideration by the Participant. Dividend Equivalents may also be granted under the Plan in conjunction with Performance Units, at any time during the Performance Period, without consideration by the Participant. Dividend Equivalents will be granted under a Performance-Based Restricted Stock Award in conjunction with additional shares of Stock issued if Target Performance Award performance objectives are exceeded.

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        B.    Payment.    Each Dividend Equivalent will entitle the Participant to receive an amount equal to the dividend actually paid with respect to a share of Stock on each dividend payment date from the Date of Grant to the date the Dividend Equivalent lapses as set forth in Section 11D. The Plan Administrator, in his/her sole discretion, may direct the payment of such amount at such times and in such form and manner as determined by the Plan Administrator.

        C.    Nontransferable.    A Dividend Equivalent will not be transferable by the Participant.

        D.    Lapse of a Dividend Equivalent.    Each Dividend Equivalent will lapse on the earlier of (i) the date of the lapse of the related Option or Stock Appreciation Right; (ii) the date of the exercise of the related Option or Stock Appreciation Right; (iii) the end of the Performance Period (or if earlier, the date the Participant ceases employment) of the related Performance Units or Performance-Based Restricted Stock Award; or (iv) the lapse date established by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

        12.    Accelerated Award Payout/Exercise.

        A.    Change in Control.    Notwithstanding anything in this Plan document to the contrary, a Participant is entitled to an accelerated payout or accelerated Option or Exercise Period (as set forth in Section 12B) with respect to any previously granted Award, upon the happening of a change in control.

        A change in control for purposes of this Section 12 means the occurrence of any one of the following events:

        (i)    individuals who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the "Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

        (ii)    any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the event described in this paragraph  (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Participant or any group of persons including Participant (or any entity controlled by Participant or any group of persons including Participant);

        (iii)    Company shareholder approval of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies,

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whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

        (iv)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

        B.    Amount of Award Subject to Accelerated Payout/Option Period/Exercise Period.    The amount of a Participant's previously granted Award that will be paid or exercisable upon the happening of a change in control will be determined as follows:

        Restricted Stock Awards.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of shares of Restricted Stock that were issued on the Date of Grant, prorated based on the number of months of the restriction period that have elapsed as of the payout date. Also, with respect to Performance-Based Restricted Stock Awards, in determining the amount of the payout, maximum performance achievement will be assumed.

        Stock Option Awards and Stock Appreciation Rights.    Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately exercisable.

        Performance Units.    The Participant will be entitled to an accelerated Award payout, and the amount of the payout will be based on the number of Performance Units subject to the Target Performance Award as established on the Date of Grant, prorated based on the number of months of the Performance Period that have elapsed as of the payout date, and assuming that maximum performance was achieved.

        C.    Timing of Accelerated Payout/Option Period/Exercise Period.    The accelerated payout set forth in Section 12B will be made in cash within 30 days after the date of the change in control. The

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accelerated Option Period/Exercise Period set forth in Section 12B will begin on the date of the change in control, and applicable payments will be in cash. When Stock is related to the Award, the amount of cash will be determined based on the Fair Market Value of Stock on the payout or exercise date, whichever is applicable.

        13.    Amendment of Plan.

        The Plan Administrator may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, except no such action may be taken without the consent of the Participant to whom any Award was previously granted, which adversely affects the rights of such Participant concerning such Award, except as such termination or amendment of the Plan is required by statute, or rules and regulations promulgated thereunder.

        14.    Miscellaneous Provisions.

        A.    Nontransferability.    No benefit provided under this Plan shall be subject to alienation or assignment by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process except (i) to the extent specifically mandated and directed by applicable state or federal statute, (ii) as requested by the Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), and approved by the Plan Administrator, to satisfy income tax withholding, and (iii) as requested by the Participant and approved by the Plan Administrator, to members of the Participant's family, or a trust established by the Participant for the benefit of family members.

        B.    No Employment Right.    Participation in this Plan shall not constitute a contract of employment between Constellation Energy or any Subsidiary and any person and shall not be deemed to be consideration for, or a condition of, continued employment of any person.

