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 September 30, 2004

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)

410-783-2800

(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 175,852,525 shares outstanding of
Constellation Energy Group, Inc. on October 29, 2004.

         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 and Overview
		Business Environment
		Events of 2004
		Results of Operations
		Financial Condition
		Capital Resources
		Market Risk
		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 5—Other Information
	Item 6—Exhibits
	Signature

2

PART 1—FINANCIAL INFORMATION

Item 1—Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

		Three Months Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
		(In millions, except per share amounts)
Revenues
	Nonregulated revenues	$	2,777.9		$	1,940.0		$	7,216.5		$	5,173.8
	Regulated electric revenues		582.0			582.3			1,543.6			1,505.5
	Regulated gas revenues		74.6			78.3			504.0			514.0
	Total revenues		3,434.5			2,600.6			9,264.1			7,193.3
Expenses
	Operating expenses		2,808.8			2,012.6			7,806.0			5,834.1
	Impairment losses and other costs		1.1			—			3.7			—
	Workforce reduction costs		—			0.7			—			2.1
	Depreciation and amortization		138.4			127.7			391.6			355.6
	Accretion of asset retirement obligations		14.5			10.7			38.1			32.0
	Taxes other than income taxes		67.7			61.8			195.0			191.7
	Total expenses		3,030.5			2,213.5			8,434.4			6,415.5
Net (Loss) Gain on Sales of Investments and Other Assets			(7.5	)		2.1			(1.6	)		16.3
Income from Operations			396.5			389.2			828.1			794.1
Other (Expense) Income			(2.7	)		4.5			7.6			19.3
Fixed Charges
	Interest expense		80.7			85.3			249.0			251.2
	Interest capitalized and allowance for borrowed funds used during construction		(2.3	)		(2.3	)		(8.1	)		(9.5	)
	BGE preference stock dividends		3.3			3.3			9.9			9.9
	Total fixed charges		81.7			86.3			250.8			251.6
Income from Continuing Operations Before Income Taxes			312.1			307.4			584.9			561.8
Income Taxes			101.5			114.5			130.9			205.1
Income from Continuing Operations and Before
	Cumulative Effects of Changes in Accounting Principles		210.6			192.9			454.0			356.7
	Loss from discontinued operations, net of income taxes of $0.1 and $26.5, respectively		(0.2	)		—			(49.2	)		—
	Cumulative effects of changes in accounting principles, net of income taxes of $119.5		—			—			—			(198.4	)
Net Income		$	210.4		$	192.9		$	404.8		$	158.3
Earnings Applicable to Common Stock		$	210.4		$	192.9		$	404.8		$	158.3
Average Shares of Common Stock Outstanding—Basic			175.5			167.0			170.7			165.9
Average Shares of Common Stock Outstanding—Diluted			176.4			167.7			171.8			166.2
Earnings Per Common Share from Continuing Operations and Before Cumulative Effects of Changes in Accounting Principles—Basic		$	1.20		$	1.16		$	2.66		$	2.15
	Loss from discontinued operations—Basic		—			—			(0.29	)		—
	Cumulative effects of changes in accounting principles—Basic		—			—			—			(1.20	)
Earnings Per Common Share—Basic		$	1.20		$	1.16		$	2.37		$	0.95
Earnings Per Common Share from Continuing Operations and Before Cumulative Effects of Changes in Accounting Principles—Diluted		$	1.19		$	1.15		$	2.64		$	2.15
	Loss from discontinued operations—Diluted		—			—			(0.28	)		—
	Cumulative effects of changes in accounting principles—Diluted		—			—			—			(1.20	)
Earnings Per Common Share—Diluted		$	1.19		$	1.15		$	2.36		$	0.95
Dividends Declared Per Common Share		$	0.285		$	0.260		$	0.855		$	0.780

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

			Three Months Ended September 30,						Nine Months Ended September 30,
			2004			2003			2004			2003
			(In millions)
Net Income			$	210.4		$	192.9		$	404.8		$	158.3
	Other comprehensive income (OCI)
		Reclassification of net losses on securities from OCI to net income, net of taxes		2.6			0.8			2.3			0.5
		Reclassification of net gains on hedging instruments from OCI to net income, net of taxes		(111.0	)		(15.2	)		(180.2	)		(24.9	)
		Net unrealized gains (losses) on hedging instruments, net of taxes		88.0			(48.3	)		286.8			(40.8	)
		Net unrealized (losses) gains on securities, net of taxes		(1.2	)		6.9			12.8			21.7
Comprehensive Income			$	188.8		$	137.1		$	526.5		$	114.8

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

			September 30, 2004*			December 31, 2003
			(In millions)
Assets
	Current Assets
		Cash and cash equivalents	$	528.9		$	721.3
		Accounts receivable (net of allowance for uncollectibles of $41.6 and $51.7, respectively)		1,392.8			1,563.0
		Mark-to-market energy assets		568.8			488.3
		Risk management assets		594.9			249.5
		Materials and supplies		201.4			203.2
		Fuel stocks		327.5			196.8
		Other		236.7			221.4
		Total current assets		3,851.0			3,643.5
	Investments and Other Assets
		Nuclear decommissioning trust funds		986.8			736.1
		Investments in qualifying facilities and power projects		326.8			332.6
		Mark-to-market energy assets		412.1			261.9
		Risk management assets		341.2			158.4
		Goodwill		142.5			144.0
		Other		289.6			343.8
		Total investments and other assets		2,499.0			1,976.8
	Property, Plant and Equipment
		Nonregulated property, plant and equipment		8,600.4			8,110.0
		Regulated property, plant and equipment		5,381.5			5,266.7
		Nuclear fuel (net of amortization)		232.6			202.9
		Accumulated depreciation		(4,191.7	)		(3,978.1	)
		Net property, plant and equipment		10,022.8			9,601.5
	Deferred Charges
		Regulatory assets (net)		206.6			229.5
		Other		157.0			149.6
		Total deferred charges		363.6			379.1
	Total Assets		$	16,736.4		$	15,600.9

* 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

			September 30, 2004*			December 31, 2003
			(In millions)
Liabilities and Equity
	Current Liabilities
		Short-term borrowings	$	1.5		$	9.6
		Current portion of long-term debt		528.7			343.2
		Accounts payable		849.0			1,149.2
		Customer deposits and collateral		187.4			194.5
		Mark-to-market energy liabilities		578.1			474.6
		Risk management liabilities		174.8			134.6
		Other		572.0			552.2
		Total current liabilities		2,891.5			2,857.9
	Deferred Credits and Other Liabilities
		Deferred income taxes		1,490.3			1,384.4
		Asset retirement obligations		809.5			595.9
		Mark-to-market energy liabilities		355.2			258.0
		Risk management liabilities		505.9			170.1
		Postretirement and postemployment benefits		375.5			361.8
		Net pension liability		196.5			225.7
		Deferred investment tax credits		73.0			78.4
		Other		172.5			185.6
		Total deferred credits and other liabilities		3,978.4			3,259.9
	Long-term Debt
		Long-term debt of Constellation Energy		3,367.1			3,350.0
		Long-term debt of nonregulated businesses		380.0			389.2
		First refunding mortgage bonds of BGE		346.3			476.1
		Other long-term debt of BGE		919.6			919.6
		6.20% deferrable interest subordinated debentures due October 15, 2043 to BGE wholly owned BGE Capital Trust II relating to trust preferred securities		257.7			257.7
		Unamortized discount and premium		(11.2	)		(10.2	)
		Current portion of long-term debt		(528.7	)		(343.2	)
		Total long-term debt		4,730.8			5,039.2
	Minority Interests			125.4			113.4
	BGE Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholders' Equity
		Common stock		2,478.6			2,179.8
		Retained earnings		2,341.2			2,081.9
		Accumulated other comprehensive income (loss)		0.5			(121.2	)
		Total common shareholders' equity		4,820.3			4,140.5
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	16,736.4		$	15,600.9

* 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

Nine Months Ended September 30,				2004			2003
				(In millions)
Cash Flows From Operating Activities
	Net income			$	404.8		$	158.3
	Adjustments to reconcile to net cash provided by operating activities
		Loss from discontinued operations			49.2			—
		Cumulative effects of changes in accounting principles			—			198.4
		Depreciation and amortization			487.3			446.6
		Accretion of asset retirement obligations			38.1			32.0
		Deferred income taxes			96.3			70.6
		Investment tax credit adjustments			(5.4	)		(5.5	)
		Deferred fuel costs			10.8			(10.9	)
		Pension and postemployment benefits			(8.8	)		(76.0	)
		Net loss (gain) on sales of investments and other assets			1.6			(16.3	)
		Impairment losses and other costs			3.7			—
		Workforce reduction costs			—			2.1
		Equity in earnings of affiliates less than dividends received			17.3			24.5
		Changes in
			Accounts receivable		199.4			(544.6	)
			Mark-to-market energy assets and liabilities		(23.6	)		21.8
			Risk management assets and liabilities		(17.4	)		(23.7	)
			Materials, supplies and fuel stocks		(138.7	)		(42.3	)
			Other current assets		(30.7	)		(56.3	)
			Accounts payable		(308.1	)		292.6
			Other current liabilities		(9.4	)		158.2
			Other		(17.3	)		(67.2	)
	Net cash provided by operating activities				749.1			562.3
Cash Flows From Investing Activities
	Purchases of property, plant and equipment				(496.4	)		(466.2	)
	Acquisitions, net of cash acquired				(457.0	)		(517.3	)
	Contributions to nuclear decommissioning trust funds				(17.7	)		(13.2	)
	Proceeds from sale of discontinued operations				72.7			—
	Sales of investments and other assets				29.6			124.3
	Other investments				(16.3	)		(91.4	)
	Net cash used in investing activities				(885.1	)		(963.8	)
Cash Flows From Financing Activities
	Net maturity of short-term borrowings				(8.1	)		(0.1	)
	Proceeds from issuance of
		Common stock			271.7			62.0
		Long-term debt			—			740.6
	Repayment of long-term debt				(180.4	)		(456.1	)
	Common stock dividends paid				(139.7	)		(125.7	)
	Other				0.1			(11.1	)
	Net cash (used in) provided by financing activities				(56.4	)		209.6
Net Decrease in Cash and Cash Equivalents					(192.4	)		(191.9	)
Cash and Cash Equivalents at Beginning of Period					721.3			615.0
Cash and Cash Equivalents at End of Period				$	528.9		$	423.1