        C.    Tax Withholding.    Constellation Energy or a Subsidiary may withhold any applicable federal, state or local taxes at such time and upon such terms and conditions as required by law or determined by Constellation Energy or a Subsidiary. Subject to compliance with any requirements of applicable law, the Plan Administrator may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to Constellation Energy or a Subsidiary, the retention by Constellation Energy or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant's Stock, having a Fair Market Value equal to the withholding amount.

        D.    Fractional Shares.    Any fractional shares concerning Awards shall be eliminated at the time of payment or payout by rounding down for fractions of less than one-half and rounding up for fractions of equal to or more than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

        E.    Government and Other Regulations.    The obligation of Constellation Energy to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. Constellation Energy shall be under no obligation to register under the Securities Act of 1933, as amended ("Act"), any of the shares of Stock issued, delivered or paid in settlement under the Plan. If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, Constellation Energy may restrict its transfer in such manner as it deems advisable to ensure such exempt status. The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974.

        F.    Indemnification.    The Plan Administrator (and his/her designees), and Constellation Energy's Chairman of the Board, and President and all other employees of Constellation Energy or its Subsidiaries whose assigned duties include matters under the Plan, shall be indemnified by Constellation Energy or its Subsidiaries or from proceeds under insurance policies purchased by

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Constellation Energy or its Subsidiaries against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any related claim.

        G.    Changes in Capital Structure.    In the event of any change in the outstanding shares of Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar changes in the Stock, then appropriate adjustments shall be made in the shares of Stock theretofore awarded to the Participants and in the aggregate number of shares of Stock which may be awarded pursuant to the Plan. Such adjustments shall be conclusive and binding for all purposes. Additional shares of Stock issued as the result of any such change shall bear the same restrictions as the shares of Stock to which they relate.

        H.    Constellation Energy Successors.    In the event Constellation Energy becomes a party to a merger, consolidation, sale of substantially all of its assets or any other corporate reorganization in which Constellation Energy will not be the surviving corporation or in which the holders of the Stock will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy under this Plan.

        I.    Governing Law.    All matters relating to the Plan or to Awards granted hereunder shall be governed by the laws of the State of Maryland, without regard to the principles of conflict of laws.

        J.    Relationship to Other Benefits.    Any Awards under this Plan are not considered compensation for purposes of determining benefits under any pension, profit sharing, or other retirement or welfare plan, or for any other general employee benefit program.

        K.    Expenses.    The expenses of administering the Plan shall be borne by Constellation Energy and its Subsidiaries.

        L.    Titles and Headings.    The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.

You may obtain without charge, upon written or oral request, a copy of documents incorporated by reference in the Registration Statement on file with the Securities and Exchange Commission pertaining to the securities offered under the Management Long-Term Incentive Plan. In addition you may obtain, without charge, upon written or oral request, a copy of documents that are required to be delivered under Rule 428(b) of the Securities Act including our annual report to shareholders or annual report on Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any of these documents, you may telephone or write:

Kathleen A. Chagnon
Corporate Secretary
750 East Pratt Street
18^th Floor
Baltimore, Maryland 21202
(410) 783-3600

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Management Long-Term Incentive Plan
Appendix

Additional Information

        The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

        Participants may obtain additional information about the Plan by contacting:

Director—Compensation
Constellation Energy Group, Inc.
750 East Pratt Street
5^th Floor
Baltimore, MD 21201-2437
(410) 783-2844

        After each grant is made, participants will be furnished with information about the amount of the grant. At least annually, participants will be furnished with information about their outstanding grants.

        In general, grants subject to restrictions are taxable to participants when the restrictions lapse, and deductible by Constellation Energy at such time, based on the fair market value of the awards when the restrictions lapse. Grants not subject to restrictions are taxable/deductible at fair market value on the grant date. Additionally, options are subject to other special tax provisions.

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EX-10.(L)

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Exhibit 10(l)

CONSENT TO ASSIGNMENT AND ASSUMPTION AGREEMENT

by and among

ALLEGHENY ENERGY SUPPLY COMPANY, LLC

And

BALTIMORE GAS AND ELECTRIC COMPANY

And

CONSTELLATION POWER SOURCE, INC.

Dated as of May 9, 2003

CONSENT TO ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Consent to Assignment and Assumption Agreement ("Agreement") is by and among Allegheny Energy Supply Company, LLC ("Assignor"), Baltimore Gas and Electric Company ("Utility") and Constellation Power Source, Inc. (Assignee").