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 September 30,						Nine Months Ended September 30,
			2004			2003			2004			2003
			(In millions)
Revenues
	Electric revenues		$	582.0		$	582.3		$	1,543.6		$	1,505.6
	Gas revenues			75.3			81.0			507.4			524.5
	Total revenues			657.3			663.3			2,051.0			2,030.1
Expenses
	Operating expenses
		Electricity purchased for resale		338.4			345.7			833.1			826.5
		Gas purchased for resale		31.6			30.1			307.1			319.5
		Operations and maintenance		107.9			130.6			312.3			299.4
		Workforce reduction costs		—			0.2			—			0.7
	Depreciation and amortization			61.3			57.5			181.9			169.3
	Taxes other than income taxes			41.0			36.4			124.1			118.1
	Total expenses			580.2			600.5			1,758.5			1,733.5
Income from Operations				77.1			62.8			292.5			296.6
Other (Expense) Income				(3.2	)		1.2			(2.2	)		2.2
Fixed Charges
	Interest expense			23.9			26.6			73.6			85.6
	Allowance for borrowed funds used during construction			(0.2	)		(0.3	)		(0.7	)		(1.3	)
	Total fixed charges			23.7			26.3			72.9			84.3
Income Before Income Taxes				50.2			37.7			217.4			214.5
Income Taxes				18.8			13.8			84.8			83.8
Net Income				31.4			23.9			132.6			130.7
Preference Stock Dividends				3.3			3.3			9.9			9.9
Earnings Applicable to Common Stock			$	28.1		$	20.6		$	122.7		$	120.8

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

			Three Months Ended September 30,				Nine Months Ended September 30,
			2004		2003		2004			2003
			(In millions)
Net Income			$	28.1	$	20.6	$	122.7		$	120.8
	Other comprehensive income
		Reclassification of unrealized gain on hedging instruments from OCI to net income, net of taxes		—		—		(0.1	)		—
		Unrealized gain on hedging instruments, net of taxes		—		—		—			0.8
Comprehensive Income			$	28.1	$	20.6	$	122.6		$	121.6

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

				September 30, 2004*			December 31, 2003
				(In millions)
Assets
	Current Assets
		Cash and cash equivalents		$	9.9		$	11.0
		Accounts receivable (net of allowance for uncollectibles of $12.9 and $10.7, respectively)			332.4			354.8
		Investment in cash pool, affiliated company			—			230.2
		Accounts receivable, affiliated companies			52.3			4.5
		Fuel stocks			103.3			62.8
		Materials and supplies			34.9			29.9
		Prepaid taxes other than income taxes			66.3			42.8
		Other			11.0			9.9
		Total current assets			610.1			745.9
	Investments and Other Assets
		Receivable, affiliated company			154.2			131.6
		Other			88.0			90.4
		Total other assets			242.2			222.0
	Utility Plant
		Plant in service
			Electric		3,712.2			3,599.3
			Gas		1,080.6			1,064.7
			Common		485.3			467.7
			Total plant in service		5,278.1			5,131.7
		Accumulated depreciation			(1,905.6	)		(1,807.7	)
		Net plant in service			3,372.5			3,324.0
		Construction work in progress			98.2			130.5
		Plant held for future use			5.2			4.5
		Net utility plant			3,475.9			3,459.0
	Deferred Charges
		Regulatory assets (net)			206.6			229.5
		Other			48.5			50.2
		Total deferred charges			255.1			279.7
	Total Assets			$	4,583.3		$	4,706.6

* 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

			September 30, 2004*			December 31, 2003
			(In millions)
Liabilities and Equity
	Current Liabilities
		Current portion of long-term debt	$	217.9		$	330.6
		Accounts payable		102.8			111.2
		Borrowing from cash pool, affiliated company		73.5			—
		Accounts payable, affiliated companies		111.5			151.7
		Customer deposits		62.9			59.7
		Accrued taxes		13.3			33.0
		Accrued interest		31.3			22.3
		Other		28.4			43.3
		Total current liabilities		641.6			751.8
	Deferred Credits and Other Liabilities
		Deferred income taxes		613.4			585.8
		Postretirement and postemployment benefits		280.7			279.2
		Other		40.8			49.5
		Total deferred credits and other liabilities		934.9			914.5
	Long-term Debt
		First refunding mortgage bonds of BGE		346.3			476.1
		Other long-term debt of BGE		919.6			919.6
		6.20% deferrable interest subordinated debentures due October 15, 2043 to wholly owned BGE Capital Trust II relating to trust preferred securities		257.7			257.7
		Long-term debt of nonregulated businesses		25.0			25.0
		Unamortized discount and premium		(3.4	)		(4.1	)
		Current portion of long-term debt		(217.9	)		(330.6	)
		Total long-term debt		1,327.3			1,343.7
	Minority Interest			18.8			18.9
	Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholder's Equity
		Common stock		912.2			912.2
		Retained earnings		557.8			574.7
		Accumulated other comprehensive income		0.7			0.8
		Total common shareholder's equity		1,470.7			1,487.7
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	4,583.3		$	4,706.6

* 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

Nine Months Ended September 30,				2004			2003
				(In millions)
Cash Flows From Operating Activities
	Net income			$	132.6		$	130.7
	Adjustments to reconcile to net cash provided by operating activities
		Depreciation and amortization			187.9			175.1
		Deferred income taxes			28.9			33.9
		Investment tax credit adjustments			(1.4	)		(1.4	)
		Deferred fuel costs			10.8			(10.9	)
		Pension and postemployment benefits			(18.7	)		(61.3	)
		Workforce reduction costs			—			0.7
		Allowance for equity funds used during construction			(1.4	)		(2.3	)
		Changes in
			Accounts receivable		22.4			16.3
			Receivables, affiliated companies		(47.8	)		128.8
			Materials, supplies, and fuel stocks		(45.5	)		(50.1	)
			Other current assets		(24.6	)		(27.6	)
			Accounts payable		(8.4	)		(24.4	)
			Accounts payable, affiliated companies		(40.2	)		56.4
			Other current liabilities		(22.4	)		60.9
			Other		(19.8	)		(17.2	)
	Net cash provided by operating activities				152.4			407.6
Cash Flows From Investing Activities
	Utility construction expenditures (excluding allowance for funds used during construction)				(185.4	)		(187.3	)
	Change in cash pool at parent				303.7			134.6
	Sales of investments and other assets				4.9			—
	Other				2.7			(0.9	)
	Net cash provided by (used in) investing activities				125.9			(53.6	)
Cash Flows From Financing Activities
	Distribution to parent				(139.7	)		(81.3	)
	Proceeds from issuance of long-term debt				—			196.8
	Repayment of long-term debt				(129.8	)		(460.4	)
	Preference stock dividends paid				(9.9	)		(9.9	)
	Other				—			1.2
	Net cash used in financing activities				(279.4	)		(353.6	)
Net (Decrease) Increase in Cash and Cash Equivalents					(1.1	)		0.4
Cash and Cash Equivalents at Beginning of Period					11.0			10.2
Cash and Cash Equivalents at End of Period				$	9.9		$	10.6

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 Group, Inc. (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 "regulated business(es)" 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 common stock equivalent shares, consisting of stock options, were as follows:

	Quarter Ended September 30,		Nine Months Ended September 30,
	2004	2003	2004	2003
	(In millions)
Dilutive	0.9	0.7	1.1	0.3
Not dilutive — excluded from diluted EPS	1.5	—	1.2	2.8

Stock-Based Compensation

Under our long-term incentive plans, we granted stock options, performance-based stock units, performance-based restricted stock, service-based restricted stock units, 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 14 of our 2003 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 provisions of SFAS No. 123 to all outstanding stock options and stock awards in each period.

		Quarter Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
		(In millions, except per share amounts)
Net income, as reported		$	210.4		$	192.9		$	404.8		$	158.3
Add: Stock-based compensation expense determined under intrinsic value method and included in reported net income, net of related tax effects			3.7			3.8			9.0			7.9
Deduct: Stock-based compensation expense expense determined under fair value determined under fair value based method for all awards, net of related tax effects			(5.9	)		(5.9	)		(14.8	)		(14.4	)
Pro-forma net income		$	208.2		$	190.8		$	399.0		$	151.8
Earnings per share:
	Basic — as reported	$	1.20		$	1.16		$	2.37		$	0.95
	Basic — pro forma	$	1.19		$	1.14		$	2.34		$	0.91
	Diluted — as reported	$	1.19		$	1.15		$	2.36		$	0.95
	Diluted — pro forma	$	1.18		$	1.14		$	2.32		$	0.91

Impairment Losses and Other Costs

In the second quarter of 2004, our other nonregulated businesses recognized an impairment loss of $2.6 million pre-tax, or $1.6 million after-tax, related to an other than temporary decline in fair value of one of our financial investments.

        In the third quarter of 2004, our other nonregulated businesses recognized an impairment loss of $1.1 million pre-tax, or $0.7 million after-tax, related to an other than temporary decline in fair value of one of our financial investments.

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Accretion of Asset Retirement Obligations

SFAS No. 143, Accounting for Asset Retirement Obligations, 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.

        The change in our "Asset retirement obligations" liability during 2004 was as follows:

	(In millions)
Liability at January 1, 2004	$	595.9
Accretion expense		38.1
Liabilities incurred		177.5
Other		(2.0	)
Liabilities settled		—
Revisions to cash flows		—
Liability at September 30, 2004	$	809.5

        "Liabilities incurred" in the table above primarily reflects the asset retirement obligation recorded in connection with our acquisition of the R.E. Ginna Nuclear Power Plant (Ginna). We discuss the acquisition of Ginna in more detail in the Acquisition of Ginna section on the next page. "Other" in the table above represents the asset retirement obligation associated with our geothermal facility in Hawaii that was sold during the quarter ended June 30, 2004. At the time of the sale, the asset retirement obligation was transferred to the buyer of the geothermal facility. We discuss the sale of the geothermal facility in more detail in the Loss from Discontinued Operations section below.

Net Gain or Loss on Sales of Investments and Other Assets

2004

During the nine months ended September 30, 2004, our other nonregulated businesses recognized a $1.6 million pre-tax, or $0.9 million after-tax, net loss on the sale of non-core assets as follows:

•

a $1.1 million pre-tax gain in the first quarter on an installment sale of real estate,

•

a $0.4 million pre-tax gain in the first quarter on the sale of a financial investment,

•

a $3.3 million pre-tax gain in the second quarter on the sale of a financial investment,

•

a $1.1 million pre-tax gain in the second quarter on the sale of real estate, and

•

a $7.5 million pre-tax loss in the third quarter on the sale of a financial investment.

2003

During the nine months ended September 30, 2003, our other nonregulated businesses recognized a $16.3 million pre-tax, or $9.9 million after-tax, gain 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 real estate,

•

a $0.5 million pre-tax gain in the second quarter of 2003 on the sale of financial investments,

•

a $1.5 million pre-tax gain during the third quarter from the sale of two parcels of real estate, and

•

a $0.6 million pre-tax gain during the third quarter on the sale of financial investments.

Loss from Discontinued Operations

In the fourth quarter of 2003, we began to re-evaluate our strategy regarding our geothermal generating facility in Hawaii. The reevaluation of our strategy included soliciting bids to determine the level of interest in the facility. As of December 31, 2003, management determined that disposal of the facility was more likely than not to occur. As a result, we evaluated the facility for impairment as of December 31, 2003, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and determined that the facility was not impaired primarily due to indicative bids from third parties above the carrying value of the assets.

        In March 2004, after reviewing final binding offers, management committed to a plan to sell the facility that met the "held for sale" criteria under SFAS No. 144. During the second quarter of 2004, we completed the sale of the facility.