RECITALS

        WHEREAS, Assignor, on August 15, 2001, entered into a Full Requirements Service Agreement with Utility (the "Assigned Agreement"), which is incorporated into and made a part of this Agreement by reference as if set forth in full in this Agreement; and

        WHEREAS, Assignor conducted a competitive request for proposals beginning on March 27, 2003 to assign the Assigned Agreement to which numerous parties responded; and

        WHEREAS, Assignee was the winning bidder in the competitive request for proposals process; and

        WHEREAS, Assignor and Assignee are parties to that certain Assignment and Assumption Agreement, dated as of May 9, 2003 (the "Assignment and Assumption Agreement"), pursuant to which, among other things, Assignor has agreed to sell, transfer, convey and assign to Assignee the Assigned Agreement and Assignee has agreed to accept such sale, transfer, conveyance and assignment of the Assigned Agreement; and

        WHEREAS, the Assigned Agreement, by its terms, is assignable and Assignor, pursuant to the Assignment and Assumption Agreement, desires to sell, transfer, convey and assign to Assignee all of Assignor's rights, title, benefits, privileges and interests in and to the Assigned Agreement and Assignee desires to acquire and accept such rights, title, benefits, privileges and interests and to assume the Contract Liabilities; and

        WHEREAS, Utility agrees, effective as of the Assignment Date, to consent to the assignment by Assignor to Assignee of all of Assignor's rights, title, benefits, privileges and interests in and to the Assigned Agreement and the acquisition and acceptance by Assignee of such rights, title, benefits, privileges and interests and to the assumption by Assignee of the Contract Liabilities, on the terms and conditions contained herein; and

        WHEREAS, each of the Assignor, Assignee and Utility acknowledge that the assignment contemplated in the Assignment and Assumption Agreement is contingent on the Federal Energy Regulatory Commission ("FERC") issuing an order approving the 203 filing to be made by Assignor; and

        WHEREAS, Assignor and Assignee have agreed to a Back-to-Back Agreement in the event that such FERC approval is not received prior to June 27 and provided that Closing has occurred, 2003 and have further agreed that the Back-to-Back Agreement will be in place effective as of Flow Date and continuing until the earlier of (i) the Assignment Date and (ii) the end of the Term of the Assigned Agreement (as defined therein); and

[DELETED TEXT]

        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

        1.    Definitions.    All capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Assignment and Assumption Agreement.

        2.    Consent to Assignment and Assumption Agreement.    In satisfaction of Section 13.2 of the Assigned Agreement, effective as of the Assignment Date, Utility hereby consents to the Assignment

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and Assumption Agreement and all of the terms and conditions thereunder including, without limitation, (i) the assignment, sale, transfer and conveyance by Assignor to Assignee of all of Assignor's rights, title, benefits, privileges and interests in and to the Assigned Agreement, and (ii) the acquisition and acceptance by Assignee of all of such rights, title, benefits, privileges and interests and the assumption by Assignee of the Contract Liabilities. Utility hereby agrees, effective as of the Assignment Date, to be bound by the terms of the Assigned Agreement and to perform all obligations of Utility thereunder as if the Assigned Agreement had been entered into originally between Utility and Assignee but with all other terms remaining unaltered except as expressly altered herein. Utility agrees that Assignee's only liability and obligations under the Assigned Agreement are the Contract Liabilities and that Assignee shall not have liability or obligations with respect to the Excluded Liabilities.

        3.    Releases.    Effective on the Assignment Date and subject to the occurrence of the Closing, Utility hereby releases, acquits and forever discharges Assignor and each of its officers, directors, agents, servants, employees, present and future parent, subsidiary and affiliated corporations, successors in interest, insurers, assigns and indemnitees, of and from any and all claims of whatsoever kind and nature, character and description, whether known or unknown, and whether anticipated or unanticipated, arising from the Assigned Agreement and any events, transactions or occurrences thereunder that happened at any time on and after the Assignment Date. Effective on the Assignment Date and subject to the occurrence of the Closing, Assignor hereby releases, acquits and forever discharges Utility and each of its officers, directors, agents, servants, employees, present and future parent, subsidiary and affiliated corporations (excluding Assignee), successors in interest, insurers, assigns and indemnitees, of and from any and all claims of whatsoever kind and nature, character and description, whether known or unknown, and whether anticipated or unanticipated, arising from the Assigned Agreement and any events, transactions or occurrences thereunder that happened at any time on and after, the Assignment Date. Notwithstanding anything contained herein to the contrary, the consent and releases set forth herein shall (i) not release or discharge any party from its obligations under this Agreement, and (ii) be deemed to be of no force and effect if the Assignment Date or the Closing does not occur.

[DELETED TEXT]

        5.    Back-to-Back Agreement and [DELETED TEXT].    Utility acknowledges that, pursuant to the Assignment and Assumption Agreement, if FERC has not issued an order approving the Assignor's 203 filing prior to June 27, 2003 and provided that Closing has occurred, then effective as of Flow Date and continuing until the earlier of (i) the Assignment Date and (ii) the end of the Term of the Assigned Agreement (as defined therein) (the "Back-to-Back Period"), Assignee shall sell and deliver, or cause to be delivered to Assignor and Assignor shall purchase and receive, or cause to be received from Assignee the Full Requirements Service (as defined in the Assigned Agreement) that Assignor is obligated to deliver and Utility is obligated to receive under the terms and conditions set forth in the Assigned Agreement, but only to the extent that Assignor actually in fact delivers the Full Requirements Service to Utility under the terms of the Assigned Agreement. Under the Back-to-Back Agreement, Assignee shall be entitled to any and all proceeds from "Transmission Congestion Rights" that Assignor is entitled to under the Assigned Agreement. For the purposes of the Back-to-Back Agreement, "Transmission Congestion Rights" shall be defined as Fixed Transmission Rights (as defined in the Assigned Agreement), Auction Revenue Right's (as defined by PJM), currently referred to as Financial Transmission Rights by PJM, or any subsequent similar structure whereby Assignor is entitled under the Assigned Agreement to receive revenue from congestion credits. In addition, Assignee shall be entitled to receive any penalty associated with the PJM RAA for Utility's failure to implement its Load Response Resources (as defined in the Assigned Agreement).

        Utility further acknowledges, and agrees, that, pursuant to the Assignment and Assumption Agreement, during the Back-to-Back Period, Assignee shall be Assignor's exclusive agent and Assignee shall assume responsibility for, including but not limited to, the following actions to the extent Assignor

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may otherwise lawfully take them under the Assigned Agreement, and may take such actions without Assignor giving its approval thereof: (i) directing and scheduling the quantity and timing of thehourly load demands under the Assigned Agreement; (ii) dealing directly with Utility, PJM and other transmission providers, federal, state and local governmental authorities and any other persons; (iii) nominating Transmission Congestion Rights and receiving directly, through assignment or otherwise, the revenues associated therewith and (iv) billing, collecting and performing all settlements necessary [DELETED TEXT]

        6.    Credit Support During Back-to-Back Period.    Solely for the purposes of the Back-to-Back Agreement and only during the Back-to-Back Period, Utility acknowledges and agrees that (i) credit support under Article 8 of the Assigned Agreement shall come solely from Assignee under the terms and conditions set forth below in Section 6(a) and (ii) Utility shall not have any rights to request credit support under Article 8 of the Assigned Agreement from Assignor.