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        We recorded a loss on sale of $0.3 million pre-tax, or $0.2 million after-tax, during the quarter ended September 30, 2004 and a loss on sale of $77.8 million pre-tax, or $50.5 million after-tax, during the nine months ended September 30, 2004. We reported the after-tax loss on sale as a component of "Loss from discontinued operations" in our Consolidated Statements of Income. Additionally, we recognized earnings from the facility prior to sale of $2.1 million pre-tax, or $1.3 million after-tax, for the nine months ended September 30, 2004 as a component of "Loss from discontinued operations." The sale is reflected in our Merchant Energy Business reportable segment.

        We have not reclassified the prior year results of operations, which were reported under the equity method as "Nonregulated revenues," because we believe that reclassification of immaterial prior period results would be less useful than consistent reporting of prior year amounts. The facility had a $4.0 million net loss, including a $1.1 million cumulative effect of change in accounting principle for the adoption of SFAS No. 143, during the nine months ended September 30, 2003.

Acquisition of Ginna

On June 10, 2004, we completed our purchase of the R. E. Ginna nuclear facility (Ginna) which is located in Ontario, New York from Rochester Gas & Electric Corporation (RG&E). Ginna consists of a 495 megawatt single-unit pressurized water reactor that entered service in 1970 and is licensed to operate until 2029.

        We purchased 100 percent of Ginna for $457.0 million including direct costs associated with the acquisition, of which $430.0 million was paid in cash at closing and the remaining $27.0 million was paid in the third quarter of 2004. RG&E also transferred to us $200.5 million in decommissioning funds.

        We will sell 90 percent of Ginna's output back to RG&E at an average price of nearly $44 per megawatt-hour until June 2014 under a unit contingent power purchase agreement (if the output is not available because the plant is not operating, there is no requirement to provide output from other sources). The acquisition of Ginna was immediately accretive to earnings.

        We accounted for this transaction as an asset acquisition and included Ginna in our Merchant Energy Business reportable segment. Our purchase price allocation for the net assets acquired is as follows:

Ginna Net Assets Acquired

At June 10, 2004
	(In millions)
Current assets	$	27.9
Nuclear decommissioning trust fund		200.5
Nuclear fuel		14.5
Net property, plant and equipment		382.8
Intangible assets (details below)		38.8
Other assets		123.9
Total assets acquired		788.4
Current liabilities		20.8
Asset retirement obligations		177.3
Deferred credits and other liabilities		133.3
Net assets acquired	$	457.0

        The intangible assets acquired consist of the following:

Description	Amount		Weighted- Average Useful Life
	(In millions)		(In years)
Operating procedures and manuals	$	26.1	25
Permits and licenses		8.5	25
Software		4.2	5
Total intangible assets	$	38.8

Information by Operating Segment

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

•

Our nonregulated merchant energy business includes:

–

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

–

our competitive supply activities which include:

–

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

13

–

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 central Maryland.

•

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

        Our remaining nonregulated businesses:

•

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

•

provide home improvements, service electric and gas appliances, service heating, air conditioning, plumbing, electrical, and indoor air quality systems, and provide natural gas marketing to residential customers in central 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.

        Our Merchant Energy, Regulated Electric, and Regulated Gas reportable segments are strategic businesses based principally upon regulations, products, and services all of which 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 below.

	Reportable Segments
	Merchant Energy Business			Regulated Electric Business		Regulated Gas Business			Other Nonregulated Businesses			Eliminations			Consolidated
	(In millions)
For the three months ended September 30,
2004
Unaffiliated revenues	$	2,669.7		$	582.0	$	74.6		$	108.2		$	—		$	3,434.5
Intersegment revenues		282.4			—		0.7			—			(283.1	)		—
Total revenues		2,952.1			582.0		75.3			108.2			(283.1	)		3,434.5
Loss from discontinued operations		(0.2	)		—		—			—			—			(0.2	)
Net income (loss)		188.0			36.8		(8.8	)		(5.6	)		—			210.4
2003
Unaffiliated revenues	$	1,795.7		$	582.3	$	78.3		$	144.3		$	—		$	2,600.6
Intersegment revenues		377.8			—		2.7			0.2			(380.7	)		—
Total revenues		2,173.5			582.3		81.0			144.5			(380.7	)		2,600.6
Net income		171.6			18.2		2.4			0.7			—			192.9
For the nine months ended September 30,
2004
Unaffiliated revenues	$	6,905.7		$	1,543.6	$	504.0		$	310.8		$	—		$	9,264.1
Intersegment revenues		799.0			—		3.4			—			(802.4	)		—
Total revenues		7,704.7			1,543.6		507.4			310.8			(802.4	)		9.264.1
Loss from discontinued operations		(49.2	)		—		—			—			—			(49.2	)
Net income (loss)		287.7			107.1		15.7			(5.7	)		—			404.8
2003
Unaffiliated revenues	$	4,730.7		$	1,505.5	$	514.0		$	443.1		$	—		$	7,193.3
Intersegment revenues		938.5			0.1		10.5			0.2			(949.3	)		—
Total revenues		5,669.2			1,505.6		524.5			443.3			(949.3	)		7,193.3
Cumulative effects of changes in accounting principles		(198.4	)		—		—			—			—			(198.4	)
Net income		27.5			89.3		31.9			9.6			—			158.3

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

Our Merchant Energy Business segment assets have changed during 2004 due to the acquisition of Ginna and the sale of a geothermal generating facility in Hawaii. We discuss these events in more detail beginning on page 12 of the Notes to the Consolidated Financial Statements.

14

Pension and Postretirement Benefits

In December 2003, the President signed into law the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act). This legislation provides a prescription drug benefit for Medicare beneficiaries, a benefit we provide to our Medicare eligible retirees.

        We concluded that prescription drug benefits available under our postretirement health care plan are currently "actuarially equivalent" to Medicare Part D and thus qualify for the subsidy under the Act. The expected subsidy will offset or reduce our share of the cost of the underlying postretirement prescription drug coverage. The impact of this legislation is to reduce our Accumulated Postretirement Benefit Obligation by $30.6 million and reduce our annual postretirement benefit expense during 2004 by $4.0 million. We recorded a reduction of operating expenses of approximately $3 million as a result of the Act through September 30, 2004, reflecting its impact retroactive to January 1, 2004, in accordance with Financial Accounting Standards Board (FASB) Staff Position (FSP) 106-2—Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003, as discussed in the Accounting Standards Adopted section on page 24.

        We show the components of net periodic pension benefit cost in the following table:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Components of net periodic pension benefit cost
Service cost	$	10.1		$	8.5		$	30.1		$	26.9
Interest cost		20.6			20.5			61.7			64.8
Expected return on plan assets		(24.6	)		(24.0	)		(73.4	)		(75.9	)
Amortization of unrecognized prior service cost		1.4			1.4			4.3			4.6
Recognized net actuarial loss		3.6			1.2			10.8			3.9
Amount capitalized as construction cost		(1.2	)		(0.7	)		(3.1	)		(2.3	)
Net periodic pension benefit cost	$	9.9		$	6.9		$	30.4		$	22.0

The amounts shown above do not reflect a settlement charge of $2.8 million recorded in the third quarter of 2004 related to one of our nonqualified plans.

        We made a $50.0 million contribution to our qualified pension plans on January 16, 2004 even though there is no IRS required minimum contribution.

        We show the components of net periodic postretirement benefit cost in the following table:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Components of net periodic postretirement benefit cost
Service cost	$	1.4		$	1.7		$	5.3		$	5.3
Interest cost		4.7			7.1			18.3			22.4
Amortization of transition obligation		0.4			0.6			1.7			1.8
Recognized net actuarial loss		0.6			1.5			2.5			4.9
Amortization of unrecognized prior service cost		(0.8	)		(0.9	)		(2.9	)		(3.0	)
Amount capitalized as construction cost		(1.3	)		(2.6	)		(5.3	)		(7.8	)
Net periodic postretirement benefit cost	$	5.0		$	7.4		$	19.6		$	23.6

        Our non-qualified pension plans and our postretirement benefit programs are not funded; however, we have trust assets securing certain executive pension benefits. We estimate that we will incur approximately $6 million in pension benefit payments for our non-qualified pension plans and approximately $28 million for retiree health and life insurance benefit payments during 2004.

Financing Activities

Constellation Energy

During the first quarter of 2004, we decided to continue our ownership in a synthetic fuel processing facility in South Carolina. We discuss this facility in more detail in the Income Taxes section on the next page. In connection with our decision to continue with our ownership in this facility, we are committed to making fixed payments until the end of 2007. Accordingly, during the first quarter of 2004, we recorded a liability of $39.3 million in "Long-term debt" in our Consolidated Balance Sheets for these fixed payments.

        In June 2004, Constellation Energy arranged an $800.0 million three-year revolving credit facility and a $300.0 million five-year revolving credit facility replacing a $447.5 million 364-day revolving credit facility which expired in the second quarter of 2004. Constellation Energy also has an existing $640.0 million revolving credit facility expiring in June 2005 and a $447.5 million facility expiring in June 2006.

15

        We use these 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 facilities 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 $2.2 billion. In addition, BGE maintains $200.0 million in credit facilities as discussed below. At September 30, 2004, letters of credit that totaled $761.4 million were issued under our facilities.

        Under our continuous offering program, employee benefit plans, and shareholder investment plans we issued $44.8 million of common stock during the nine months ended September 30, 2004.

        Additionally, on July 1, 2004, we issued 6.0 million shares of common stock for net proceeds of $226.9 million to fund a portion of the acquisition of Ginna.

        In October 2004, we terminated certain loans under other revolving credit agreements of $41.4 million related to our Latin American power distribution project. We replaced these revolving credit agreements with loans under new revolving credit agreements totaling $100.0 million.

BGE

Through the date of this report, certain credit facilities expired and BGE renewed those facilities. BGE continues to maintain $200.0 million in annual committed credit facilities, expiring May 2005 through November 2005, to ensure adequate liquidity to support its operations. We can borrow directly from the banks or use the facilities to allow commercial paper to be issued. As of September 30, 2004, BGE had no outstanding commercial paper, which results in $200.0 million in unused credit facilities.

        During the third quarter of 2004, BGE called $4.8 million principal amount of its Remarketed Floating Rate Series due September 1, 2006 to satisfy the sinking fund requirement under the First Refunding Mortgage Bond indenture. These bonds were redeemed in whole or in part at the sinking fund call price of 100% of principal amount plus accrued interest from June 1, 2004 to, but not including, August 25, 2004.

Income Taxes

Our merchant energy business has 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. We recognize the tax benefit of these credits in our Consolidated Statements of Income when we believe it is highly probable that the credits will be sustained. The synthetic fuel process involves combining coal material with a chemical reagent to create a significant chemical change. A taxpayer may request a private letter ruling from the Internal Revenue Service (IRS) to support its position that the synthetic fuel produced undergoes a significant chemical change and thus qualifies for Section 29 credits.

        As of September 30, 2004, we have recognized cumulative tax benefits associated with Section 29 credits of $180.6 million, of which $21.9 million was recognized during the quarter ended September 30, 2004 and $102.6 million during the nine months ended September 30, 2004.

        We own a minority ownership in four synthetic fuel facilities located in Ohio, Virginia, and West Virginia. These facilities have received private letter rulings from the IRS. In January 2004, the IRS concluded its examination of the partnership that owns these facilities for the tax years 1998 through 2001 and the IRS did not disallow any of the previously recognized synthetic fuel credits. During the second quarter of 2004, we received final written notice of the resolution of the examination from the IRS.

        In 2003, we purchased 99% ownership in a South Carolina facility that produces synthetic fuel. We did not recognize in our Consolidated Statements of Income the tax benefit of $35.9 million for credits claimed on our South Carolina facility in 2003 pending receipt of a favorable private letter ruling. On April 15, 2004, we received a favorable private letter ruling. We believe receipt of the private letter ruling provides assurance that it is highly probable that the credits will be sustained. Therefore, we recognized the tax benefit of $35.9 million in our Consolidated Statements of Income during the quarter ended June 30, 2004.

        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 any future challenge by the IRS, legislative or regulatory action, or the ultimate impact of such events 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.

16

        Our recognition of the Section 29 credits reduced our effective tax rate as detailed in the table below. Total income taxes are different from the amount that would be computed by applying the statutory Federal income tax rate of 35% to book income before income taxes as follows:

		Quarter Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
		(In millions)
Income before income taxes (excluding BGE preference stock dividends)		$	315.4		$	310.7		$	594.8		$	571.7
Statutory federal income tax rate			35	%		35	%		35	%		35	%
Income taxes computed at statutory federal rate			110.4			108.7			208.2			200.1
(Decreases) increases in income taxes due to:
	Synthetic fuel tax credits (2004)		(21.9	)		(8.9	)		(66.7	)		(26.8	)
	Synthetic fuel tax credits (2003)*		—			—			(35.9	)		—
	State income taxes, net of federal tax benefit		12.5			12.6			22.0			28.3
	Other		0.5			2.1			3.3			3.5
Total income taxes		$	101.5		$	114.5		$	130.9		$	205.1
Effective tax rate			32.2	%		36.8	%		22.0	%		35.9	%

* Credits associated with 2003 production at our South Carolina facility.

Commitments, Guarantees, and Contingencies

We have made substantial commitments in connection with our merchant energy, regulated gas, and other nonregulated businesses. These commitments relate to:

•

purchase of electric generating capacity and energy,

•

procurement and delivery of fuels,

•

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

•

long-term service agreements, capital for construction programs and other.

        Our merchant energy business has committed to long-term service agreements and other purchase commitments for our plants.

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

        Our other nonregulated businesses have committed to gas purchases, as well as to contribute additional capital for construction programs and joint ventures in which they have an interest.

        We have also committed to long-term service agreements and other obligations related to our information technology systems.

        At September 30, 2004, the total amount of commitments was $4,502.8 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 2014 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.

17

Guarantees

The terms of our guarantees are as follows:

	Expiration
	2004		2005- 2006		2007- 2008		Thereafter		Total
	(In millions)
Competitive Supply	$	2,884.9	$	1,359.5	$	305.0	$	562.2	$	5,111.6
Other		0.3		5.3		—		1,270.0		1,275.6
Total	$	2,885.2	$	1,364.8	$	305.0	$	1,832.2	$	6,387.2

        At September 30, 2004, Constellation Energy had a total of $6,387.2 million of guarantees outstanding related to loans, credit facilities, and contractual performance of certain of its subsidiaries as described below. These guarantees do not represent incremental obligations and we do not expect to fund the full amount under these guarantees.

•

Constellation Energy guaranteed $5,111.6 million on behalf of our subsidiaries for competitive supply activities. These guarantees are put into place in order to allow our subsidiaries the flexibility needed to conduct business with counterparties without having to post substantial collateral. While the face amount of these guarantees is $5,111.6 million, our calculated fair value of obligations covered by these guarantees was $1,144.7 million at September 30, 2004. If the parent company was required to fund defaulted subsidiary obligations, the total amount at current market prices is $1,144.7 million. The recorded fair value of obligations in our Consolidated Balance Sheets for these guarantees was $674.8 million at September 30, 2004.

•

Constellation Energy guaranteed $945.5 million primarily on behalf of our nuclear facilities related to nuclear insurance and decommissioning.

•

Constellation Energy guaranteed $41.5 million on behalf of our other nonregulated businesses primarily for loans and performance bonds of which $25.0 million was recorded in our Consolidated Balance Sheets at September 30, 2004.

•

Our merchant energy business guaranteed $16.4 million for loans and other performance guarantees related to certain power projects in which we have an investment.

•

Our other nonregulated businesses guaranteed $8.9 million for performance bonds.

•

BGE guaranteed two-thirds of certain debt of Safe Harbor Water Power Corporation, an unconsolidated investment. At September 30, 2004, 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 Preferred Securities of $250.0 million of BGE Capital Trust II, an unconsolidated investment, as discussed in more detail in Note 9 of our 2003 Annual Report on Form 10-K.

        The total recorded fair value of obligations in our Consolidated Balance Sheets was $699.8 million and not the $6.4 billion 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

•

treatment, storage, and disposal of solid and hazardous waste.

Air Quality

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 sulfur dioxide (SO₂), nitrogen oxide (NOx), 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 on the next page.

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National Ambient Air Quality Standards

The Environmental Protection Agency (EPA) established new National Ambient Air Quality Standards for very fine particulates and a new eight-hour standard for ozone to replace the existing one-hour standard. In April 2004, the EPA identified the areas that would be in ozone nonattainment under the new eight-hour standard. The affected states have three years to develop and submit plans for compliance. The EPA has also proposed a rule to address the interstate transport of SO₂ and NOx emissions from fossil fired plants located primarily in the Eastern United States. While any new standards may require increased controls at some of our fossil generating plants in the future, planning and implementation of unit specific requirements will likely take place over several years. We are unable to estimate the cost of compliance until the states and the EPA have finalized their plans for meeting the standards or finalized the proposed rule.

        We own several generating facilities in Maryland and California, states that have been designated as severe ozone nonattainment areas under the existing one-hour standard. The Clean Air Act requires states to assess fees against every major stationary source of NOx and volatile organic chemicals in severe ozone nonattainment areas if national air quality standards are not achieved by a specified deadline. If implemented, the fee would be assessed based on the magnitude of a source's emissions as compared to its emissions when the area failed to meet the deadline. The exact method of computing these fees has not been established and will depend in part on state implementation regulations that have not been finalized.

        The current deadline for most severe ozone nonattainment areas is 2005, including those in which our generating facilities are located. Assessment of fees would commence in 2006 if the current effective date is maintained. However, there is significant uncertainty regarding the date when fees would be assessed, if they are assessed, in light of the EPA's designation of nonattainment areas under the new eight-hour ozone nonattainment standard, as well as its recent decision to reconsider, in part, its planned rescission of the existing one-hour nonattainment standard. Consequently, we are unable to estimate the ultimate timing or financial impact of the fees in light of the uncertainty surrounding the effective date and the methodology that will be used in calculating the fees.

New Source Review

The EPA and several states filed suits against a number of coal-fired power plants primarily 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 in which we have an ownership interest. We have responded to the EPA, and as of the date of this report the EPA has taken no further action.

        Based on the level 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.

        On October 27, 2003, the EPA's new source review rule on routine maintenance was published in the Federal Register. The new regulations would establish an equipment replacement cost threshold for determining when major new source review requirements are triggered. Plant owners may spend up to 20% of the replacement value of a generation unit on certain improvements each year without triggering requirements for new pollution controls. An appeal was filed with the United States Court of Appeals delaying the effective date of the rule pending the outcome of the appeal. We cannot predict the timing or outcome of this appeal, or its possible effect on our financial results.

Hazardous Air Emissions

The Clean Air Act requires the EPA to evaluate the public health impacts of hazardous air emissions from electric generating facilities. On December 15, 2003, the EPA proposed to regulate the emissions of mercury from coal-fired facilities and nickel from residual oil-fired facilities. Under the mercury proposal, the EPA has proposed two compliance alternatives, a unit specific standard and a cap and trade program. As proposed, compliance with the unit specific limits would be as early as March 2008 and compliance with the cap and trade program would be by 2010. The nickel emission limits for residual oil-fired facilities would require compliance by March 2008. We believe final regulations could be issued in 2005 and could affect all coal and oil-fired boilers. The cost of compliance with the final regulations could be material.

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Global Climate Change

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.

Water Quality

Our facilities are subject to a variety of federal and state regulations governing existing and potential water/wastewater and storm water discharges. Under current provisions of the Clean Water Act, existing wastewater discharge permits are renewed every five years, at which time permit effluent limits come under extensive review and can be modified to account for more stringent regulations. In addition, the permits can be modified at any time. Changes to the water discharge permits of our coal or other fuel suppliers due to federal or state initiatives may increase the cost of fuel, which in turn could have a significant impact on our operations.

Water Intake Regulations

On July 9, 2004, EPA published final rules under the Clean Water Act that require cooling water intake structures to reflect the best technology available for minimizing adverse environmental impacts. The final rules require the installation of additional intake screens or other protective measures, as well as extensive site-specific study and monitoring requirements. We currently have six facilities affected by the regulation. The rule allows for a number of compliance options that will be assessed through 2007, following which we will determine our most viable options. Until we determine our most viable option under the final rules, we can not estimate our compliance costs, however the costs associated with the final rules could be material.

Solid and Hazardous Waste

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

Metal Bank

In 1997, EPA, under the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund"), issued a Record of Decision (ROD) for the proposed clean-up at the Metal Bank of America site, a metal reclaimer in Philadelphia. We had previously recorded a liability in our Consolidated Balance Sheets for BGE's 15.47% share of probable clean-up costs. Based on current settlement negotiations among the EPA and the potentially responsible parties involved at the site, we do not believe we will incur clean-up costs in excess of the amount recorded as a liability. The EPA and the potentially responsible parties, including BGE, are currently pursuing claims against Metal Bank of America for an equitable share of expected site remediation costs.

68th Street Dump

In 1999, the EPA proposed to add the 68^th Street Dump in Baltimore, Maryland to the Superfund National Priorities List ("NPL"), which is its list of sites targeted for clean-up and enforcement, 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, but decided not to include the site in its September 2003 update. We and other potentially responsible parties formed the 68^th Street Coalition in March 2004, and the coalition has entered into consent order negotiations with the EPA to investigate clean-up options for the site under the Superfund Alternative Sites Program. During negotiations under this program, the 68^th Street Dump will not be placed on the NPL. At this stage, it is not possible to predict the outcome of those discussions or our share of the liability. However, the costs could have a material effect on our financial results.

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Kane and Lombard

The EPA issued its ROD for the Kane and Lombard Drum site located in Baltimore, Maryland on September 30, 2003. The ROD specifies the clean-up plan for the site, consisting of enhanced reductive dechlorination, a soil management plan, and institutional controls. The ROD was consistent with the proposed remedy the EPA released in December 2002. On July 1, 2004, the EPA issued a Special Notice/Demand Letter to BGE and three other potentially responsible parties regarding implementation of the remedy. In response, the potentially responsible parties have proposed negotiations with the EPA regarding the implementation. The total clean-up costs are estimated to be approximately $10 million. We estimate our current share of site-related costs to be 11.1%. Our share of these future costs has not been determined and it may vary from the current estimate. In December 2002, we recorded a liability in our Consolidated Balance Sheets for our share of the clean-up costs that we believe is probable.