        (a)   Unless Assignee satisfies the Creditworthiness Criteria, as security for Assignor's obligations under the Assigned Agreement, Assignee shall deliver to BGE a guaranty of payment from either Parent, or another affiliate of Assignee that satisfies the Creditworthiness Criteria, in an amount equal to the reasonably determined credit exposure of BGE to Assignor taking into account such factors as market risk, settlement risk, the underlying creditworthiness of Assignee, or such other conditions as may be reasonable under the circumstances. Such credit support shall be available to be drawn upon by BGE in the event of default by Assignee of its obligations hereunder, and except as otherwise provided in this paragraph shall be maintained in effect (by annual renewal or otherwise) by Assignee for the Term of the Assigned Agreement. Assignee may deliver substitute credit support pursuant to 8.1(b) of the Assigned Agreement. Notwithstanding the foregoing, if at any time during the Term of the Assigned Agreement, Assignee satisfies the Creditworthiness Criteria or the parties agree to alternative credit arrangements, its obligation to deliver any credit support pursuant to this paragraph shall be suspended for so long as Assignee continues to satisfy the Creditworthiness Criteria. From and after the date on which Assignee satisfies the Creditworthiness Criteria, Assignee shall make all certifications to BGE as Assignor would have been required to do under 8.1(c) of the Assigned Agreement. If at any time thereafter Assignee no longer satisfies the Creditworthiness Criteria, then Assignee shall, within ten (10) business days after receipt of written notice with respect thereto, deliver a guaranty that satisfies the requirements of 8.1(a) of the Assigned Agreement or other credit support in accordance with section 8.1(b) of the Assigned Agreement. The failure of Assignee or its guarantor to maintain any of the security requirements under this paragraph shall be considered an "Event of Default" under Section 7.1 of the Assigned Agreement with both Assignee and Assignor deemed to be the "Defaulting Party". Assignee shall then be liable for any resulting Termination Payment under the Assigned Agreement, if such a payment is owed by the Defaulting Party. All capitalized terms in this Section which have not been previously defined shall have the meanings ascribed to such terms in the Assigned Agreement.

        7.    Utility Representations.

        (a)   Utility is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and is in good standing in all jurisdictions where necessary in light of the business it conducts (including, without limitation, performance of its obligations under the Assigned Agreement) and the properties it owns.

        (b)   Utility has the necessary corporate power, authority and legal right to execute, deliver and perform the Assigned Agreement and this Agreement, and the execution and delivery by the Utility of the Assigned Agreement and this Agreement and the performance of its obligations there under and hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Utility's board of directors except for those consents and approvals which may have been duly obtained and are in full force and effect, (ii) violate any provisions

3

of the corporate charter or by-laws of the Utility or any provision of any law, rule, or regulation, or any order, write, judgment, injunction, decree, determination or award having applicability to the Utility, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Utility is a party or by which it or its properties may be bound or affected.

        (c)   Each of the Assigned Agreement and this Agreement has been duly executed and delivered, is in full force and effect and constitutes a legal, valid and binding obligation of the Utility, enforceable in accordance with its terms, and there are no amendments, modifications or supplements thereto, either oral or written.

        (d)   Utility has not assigned, transferred, pledged or hypothecated the Assigned Agreement or any interest therein.

        (e)   Other than FERC approval, no consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of the Assigned Agreement or this Agreement or the performance by the Utility of its obligations there under or hereunder.

        (f)    Utility has contracted for the delivery of power (including energy, capacity, ancillary services or other components) under the Assigned Agreement and will accept the delivery of such power from suppliers under the Assigned Agreement as agent for its customers.

        8.    Assignee Representations.

        (a)   The Assignee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is in good standing in all jurisdictions where necessary in light of the business it conducts (including without limitation performance of its obligations under the Assigned Agreement) and the properties it owns.

        (b)   The Assignee has the necessary corporate power, authority and legal right to perform the Assigned Agreement and this Agreement, and the execution and delivery by the Assignee of this Agreement and the performance of its obligations thereunder and under the Assigned Agreement have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Assignee's board of directors except for those consents and approvals which may have been duly obtained and are in full force and effect, (ii) violate any provisions of the corporate charter or by-laws of the Assignee or any provision of any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award having applicability to the Assignee, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Assignee is a party or by which it or its properties may be bound or affected

        (c)   This Agreement has been duly executed and delivered, is in full force and effect and constitutes a legal, valid and binding obligation of the Assignee, enforceable in accordance with its terms.

        (d)   Other than FERC approval, no consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of this Agreement or the performance by the Assignee of its obligations thereunder or under the Assigned Agreement.

        9.    Assignor Representations.

        (a)   The Assignor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is in good standing in all jurisdictions where necessary in light of the

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business it conducts (including, without limitation, performance of its obligations under the Assigned Agreement) and the properties it owns.

        (b)   The Assignor has the necessary corporate power, authority and legal right to execute, deliver and perform the Assigned Agreement and this Agreement, and the execution and delivery by Assignor of the Assigned Agreement and this Agreement and the performance of its obligations thereunder and hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Assignor's directors except for those consents and approvals which may have been duly obtained and are in full force and effect (ii) violate any provisions of the corporate charter or by-laws of the Assignor or any provision of any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award having applicability to the Assignor, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Assignor is a party or by which it or its properties may be bound or affected.

        (c)   Each of the Assigned Agreement and this Agreement has been duly executed and delivered, is in full force and effect and constitutes a legal, valid and binding obligation of the Assignor, enforceable in accordance with its terms, and there are no amendments, modifications or supplements thereto, either oral or written.

        (d)   The Assignor has not assigned, transferred, pledged or hypothecated the Assigned Agreement or any interest therein.

        (e)   Other than FERC approval, no consent or approval of, or other action by, or any notice or filing with, any court or administrative or governmental body (except those previously obtained and in full force and effect) is required in connection with the execution and delivery of the Assigned Agreement or this Agreement or the performance by the Assignor of its obligations thereunder or hereunder; provided, however, that Assignor intends to provide an informational filing to the Maryland Public Service Commission Board of Public Utilities advising of the assignment of the Assigned Agreement on or about the time that Assignor makes the 203 filing with the FERC.

        10.    Setoff Rights.    Assignor, Assignee and Utility hereby agree, effective as of the Closing, that Assignee may, in its sole and absolute discretion, setoff any and all amounts which are due and owing from Assignee to Assignor under the Assignment and Assumption Agreement against any and all amounts which are due and owing from Assignor to Utility under the Assigned Agreement and that, upon such setoff, Assignee shall not owe such amounts to Assignor and Assignor shall not owe such amounts to Utility, provided, however, that any amounts then or thereafter owing from Utility to Assignee are correspondingly reduced by the amount setoff.

        11.    Notice.    All notices, requests, statements or payments shall be made as specified below. All notices are required to be in writing and shall be delivered by letter, facsimile or other documentary form. Notice by facsimile or hand delivery shall be deemed to have been received by the close of the Business Day on which it was transmitted or hand delivered (unless transmitted or hand delivered after close in which case it shall be deemed received at the close of the next Business Day). Notice by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent. A Party may change its addresses by providing notice of same in accordance herewith. Notices shall be sent as follows:

If to Assignor, to:

Contract Administration
Allegheny Energy Supply Company, LLC
4350 Northern Pike
Monroeville, PA 15146-2841

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If to Assignee, addressed to:

Constellation Power Source, Inc.
Attn: General Counsel
111 Market Place
Suite 500
Baltimore, Maryland 21202
Phone: (410) 468-3500
Fax: (410) 468-3499

If to Utility, addressed to:

Baltimore Gas and Electric Company
General Counsel
20^th Floor—Gas and Electric Bldg.
39 W. Lexington Street
Baltimore, Maryland 21201
Phone: (410) 234-6318
Fax: (410) 234-5012

        12.    Governing Law.    The parties hereto agree that this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, excluding any choice of law rules, which may direct the application of the laws of another jurisdiction.

        13.    Waiver.    No term, covenant or condition hereof shall be deemed waived and no breach excused unless such waiver or excuse shall be in writing and signed by the party claimed to have so waived or excused.

        14.    Further Actions by Assignor.    Assignor for itself and its successors and assigns, does hereby covenant with Assignee, its successors and assigns, that, in order to more effectively convey, transfer, assign, vest, perfect or confirm in Assignee, the rights intended to be conveyed hereunder, Assignor and its successors and assigns will, on or after the date hereof and without further consideration, do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, bills of sale, transfers, consents, assurances, releases, assignments and conveyances, powers of attorney, conveying and confirming unto Assignee, its successors and assigns, all and singular, the Assigned Agreement hereby granted, sold, assigned, transferred, conveyed and delivered as Assignee, its successors or assigns, shall reasonably require.

        15.    Counterparts.    This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be an original, but which together shall constitute one and the same instrument.

        16.    Binding Upon Successors.    The terms and conditions of this Agreement shall extend and bind, and inure to the benefit of, the parties and their successors and assigns.

        17.    Amendment.    This Agreement may be modified, amended or rescinded only by a writing expressly referring to this Agreement and signed by all of the parties hereto.