Spring Gardens

In late December 1996, BGE signed a consent order with the Maryland Department of the Environment that required BGE 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 in 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 September 30, 2004, BGE spent approximately $40 million for remediation at this site. BGE also investigated other small sites where gas was manufactured in the past. We do not expect the clean-up 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, Nine Mile Point, and Ginna 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.

        In November 2002, the President signed into law the Terrorism Risk Insurance Act ("TRIA") of 2002. Under the TRIA, property and casualty insurance companies are required to offer insurance for losses resulting from Certified acts of terrorism. Certified acts of terrorism are determined by the Secretary of State and Attorney General and primarily are based upon the occurrence of significant acts of international terrorism. Our nuclear property and accidental outage insurance programs, as discussed later in this section, provide coverage for Certified acts of terrorism.

        If there were an accident or an extended outage at any unit of Calvert Cliffs, Nine Mile Point, or Ginna, it could have a substantial adverse impact on our financial results.

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. The retrospective premium assessment is $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 $503 million per incident at any commercial reactor in the country, payable at no more than $50 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. Claims resulting from non-certified acts of terrorism are limited to the commercial insurance discussed above, regardless of the number of nuclear plants affected. In addition, the U.S. Congress could impose additional revenue-raising measures to pay claims.

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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 a single 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 premium assessments. RG&E, the seller of Ginna, retains the liabilities for existing and potential claims that occurred prior to June 10, 2004. 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 coverage at Calvert Cliffs, Nine Mile Point, and Ginna. In addition, we maintain $2.25 billion of excess coverage at Calvert Cliffs and Nine Mile Point and $1.77 billion of excess coverage at Ginna for property damage, decontamination, and premature decommissioning liability. 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 $91.7 million.

        Losses resulting from non-certified acts of terrorism are covered as a common occurrence, meaning that if non-certified terrorist acts occur against one or more commercial nuclear power plants insured by our nuclear property insurance company within a 12-month period, they would be treated as one event and the owners of the plants would share one full limit of liability (currently $3.24 billion).

Accidental Nuclear Outage Insurance

Our policies provide indemnification on a weekly basis for losses resulting from an accidental outage of a nuclear unit. Coverage begins after a 12-week deductible period and continues at 100% of the weekly indemnity limit for 52 weeks and then 80% of the weekly indemnity limit for the next 110 weeks. Our coverage is up to $490.0 million per unit at Calvert Cliffs and Ginna, $420.0 million for Unit 1 of Nine Mile Point, and $401.8 million for Unit 2 of Nine Mile Point. This amount can be reduced by up to $98.0 million per unit at Calvert Cliffs and $84.0 million for Nine Mile Point if an outage of more than one unit is caused by a single insured physical damage loss.

Non-nuclear Property Insurance

Our conventional property insurance provides coverage of $1.0 billion per occurrence for Certified acts of terrorism as defined under the TRIA. 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. Our conventional property insurance program also provides coverage for non-certified acts of terrorism up to an annual aggregate limit of $333 million. If a terrorist act occurs at any of our facilities, it could have a significant adverse impact on our financial results.

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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 the Market Risk section on page 49.

Interest Rates

We use interest rate swaps to manage our interest rate exposures associated with new debt issuances and to optimize the mix of fixed and floating rate debt. The swaps used to manage our exposure prior to the issuance of new debt are designated as cash-flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, 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" in our Consolidated Statements of Income during the periods in which the interest payments being hedged occur.

        The swaps used to optimize the mix of fixed and floating rate debt are designated as fair value hedges under SFAS No. 133. We record any gains or losses on swaps that qualify for fair value hedge accounting treatment, as well as changes in the fair value of the debt being hedged, in "Interest expense," and we record any changes in fair value of the swaps and the debt in "Risk management assets and liabilities" and "Long-term debt" in our Consolidated Balance Sheets. In addition, we record the difference between interest on hedged fixed rate debt and floating rate swaps in "Interest expense" in the periods that the swaps settle.

        At September 30, 2004, we have net unrealized pre-tax gains of $19.1 million related to interest rate cash-flow hedges recorded in "Accumulated other comprehensive income." We expect to reclassify $2.9 million of pre-tax net gains on these swap contracts from "Accumulated other comprehensive income" into "Interest expense" during the next twelve months.

        During the third quarter of 2004, to optimize the mix of fixed and floating rate debt, we entered into interest rate swaps qualifying as fair value hedges relating to $450 million of our fixed rate debt and converted this notional amount of debt to a floating rate. At September 30, 2004, the $17.1 million increase in the fair value of these hedges was recorded, for which there was no hedge ineffectiveness, as an increase in our "Risk management assets" and "Long-term debt."

Commodity Prices

At September 30, 2004, our merchant energy business had designated certain purchase and sale contracts as cash-flow hedges of forecasted transactions for the years 2004 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 physical 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 September 30, 2004, our merchant energy business has net unrealized pre-tax gains of $179.8 million on these hedges recorded in "Accumulated other comprehensive income." We expect to reclassify $390.4 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 September 30, 2004. However, the actual amount reclassified into earnings could vary from the amounts recorded at September 30, 2004 due to future changes in market prices.

        We recognized into earnings a pre-tax loss of $7.8 million for the quarter ended September 30, 2004 and a pre-tax loss of $6.5 million for the quarter ended September 30, 2003 related to the ineffective portion of our hedges.

        We recognized into earnings a pre-tax loss of $3.2 million for the nine months ended September 30, 2004 and a pre-tax gain of $2.8 million for the nine months ended September 30, 2003 related to the ineffective portion of our hedges.

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Accounting Standards Issued

EITF 03-1

In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on Issue 03-1, The Meaning of Other Than Temporary Impairment and Its Application to Certain Investments, related to measurement and recognition criteria that would have become effective July 1, 2004. In September 2004, the FASB issued FSP EITF 03-1-1 which delayed the implementation of the measurement and recognition criteria until additional implementation guidance could be developed. In accordance with Nuclear Regulatory Commission regulations, we do not manage the day-to-day activities of our nuclear decommissioning trust funds. As a result, a strict interpretation of EITF 03-1 would indicate that we do not have the ability and intent to hold investments whose market value is less than our cost until recovery. If relief from this strict interpretation is not included in the pending FASB implementation guidance, we would be required to record into earnings any decline in market value below the cost of our nuclear decommissioning investments. If this strict interpretation of EITF 03-1 had become effective at September 30, 2004, we would have been required to record a pre-tax charge of approximately $7.5 million. We have approximately $1 billion invested in nuclear decommissioning trust assets. As a result, a one percent decline in all of our investments below book value would result in approximately a $10 million pre-tax charge. We cannot predict the outcome of the implementation guidance; however, the impact could be material to our financial results.

Accounting Standards Adopted

FSP 106-2

In May 2004, the FASB issued FSP 106-2, which addresses accounting and disclosure requirements pertaining to Medicare Prescription Drug Improvement and Modernization Act of 2003. FSP 106-2 is effective July 1, 2004. We discuss the impacts of this standard in the Pension and Postretirement Benefits section on page 15.

FIN 46/FIN 46R

In January 2003, the FASB issued Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, which was subsequently revised in its entirety with the issuance of FIN 46R in December 2003.

        FIN 46R establishes conditions under which an entity must 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 46R 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 lack any of the following characteristics of a controlling financial interest:

•

control through voting rights,

•

obligation to absorb expected losses or

•

right to receive expected residual returns.

        FIN 46R 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 a VIE's expected losses, expected residual returns, or both.

        FIN 46R was effective March 31, 2004 for all VIEs except special purpose entities (SPEs), for which the effective date was December 31, 2003. Therefore, at December 31, 2003, we and BGE deconsolidated BGE Capital Trust II, an SPE established to issue trust preferred securities as described in Note 9 of our 2003 Annual Report on Form 10-K, because BGE is not its primary beneficiary. As a result, we currently record $257.7 million of deferrable interest subordinated debentures due to BGE Capital Trust II, and $7.7 million equity investment in BGE Capital Trust II in "Other investments" in our and BGE's Consolidated Balance Sheets.

        As a result of adopting the remainder of the provisions of FIN 46R as of March 31, 2004, we were not required to consolidate or deconsolidate any non-SPE entities with which we are involved through variable interests. We had preliminarily determined that we were the primary beneficiary for an unconsolidated investment in a hydroelectric generating plant located in Pennsylvania because our two-thirds voting interest is disproportionate to our 50% interest in the plant's earnings. However, we subsequently determined that the entity is not a VIE because less than substantially all of the plant's activities are conducted on our behalf, and therefore we do not have to consolidate the entity.

        We have a significant interest in the following VIEs for which we are not the primary beneficiary:

VIE	Nature of Involvement	Date of Involvement
Power projects and fuel supply entities	Equity investment and guarantees	Prior to 2003
Natural gas producing facility	Volumetric and price swap	July 2003

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        The following is summary information about these entities as of September 30, 2004:

	(In millions)
Total assets	$	307
Total liabilities		165
Our ownership interest		41
Other ownership interests		101
Our maximum exposure to loss		94

        The maximum exposure to loss represents the loss that we would incur in the unlikely event that our interests 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 September 30, 2004 consists of the following:

•

the carrying amount of our investment totaling $40 million,

•

debt and performance guarantees totaling $13 million, and

•

volumetric and price variability of up to $41 million associated with a natural gas producer swap, based on contract volumes and gas prices as of September 30, 2004.

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

Related Party Transactions—BGE

Income Statement

BGE provides standard offer service to those customers that do not choose an alternate supplier. Our wholesale marketing and risk management operation provided BGE with the energy and capacity required to meet its commercial and industrial standard offer service obligations through June 30, 2004 and provides the energy and capacity required to meet its residential standard offer service obligations through June 30, 2006. Effective July 1, 2004, BGE executed one and two-year contracts for commercial and industrial electric power supply totaling approximately 2,300 megawatts. Our wholesale marketing and risk management operation will supply a significant portion of this electric power supply.

        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 September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
	(In millions)
Purchased energy	$	281.7	$	345.7	$	776.2	$	826.5

        In addition, Constellation Energy charges BGE for the costs of 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 $27.9 million for the quarter ended September 30, 2004 compared to $20.1 million for the same period in September 30, 2003 and $70.8 million for the nine months ended September 30, 2004 compared to $54.8 million for the same period in 2003.

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 borrowed $73.5 million at September 30, 2004 and had invested $230.2 million at December 31, 2003 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, BGE's charges to Constellation Energy and its nonregulated affiliates for certain services it provides them, and the participation of BGE's employees in the Constellation Energy pension plan result in intercompany balances in 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 and Overview

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 "regulated business(es)" are to BGE.

        Our 2003 Annual Report on Form 10-K includes a detailed discussion of various items impacting our business, our results of operations and financial condition. These include:

•

Introduction and Overview section which provides a description of our business segments,

•

Strategy section,

•

Business Environment section, including how regulation, weather, and other factors affect our business, and

•

Critical Accounting Policies section.