        18.    Severability.    Every provision of this Agreement is intended to be severable. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or enforceable for any reason whatsoever, such illegality, invalidity or enforceability shall not affect the other terms and provisions hereof, which terms and provisions shall remain binding and enforceable, and to the extent possible all of such other provisions shall remain in full force and effect. If the FERC issues an order denying approval of the transfer of the Assigned Agreement, then the Parties acknowledge and agree that the provisions concerning the Back-to-Back Agreement and the [DELETED TEXT]contained in

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this Agreement and in the Assignment and Assumption Agreement shall not be affected thereby and shall remain in full force and effect provided that Closing has occurred.

        19.    Joint Negotiation.    This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties and shall not be construed against one Party or the other as a result of the preparation, submission or other event of negotiation, drafting or execution hereof.

REST OF PAGE LEFT INTENTIONALLY BLANK

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        IN WITNESS WHEREOF, each of the parties hereto have caused their duly authorized representative to execute and deliver this Consent to Assignment and Assumption Agreement on the dates written below to be effective as of May 9, 2003.

Assignee: Constellation Power Source, Inc.	Assignor: Allegheny Energy Supply Company, LLC
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:
Address:	Address:
Baltimore Gas and Electric Company
By:
Name:
Title:
Date:
Address:

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CONSENT TO ASSIGNMENT AND ASSUMPTION AGREEMENT
RECITALS

EX-12.(A)

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Exhibit No. 12(a)

CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

		6 Months Ended		12 Months Ended
		June 2003		December 2002		December 2001		December 2000		December 1999		December 1998
Income from Continuing Operations (Before Extraordinary Loss and Cumulative Effects of Changes in Accounting Principles)		$	163.8	$	525.6	$	82.4	$	345.3	$	326.4	$	305.9
Taxes on Income, Including Tax Effect for BGE Preference Stock Dividends			86.3		301.0		29.7		221.4		182.5		169.3
Adjusted Income		$	250.1	$	$826.6	$	112.1	$	566.7	$	508.9	$	475.2
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness	$	160.6	$	271.5	$	226.1	$	261.5	$	245.7	$	255.3
	Earnings Required for BGE Preference Stock Dividends		10.9		21.8		21.4		21.9		21.0		33.8
	Capitalized Interest		6.3		42.5		55.8		21.1		2.7		3.6
	Interest Factor in Rentals		1.7		2.1		2.0		2.2		1.8		1.9
	Total Fixed Charges	$	179.5	$	337.9	$	305.3	$	306.7	$	271.2	$	294.6
Earnings (1)		$	423.3	$	1,122.0	$	361.6	$	852.3	$	777.4	$	766.2
Ratio of Earnings to Fixed Charges			2.37		3.33		1.18		2.78		2.87		2.60

(1)

Earnings are deemed to consist of income from continuing operations (before extraordinary loss and cumulative effects of changes in accounting principles) that includes earnings of Constellation Energy's consolidated subsidiaries, equity in the net income of unconsolidated subsidiaries, income taxes (including deferred income taxes, investment tax credit adjustments, and the tax effect of BGE's preference stock dividends), and fixed charges other than capitalized interest.

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CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

EX-12.(B)

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Exhibit No. 12(b)

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS

			6 Months Ended		12 Months Ended
			June 2003		December 2002		December 2001		December 2000		December 1999		December 1998
			(In Millions of Dollars)
Income from Continuing Operations (Before Extraordinary Loss)			$	106.8	$	143.1	$	97.3	$	143.5	$	328.4	$	327.7
Taxes on Income				70.0		93.3		60.3		94.2		182.0		181.3
Adjusted Income			$	176.8	$	236.4	$	157.6	$	237.7	$	510.4	$	509.0
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness		$	59.1	$	142.1	$	158.8	$	186.8	$	206.4	$	255.3
	Capitalized Interest			—		—		—		—		0.4		3.6
	Interest Factor in Rentals			0.4		0.5		0.7		0.9		1.0		1.9
	Total Fixed Charges		$	59.5	$	142.6	$	159.5	$	187.7	$	207.8	$	260.8
Preferred and Preference
	Dividend Requirements: (1)
	Preferred and Preference Dividends		$	6.6	$	13.2	$	13.2	$	13.2	$	13.5	$	21.8
	Income Tax Required			4.3		8.6		8.2		8.7		7.5		12.0
	Total Preferred and Preference
		Dividend Requirements	$	10.9	$	21.8	$	21.4	$	21.9	$	21.0	$	33.8
Total Fixed Charges and Preferred and Preference Dividend Requirements			$	70.4	$	164.4	$	180.9	$	209.6	$	228.8	$	294.6
Earnings (2)			$	236.3	$	379.0	$	317.1	$	425.4	$	717.8	$	766.2
Ratio of Earnings to Fixed Charges				3.97		2.66		1.99		2.27		3.45		2.94
Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements				3.36		2.31		1.75		2.03		3.14		2.60

(1)

Preferred and preference dividend requirements consist of an amount equal to the pre-tax earnings that would be required to meet dividend requirements on preferred stock and preference stock.

(2)

Earnings are deemed to consist of income from continuing operations (before extraordinary loss) that includes earnings of BGE's consolidated subsidiaries, income taxes (including deferred income taxes and investment tax credit adjustments), and fixed charges other than capitalized interest.

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BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS

EX-31.(A)

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Exhibit 31(a)

CONSTELLATION ENERGY GROUP, INC.

CERTIFICATION

I, Mayo A. Shattuck III, certify that:

1.

I have reviewed this report on Form 10-Q of Constellation Energy Group, Inc.;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2003

/s/ Mayo A. Shattuck Chairman of the Board, Chief Executive Officer and President

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CONSTELLATION ENERGY GROUP, INC. CERTIFICATION

EX-31.(B)

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Exhibit 31(b)

CONSTELLATION ENERGY GROUP, INC.

CERTIFICATION

I, E. Follin Smith, certify that:

1.

I have reviewed this report on Form 10-Q of Constellation Energy Group, Inc.;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2003

/s/ E. Follin Smith Senior Vice President and Chief Financial Officer

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CONSTELLATION ENERGY GROUP, INC. CERTIFICATION

EX-31.(C)

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Exhibit 31(c)

BALTIMORE GAS AND ELECTRIC COMPANY

CERTIFICATION

I, Frank O. Heintz, certify that:

1.

I have reviewed this report on Form 10-Q of Baltimore Gas and Electric Company;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2003

/s/ Frank O. Heintz President and Chief Executive Officer

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BALTIMORE GAS AND ELECTRIC COMPANY CERTIFICATION

EX-31.(D)

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Exhibit 31(d)

BALTIMORE GAS AND ELECTRIC COMPANY

CERTIFICATION

I, E. Follin Smith, certify that:

1.

I have reviewed this report on Form 10-Q of Baltimore Gas and Electric Company;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 13, 2003

/s/ E. Follin Smith Senior Vice President and Chief Financial Officer

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BALTIMORE GAS AND ELECTRIC COMPANY CERTIFICATION

EX-32.(A)

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Exhibit 32(a)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mayo A. Shattuck III, Chairman of the Board, Chief Executive Officer and President of Constellation Energy Group, Inc., certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

        (i)    The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

        (ii)   The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Constellation Energy Group, Inc.

/s/ Mayo A. Shattuck III Mayo A. Shattuck III
Chairman of the Board, Chief
Executive Officer and President

Date: August 13, 2003

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.(B)

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Exhibit 32(b)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, E. Follin Smith, Senior Vice President and Chief Financial Officer of Constellation Energy Group, Inc., certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

        (i)    The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

        (ii)   The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Constellation Energy Group, Inc.

/s/ E. Follin Smith E. Follin Smith
Senior Vice President and Chief Financial Officer

Date: August 13, 2003

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.(C)

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Exhibit 32(c)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank O. Heintz, President and Chief Executive Officer of Baltimore Gas and Electric Company, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

        (i)    The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

        (ii)   The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Baltimore Gas and Electric Company.

/s/ Frank O. Heintz Frank O. Heintz
President and Chief Executive Officer

Date: August 13, 2003

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.(D)

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Exhibit 32(d)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, E. Follin Smith, Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:

        (i)    The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

        (ii)   The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Baltimore Gas and Electric Company.

/s/ E. Follin Smith E. Follin Smith
Senior Vice President and Chief Financial Officer

Date: August 13, 2003

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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002