        Critical accounting policies are the accounting policies that are most important to the portrayal of our financial condition and results and require management's most difficult, subjective or complex judgment. Our critical accounting policies include revenue recognition/mark-to-market accounting, evaluation of assets for impairment and other than temporary decline in value, and asset retirement obligations.

        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 further 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 quarters and nine months ended September 30, 2004 and 2003. We analyze and explain the differences between periods in the specific line items of the Consolidated Statements of Income.

        We have organized our discussion and analysis as follows:

•

We describe changes to our business environment during the year.

•

We highlight significant events that occurred in 2004 that are important to understanding our results of operations and financial condition.

•

We then review our results of operations beginning with an overview of our total company results, followed by a more detailed review of those results by operating segment.

•

We review our financial condition, addressing our sources and uses of cash, security ratings, capital resources, commitments, and liquidity.

•

We conclude with a discussion of our exposure to various market risks.

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 Item 1. Description of Business—Merchant Energy Business section and in Item 7. Management's Discussion and Analysis—Business Environment section of our 2003 Annual Report on Form 10-K. Also refer to the Forward Looking Statements section on page 54 and a discussion of our market risks in the Market Risk section on page 49.

        In this section, we discuss in more detail events which have impacted our business during the nine months ended September 30, 2004.

Regulated Electric Competition

All BGE electric customers have the option to purchase electricity from alternate suppliers.

Standard Offer Service

BGE provides fixed price standard offer service for residential customers that do not select an alternative supplier through June 30, 2006. Beginning July 1, 2006, BGE's current obligation to provide fixed price standard offer service to residential customers ends, and all residential customers that receive their electric supply from BGE will be charged market-based standard offer service rates, as discussed in the Standard Offer Service—Provider of Last Resort (POLR) section on the next page.

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        BGE provided fixed price standard offer service for most of its commercial and industrial customers through June 30, 2002. The large commercial and industrial customers that did not select an alternative supplier were provided market-based standard offer service through June 30, 2004. BGE provided fixed price standard offer service to its remaining commercial and industrial customers through June 30, 2004. Beginning July 1, 2004, all commercial and industrial customers that receive their electric supply from BGE are charged market-based standard offer service rates, as discussed in the Standard Offer Service—Provider of Last Resort (POLR) section below.

Standard Offer Service—Provider of Last Resort (POLR)

Under the POLR settlement agreement approved by the Maryland Public Service Commission (Maryland PSC), BGE is obligated to provide market-based standard offer service to residential customers from July 1, 2006 through May 31, 2010, and for commercial and industrial customers for one, two or four year periods beyond June 30, 2004, depending on customer load. The POLR rates charged during this time will recover BGE's wholesale power supply costs and include an administrative fee. The administrative fee includes a shareholder return component and an incremental cost component.

        Bidding to supply BGE's standard offer service to commercial and industrial customers beyond June 30, 2004 occurred through a multi-round competitive bidding process in the first quarter of 2004. As a result, BGE executed one- and two-year contracts for commercial and industrial electric power supply totaling approximately 2,300 megawatts.

        On October 1, 2004, BGE issued requests for proposals to supply standard offer service to commercial and industrial customers beyond May 31, 2005. Bidding on approximately 1,420 megawatts is scheduled to begin in December 2004 and conclude in March 2005.

FERC Regulation

Regional Transmission Organizations and
Standard Market Design

There are a number of proceedings at the Federal Energy Regulatory Commission (FERC) that may affect the transmission revenues of BGE and other transmission owners in PJM Interconnection (PJM). In addition, there are continued market developments both in PJM and in other regions, such as the Mid-West, New York and New England that have the potential to impact our financial results. However, at this time, we cannot predict the outcome of these proceedings or the possible effect on our, or BGE's, financial results.

Other Factors

Our merchant energy business contracts with rail companies to ensure the delivery of coal to our coal-fired generation facilities. The timely delivery of coal together with the maintenance of appropriate levels of inventory is necessary to allow for continued, reliable generation from these facilities. Since the second quarter of 2004, we have experienced delays in deliveries from one of the rail companies that supplies coal to our generating facilities. In response, we have begun to procure coal using an alternative delivery method to meet our contractual load obligations. We discuss the impact on our financial results in the Mid-Atlantic Fleet section on page 33.

Accounting Standards Adopted and Issued

We discuss recently adopted and issued accounting standards in the Notes to Consolidated Financial Statements on page 24.

27

Events of 2004

Loss from Discontinued Operations

During the second quarter of 2004, we completed the sale of a geothermal facility in Hawaii. We recorded a loss on sale of $0.3 million pre-tax, or $0.2 million after-tax, during the quarter ended September 30, 2004 and a loss on sale of $77.8 million pre-tax, or $50.5 million after-tax, during the nine months ended September 30, 2004. We reported the after-tax loss on sale as a component of "Loss from discontinued operations" in our Consolidated Statements of Income. Additionally, we recognized earnings from the facility prior to sale of $2.1 million pre-tax, or $1.3 million after-tax, for the nine months ended September 30, 2004 as a component of "Loss from discontinued operations." We discuss the loss from discontinued operations in more detail in the Notes to Consolidated Financial Statements on page 12.

Acquisition

On June 10, 2004, we completed our purchase of the R. E. Ginna nuclear facility (Ginna) which is located in Ontario, New York from Rochester Gas & Electric Corporation (RG&E). Ginna consists of a 495 megawatt single-unit pressurized water reactor that entered service in 1970 and is licensed to operate until 2029. We discuss the acquisition further in the Notes to Consolidated Financial Statements on page 13.

Synthetic Fuel Tax Credits

We have 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. We recognize the tax benefit of these credits in our Consolidated Statements of Income when we believe it is highly probable that the credits will be sustained.

        As of September 30, 2004, we have recognized cumulative tax benefits associated with Section 29 credits of $180.6 million, of which $21.9 million was recognized during the quarter ended September 30, 2004 and $102.6 million during the nine months ended September 30, 2004. We discuss the synthetic fuel tax credits in more detail in the Notes to Consolidated Financial Statements on page 16.

Impairment of Financial Investment

Our other nonregulated businesses recognized a pre-tax impairment loss of $1.1 million in the third quarter and $3.7 million for the nine months ended September 30, 2004. We discuss our impairments of financial investments in more detail in the Notes to Consolidated Financial Statements on page 11.

Net Loss on Sales of Investments and Other Assets

Our other nonregulated businesses recognized a loss of $7.5 million pre-tax in the third quarter and a loss of $1.6 million pre-tax for the nine months ended September 30, 2004 on the sale of non-core assets. We discuss our net loss on sales of investments and other assets in more detail in the Notes to Consolidated Financial Statements on page 12.

Pension Plan Assets

Our actual return on pension plan assets was 3.5% through September 30, 2004. In addition, we contributed $50 million, or approximately $30 million after-tax, to our pension plans in 2004.

        If pension plan assets earned 2.25% during the fourth quarter of 2004, or one-fourth of our 9% annual return on pension assets assumption, and the liability discount rate remains unchanged, an after-tax charge to equity of approximately $43 million would be recorded at December 31, 2004 as a result of increasing our additional minimum pension liability. The amount ultimately recorded will be determined by our actual 2004 return on pension plan assets, which depends on the performance of the financial markets during 2004, and our discount rate assumption, which depends on year-end interest rates. As a result, the charge to equity, if any, could be materially different than our current estimate.

Dividend Increase

In January 2004, we announced an increase in our quarterly dividend to 28.5 cents per share on our common stock. This is equivalent to an annual rate of $1.14 per share. Previously, our quarterly dividend on our common stock was 26 cents per share, equivalent to an annual rate of $1.04 per share.

28

Results of Operations for the Quarter and Nine Months Ended
September 30, 2004 Compared with the Same Periods of 2003

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 and expense, 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 43.

Overview

Results

			Quarter Ended September 30,						Nine Months Ended September 30,
			2004			2003			2004			2003
			(In millions, after-tax)
Merchant energy			$	188.2		$	171.6		$	336.9		$	225.9
Regulated electric				36.8			18.2			107.1			89.3
Regulated gas				(8.8	)		2.4			15.7			31.9
Other nonregulated				(5.6	)		0.7			(5.7	)		9.6
Income from Continuing Operations and Before Cumulative Effects of Changes in Accounting Principles				210.6			192.9			454.0			356.7
	Loss from Discontinued Operations (see Notes)			(0.2	)		—			(49.2	)		—
	Cumulative Effects of Changes in Accounting Principles			—			—			—			(198.4	)
Net Income			$	210.4		$	192.9		$	404.8		$	158.3
Special Items Included in Operations
		Recognition of 2003 synthetic fuel tax credits	$	—		$	—		$	35.9		$	—
		Net (losses) gains on sale of investments and other assets		(4.6	)		1.3			(0.9	)		9.9
		Impairment losses and other costs		(0.7	)		—			(2.3	)		—
		Workforce reduction costs		—			(0.4	)		—			(1.3	)
Total Special Items			$	(5.3	)	$	0.9		$	32.7		$	8.6

Quarter Ended September 30, 2004

Our total net income for the quarter ended September 30, 2004 increased $17.5 million, or $0.04 per share, compared to the same period of 2003 mostly because of the following:

•

We had higher earnings from our regulated electric business mostly because of the absence of $31.4 million of incremental operations and maintenance expenses due to distribution service restoration efforts associated with Hurricane Isabel in the third quarter of 2003.

•

Our merchant energy business had higher earnings due to the realization of wholesale contracts originated in prior periods, portfolio management, higher sales volumes at NewEnergy, our retail competitive supply operation, and the favorable settlement of a pre-acquisition liability at NewEnergy relating to a bankruptcy proceeding.

•

We had higher earnings of $15.7 million from Ginna, which was acquired in June 2004, and from our Nine Mile Point facility that experienced a forced outage during the Northeast Blackout in 2003.

•

We had higher earnings of $11.1 million from our South Carolina synfuel facility.

        These increases were partially offset by the following:

•

We had higher Sarbanes-Oxley 404 implementation costs, enterprise information systems expenditures, and benefit and other inflationary costs.

•

We had lower earnings from our Mid-Atlantic fleet which recognized lower revenue less purchased fuel and energy expenses during the third quarter of 2004 compared to the same period of 2003 due to lower sales prices and higher coal costs.

•

We had lower earnings from our regulated gas business primarily due to the absence of a $7.7 million pre-tax market-based rate gas recovery, which had a favorable effect in 2003.

•

We had lower earnings of $5.9 million due to a loss on sale of a financial investment in 2004 compared to a gain on sales in 2003.

Nine Months Ended September 30, 2004

Our total net income for the nine months ended September 30, 2004 increased $246.5 million, or $1.41 per share, compared to the same period of 2003 mostly because of the following:

•

In 2003, we recorded a $266.1 million after-tax, or $1.61 per share, loss for the cumulative effect of adopting Emerging Issues Task Force (EITF) 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 was partially offset by a $67.7 million after-tax, or $0.41 per share, gain for the cumulative effect of adopting Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. These items had a combined negative impact during the nine months ended September 30, 2003.

29

•

Our merchant energy business had higher earnings of $65.8 million at our South Carolina synfuel facility primarily due to the recognition of tax credits claimed in 2003 and tax credits associated with 2004 production.

•

We had higher earnings from our regulated electric business mostly because of the absence of $31.4 million of incremental operations and maintenance expenses due to distribution service restoration efforts associated with Hurricane Isabel in 2003.

•

We had higher earnings from our nuclear generating assets due to Ginna and reduced outage days at our Calvert Cliffs nuclear power plant, partially offset by lower earnings at our Nine Mile Point facility primarily associated with lower generation and lower power prices for our output in 2004 compared to 2003.

•

We had higher earnings from our merchant energy business mostly due to the realization of wholesale contracts originated in prior periods, portfolio management, a bankruptcy settlement from PG&E at NewEnergy, and a favorable settlement of a pre-acquisition liability at NewEnergy also related to a bankruptcy proceeding.

•

We had higher earnings due to lower losses associated with economic hedges that did not qualify for cash-flow hedge accounting treatment in 2003.

•

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

        These increases were partially offset by the following:

•

We recorded a $49.2 million after-tax, or $0.28 per share, loss from discontinued operations.

•

We had higher Sarbanes-Oxley 404 implementation costs, enterprise information systems expenditures, and benefit and other inflationary costs.

•

We had lower earnings from our Mid-Atlantic fleet which recognized lower revenue less purchased fuel and energy expenses during the nine months ended September 30, 2004 compared to the same period of 2003 due to lower sales prices and higher coal costs.

•

We had lower earnings from our regulated gas business mostly because of the absence of a $7.7 million pre-tax market-based rate gas recovery which had a favorable effect in 2003.

•

We recognized a gain of $9.9 million after-tax, or $0.06 per share, related to non-core asset sales in the nine months ended September 30, 2003 that had a favorable impact in that period.

        Earnings per share was impacted by additional dilution resulting from the issuance of 6.0 million shares of common stock on July 1, 2004.

        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. We discuss the impact of deregulation on our merchant energy business in the Business Environment—Electric Competition section of our 2003 Annual Report on Form 10-K.

        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 and Note 1 of our 2003 Annual Report on Form 10-K. We summarize our policies as follows:

•

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

•

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 34.

30

Results

		Quarter Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
					(In millions)
Revenues		$	2,952.1		$	2,173.5		$	7,704.7		$	5,669.2
Fuel and purchased energy expenses			(2,227.4	)		(1,542.5	)		(6,008.8	)		(4,240.5	)
Operations and maintenance expenses			(296.2	)		(214.5	)		(888.0	)		(694.5	)
Workforce reduction costs			—			(0.5	)		—			(1.3	)
Depreciation and amortization			(68.3	)		(64.7	)		(185.4	)		(172.2	)
Accretion of asset retirement obligations			(14.5	)		(10.7	)		(38.1	)		(32.0	)
Taxes other than income taxes			(26.6	)		(24.6	)		(69.6	)		(71.0	)
Income from Operations		$	319.1		$	316.0		$	514.8		$	457.7
Income from Continuing Operations and Before Cumulative Effects of Changes in Accounting Principles (after-tax)		$	188.2		$	171.6		$	336.9		$	225.9
	Loss from Discontinued Operations (after-tax)		(0.2	)		—			(49.2	)		—
	Cumulative Effects of Changes in Accounting Principles (after-tax)		—			—			—			(198.4	)
Net Income		$	188.0		$	171.6		$	287.7		$	27.5
Special Items Included in Operations (after-tax)
	Recognition of 2003 synthetic fuel tax credits	$	—		$	—		$	35.9		$	—
	Workforce reduction costs		—			(0.3	)		—			(0.8	)
Total Special Items		$	—		$	(0.3	)	$	35.9		$	(0.8	)

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 merchant energy business 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. In managing our portfolio, we occasionally terminate, restructure, or acquire contracts. Such transactions are within the normal course of managing our portfolio and may materially impact the timing of our recognition of revenues, fuel and purchased energy expenses, and cash flows from operating activities.

        We analyze our merchant energy revenues and fuel and purchased energy expenses in the following categories because of the risk profile of each category, differences in the revenue sources, and the nature of fuel and purchased energy expenses. With the exception of a portion of our competitive supply activities that we are required to account for using the mark-to-market method of accounting, all of these activities are accounted for on an accrual basis.

•

Mid-Atlantic Fleet—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. This also includes active portfolio management of the generating assets and associated physical and financial arrangements.

•

Plants with Power Purchase Agreements—our generating facilities outside the Mid-Atlantic region with long-term power purchase agreements, including our Nine Mile Point Nuclear Station (Nine Mile Point), Ginna, Oleander, University Park, and High Desert facilities.

•

Competitive Supply—our wholesale marketing and risk management operation that provides energy products and services to distribution utilities and other wholesale customers. This category includes our remaining generating facilities whose output is primarily used in managing our competitive supply activities outside the PJM region. We also provide electric and gas energy services to retail commercial and industrial customers.

•

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

31

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

		Quarter Ended September 30,										Nine Months Ended September 30,
		2004					2003					2004					2003
		(Dollar amounts in millions)
Revenues:
	Mid-Atlantic Fleet	$	701.3				$	507.6				$	1,557.7				$	1,346.1
	Plants with Power Purchase Agreements		262.6					206.6					554.9					472.6
	Competitive Supply		1,961.9					1,438.0					5,535.2					3,811.6
	Other		26.3					21.3					56.9					38.9
	Total	$	2,952.1				$	2,173.5				$	7,704.7				$	5,669.2
Fuel and purchased energy expenses:
	Mid-Atlantic Fleet	$	(403.8	)			$	(189.8	)			$	(803.5	)			$	(580.7	)
	Plants with Power Purchase Agreements		(17.6	)				(14.8	)				(41.6	)				(38.6	)
	Competitive Supply		(1,806.0	)				(1,337.9	)				(5,163.7	)				(3,621.2	)
	Other		—					—					—					—
	Total	$	(2,227.4	)			$	(1,542.5	)			$	(6,008.8	)			$	(4,240.5	)
Revenues less fuel and purchased energy expenses:					% of Total					% of Total					% of Total					% of Total
	Mid-Atlantic Fleet	$	297.5		41	%	$	317.8		50	%	$	754.2		44	%	$	765.4		54	%
	Plants with Power Purchase Agreements		245.0		34			191.8		30			513.3		30			434.0		30
	Competitive Supply		155.9		21			100.1		17			371.5		22			190.4		13
	Other		26.3		4			21.3		3			56.9		4			38.9		3
	Total	$	724.7		100	%	$	631.0		100	%	$	1,695.9		100	%	$	1,428.7		100	%

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

Mid-Atlantic Fleet

	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Revenues	$	701.3		$	507.6		$	1,557.7		$	1,346.1
Fuel and purchased energy expenses		(403.8	)		(189.8	)		(803.5	)		(580.7	)
Revenues less fuel and purchased energy expenses	$	297.5		$	317.8		$	754.2		$	765.4

Revenues

Our merchant energy revenues in the PJM region increased $193.7 million for the three months ended September 30, 2004 compared to the same period of 2003 mostly because of the following:

•

a $265.2 million increase resulting from market-based load-serving contracts executed during multi-round competitive bidding load auctions in the first quarter of 2004, which includes load served for BGE, and

•

an $86.2 million increase due to a load-serving obligation in New Jersey that began in mid-2003.

        These increases were partially offset by a $172.2 million decrease from supplying BGE's standard offer service requirements. As of July 1, 2004, our merchant energy business no longer supplied 100% of BGE's standard offer service for commercial and industrial customers.

        For the nine months ended September 30, 2004, merchant energy revenues in the PJM region increased $211.6 million compared to the same period of 2003 mostly because of the following:

•

a $277.5 million increase as a result of load-serving contracts executed during multi-round competitive bidding load auctions, and

•

an increase of $183.5 million related to load-serving transactions in New Jersey that began in mid-2003.

        These increases in revenues were offset in part by the following:

•

a $156.7 million decrease from supplying BGE's standard offer service requirements,

•

a $63.0 million decrease primarily due to a reduction in the amount of excess generation available for sale to the market in the PJM region, and

•

the recognition of a gain on the assumption of an agreement from Allegheny in the second quarter of 2003 that had a positive impact in that period.

32

Fuel and Purchased Energy Expenses

Our merchant energy business had higher fuel and purchased energy expenses in the Mid-Atlantic Fleet during the quarter and nine months ended September 30, 2004 compared to the same periods of 2003 primarily due to increased purchased fuel and capacity expenses associated with our load-serving obligations in New Jersey and higher generation during the nine months ended September 30, 2004. In addition, as discussed in the Other Factors section on page 27, we have experienced higher coal prices because we have purchased coal from alternative suppliers at a higher price as a result of delays in deliveries from one of the rail companies that supplies coal to our generating facilities.

Plants with Power Purchase Agreements

	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Revenues	$	262.6		$	206.6		$	554.9		$	472.6
Fuel and purchased energy expenses		(17.6	)		(14.8	)		(41.6	)		(38.6	)
Revenues less fuel and purchased energy expenses	$	245.0		$	191.8		$	513.3		$	434.0

The $56.0 million increase in revenues for the quarter ended September 30, 2004 compared to the same period of 2003 was primarily due to higher revenues of $57.5 million from Ginna which was acquired in June 2004. We discuss the acquisition of Ginna in more detail in the Notes to the Consolidated Financial Statements on page 13.

        The $82.3 million increase in revenues for the nine months ended September 30, 2004 compared to the same period of 2003 was primarily due to higher revenues of $68.5 million from Ginna and higher revenues of $44.3 million from High Desert which commenced operations in April 2003. These increases were partially offset by a decrease of $19.1 million at Nine Mile Point mostly because of lower generation and lower prices for our Nine Mile Point output in 2004 compared to 2003.

Competitive Supply

	Quarter Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Accrual revenues	$	1,906.8		$	1,433.2		$	5,458.3		$	3,812.4
Mark-to-market revenues		55.1			4.8			76.9			(0.8	)
Fuel and purchased energy expenses		(1,806.0	)		(1,337.9	)		(5,163.7	)		(3,621.2	)
Revenues less fuel and purchased energy expenses	$	155.9		$	100.1		$	371.5		$	190.4

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 during the quarter and nine months ended September 30, 2004 compared to the same periods of 2003 mostly because of retail sales to commercial and industrial customers. We sold approximately 4 million megawatt hours more of electricity and 22 billion cubic feet (BCF) more of gas during the quarter ended September 30, 2004 compared to the same period of 2003 and approximately 12 million megawatt hours more of electricity and 87 BCF more of gas during the nine months ended September 30, 2004 compared to the same period of 2003. Theses increases are primarily due to:

•

new customer contracts,

•

customer renewals,

•

portfolio acquisitions during 2003,

•

acquisition of Blackhawk and Kaztex in October 2003,

•

the collection of a receivable that was previously reserved due to the financial condition of our customer, PG&E, and

•

a favorable settlement of a pre-acquisition liability in a bankruptcy proceeding.

        During the nine months ended September 30, 2004, the increase in revenues was partially offset by lower rates received from our customers.

33

        Additionally, our wholesale marketing and risk management operation had higher sales primarily in Texas, New England and Mid-West regions, and Canada. The higher sales in Texas and the New England region are primarily due to our growth in these regions. The increased sales in the Mid-West are primarily due to the portfolio acquisition from CMS Energy Corp., which occurred in the second quarter of 2003. We provide the changes in revenues and purchased fuel and energy expenses in 2004 compared to 2003 in the following table:

	Quarter Ended September 30, 2004 vs. 2003				Nine Months Ended September 30, 2004 vs. 2003
	Increases in revenues		Increases in fuel and purchased energy expenses		Increases in revenues		Increases in fuel and purchased energy expenses
	(In millions)
Retail accrual activities	$	411.2	$	387.2	$	1,269.3	$	1,208.5
Wholesale accrual activities		62.4		80.9		376.6		334.0
Total increase	$	473.6	$	468.1	$	1,645.9	$	1,542.5

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 of our 2003 Annual Report on Form 10-K.

        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 on page 49. The primary factors that cause fluctuations in our mark-to-market revenues and earnings are:

•

the number, size, and profitability of new transactions including terminations or restructurings of existing contracts,

•

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 September 30,						Nine Months Ended September 30,
			2004			2003			2004			2003
			(In millions)
Unrealized revenues
	Origination transactions		$	7.5		$	25.0		$	17.1		$	50.2
	Risk management
		Unrealized changes in fair value		47.6			(20.2	)		59.8			(51.0	)
		Changes in valuation techniques		—			—			—			—
		Reclassification of settled contracts to realized		(17.3	)		(10.0	)		(53.5	)		(80.1	)
	Total risk management			30.3			(30.2	)		6.3			(131.1	)
Total unrealized revenues*				37.8			(5.2	)		23.4			(80.9	)
Realized revenues				17.3			10.0			53.5			80.1
Total mark-to-market revenues			$	55.1		$	4.8		$	76.9		$	(0.8	)

* Total unrealized revenues is the sum of origination transactions and total risk management.

        Origination gains arise from contracts that our wholesale marketing and risk management operation structure to meet the risk management needs of our customers. Transactions that result in origination gains may be unique and provide the potential for individually significant revenues and gains from a single transaction.

        Origination gains represent the initial fair value recognized on these structured transactions. The recognition of origination gains is dependent on the existence of observable market data that validates the initial fair value of the contract. For the quarter ended September 30, 2004 we recognized $7.5 million in origination gains from three transactions and for the nine months ended September 30, 2004 we recognized $17.1 million in origination gains from ten transactions.

        As noted above, the recognition of origination gains is dependent on sufficient observable market data. Liquidity and market conditions impact our ability to identify sufficient, objective market-price information to permit recognition of origination gains. As a result, while our strategy and competitive position provide the opportunity to continue to originate such transactions, the level of origination revenues we are able to recognize may vary from year to year as a result of the number, size, and market-price transparency of the individual transactions executed in any period.

34

        Risk management revenues represent both realized and unrealized gains and losses from changes in the value of our entire portfolio, including the recognition of gains associated with decreases in the close-out reserve when we are able to obtain sufficient market price information. 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 are affected by the portion of our activities that are subject to mark-to-market accounting. Beginning January 1, 2003, under EITF 02-3, we do not record non-derivative contracts at fair value. Further, to the extent that we are not able to observe quoted market prices or other current market transactions for derivative contract values determined using models, we record a reserve to adjust such contracts to result in zero gain or loss at inception. We remove the reserve and record such contracts at fair value when we obtain current market information for contracts with similar terms and counterparties.

        Mark-to-market revenues increased $50.3 million during the third quarter of 2004 compared to the same period of 2003 mostly because of gains from risk management activities compared to losses from risk management activities in the prior year, partially offset by lower revenues from origination transactions. The increase in risk management revenues is primarily due to favorable changes in regional energy prices, price volatility, and other factors for the quarter ended September 30, 2004 compared to the same period of 2003.

        Mark-to-market revenues increased $77.7 million during the nine months ended September 30, 2004 compared to the same period of 2003 mostly because of gains from risk management activities compared to losses from risk management activities in the prior year, partially offset by lower revenues from origination transactions. The increase in risk management revenues is primarily due to favorable changes in regional energy prices, price volatility, and other factors. In addition, we had lower mark-to-market losses on hedges that did not qualify for hedge accounting treatment in 2004 compared to 2003 as discussed in more detail below.

        With the implementation of EITF 02-3 in the first quarter of 2003, all of our load-serving contracts were converted to accrual accounting. However, several economically effective hedges on these positions did not qualify for hedge accounting treatment under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and remained in the mark-to-market portfolio. We recorded a lower pre-tax loss of $2.5 million on these mark-to-market hedges during the third quarter of 2004 compared to the same period of 2003 and a lower pre-tax loss of $36.3 million during the nine months ended September 30, 2004 compared to the same period of 2003. These mark-to-market losses will be offset as we realize the related accrual load-serving positions in cash.

Mark-to-Market Energy Assets and Liabilities

Our mark-to-market energy assets and liabilities are comprised of derivative contracts and consisted of the following:

	September 30, 2004		December 31, 2003
	(In millions)
Current Assets	$	568.8	$	488.3
Noncurrent Assets		412.1		261.9
Total Assets		980.9		750.2
Current Liabilities		578.1		474.6
Noncurrent Liabilities		355.2		258.0
Total Liabilities		933.3		732.6
Net mark-to-market energy asset	$	47.6	$	17.6

        The following are the primary sources of the change in net mark-to-market energy asset/liability during 2004:

Change in Net Mark-to-Market Asset/Liability

		Quarter Ended September 30, 2004		Nine Months Ended September 30, 2004
		(In millions)
Fair value beginning of period		$(11.6	)	$ 17.6
Changes in fair value recorded as revenues
	Origination gains	$   7.5		$ 17.1
	Unrealized changes in fair value	47.6		59.8
	Changes in valuation techniques	—		—
	Reclassification of settled contracts to realized	(17.3)		(53.5)
Total changes in fair value recorded as revenues		37.8		23.4
Changes in value of exchange-listed futures and options		10.6		(31.4	)
Net change in premiums on options		13.7		28.7
Other changes in fair value		(2.9	)	9.3
Fair value at end of period		$47.6		$47.6

35

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

•

Origination gains representing the initial unrealized fair value at the time these contracts are executed to the extent permitted by applicable accounting rules.

•

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

•

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

•

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

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

•

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 and premiums on options sold as a decrease in the net mark-to-market energy asset.

        The settlement terms of the net mark-to-market energy asset/liability and sources of fair value as of September 30, 2004 are as follows:

	Settlement Term
	2004		2005			2006			2007			2008			2009			Thereafter			Fair Value
	(In millions)
Prices provided by external sources (1)	$	23.4	$	6.2		$	14.0		$	125.4		$	(1.3	)	$	—		$	—		$	167.7
Prices based on models		0.3		(13.4	)		(1.1	)		(107.5	)		6.8			(2.1	)		(3.1	)		(120.1	)
Total net mark-to-market energy asset/(liability)	$	23.7	$	(7.2	)	$	12.9		$	17.9		$	5.5		$	(2.1	)	$	(3.1	)	$	47.6

(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 table 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.

36

        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 2006, but up to 2008, depending upon the region,

•

options for the purchase and sale of electricity during peak hours for delivery terms through 2005, depending upon the region,

•

forward purchases and sales of electric capacity for delivery terms through 2006,

•

forward purchases and sales of natural gas, coal, and oil for delivery terms through 2007, and

•

options for the purchase and sale of natural gas, coal, and oil for delivery terms through 2006.

        The remainder of the net mark-to-market energy asset/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 our wholesale marketing 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 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 table 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 table 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 table. However, based upon the nature of our wholesale marketing 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 table represent expected future cash flows based on the level of forward prices and volatility factors as of September 30, 2004 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.

37

Other

	Quarter Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
	(In millions)
Revenues	$	26.3	$	21.3	$	56.9	$	38.9

Our merchant energy business holds up to a 50% ownership interest in 25 operating domestic energy projects that consist of electric generation, fuel processing, or fuel handling facilities. Of these 25 projects, 18 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. In June 2004, we sold our geothermal generating facility in Hawaii. We discuss the sale of our geothermal facility in more detail in the Notes to the Consolidated Financial Statements on page 12.

        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 the impact of subsidies from the State of California in more detail in the Merchant Energy Business—Other section of our 2003 Annual Report on Form 10-K. We discuss certain risks and uncertainties in more detail in our Forward Looking Statements section on page 54. However, should future events cause these investments to become uneconomic, our investments in these projects could become impaired under the provisions of Accounting Principles Board Opinion (APB) No. 18, The Equity Method of Accounting for Investments in Common Stock.

        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.

Operations and Maintenance Expenses

Our merchant energy business operations and maintenance expenses increased $81.7 million in the third quarter of 2004 compared to the same period of 2003 mostly due to the following:

•

an increase at our wholesale marketing and risk management operation and our retail commercial and industrial operation totaling $48.2 million mostly because of an increased number of employees due to the growth of these operations,

•

an increase of $18.2 million related to Ginna, which was purchased in June 2004, and

•

an increase due to higher Sarbanes-Oxley 404 implementation costs and higher benefit and other inflationary costs.

        Our merchant energy business operations and maintenance expenses increased $193.5 million for the nine months ended September 30, 2004 compared to the same period in 2003 mostly due to the following:

•

an increase at our wholesale marketing and risk management operation and our retail commercial and industrial operation totaling $88.1 million mostly because of an increased number of employees due to the growth of these operations,

•

an increase of $55.2 million at our nuclear generating facilities, including Nine Mile Point improvement spending and Ginna, and

•

an increase due to higher Sarbanes-Oxley 404 implementation costs and higher benefit and other inflationary costs.

Depreciation and Amortization Expense

Merchant energy depreciation and amortization expense increased $3.6 million in the third quarter of 2004 compared to the same period of 2003 mostly because of higher depreciation associated with Ginna and our synthetic fuel processing facility in South Carolina, which was acquired in May 2003.

        Merchant energy depreciation and amortization expense increased $13.2 million for the nine months ended September 30, 2004 compared to the same period of 2003 mostly because of the High Desert Power Project, which was placed into service during the second quarter of 2003, our synthetic fuel processing facility in South Carolina, and Ginna.

38

Regulated Electric Business

Our regulated electric business is discussed in detail in the Regulated Electric Competition—Maryland section of our 2003 Annual Report on Form 10-K.

Results

		Quarter Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
		(In millions)
Revenues		$	582.0		$	582.3		$	1,543.6		$	1,505.6
Electricity purchased for resale expenses			(338.4	)		(345.7	)		(833.1	)		(826.5	)
Operations and maintenance expenses			(77.5	)		(105.8	)		(222.9	)		(225.3	)
Workforce reduction costs			—			(0.2	)		—			(0.6	)
Depreciation and amortization			(49.2	)		(45.8	)		(145.5	)		(134.5	)
Taxes other than income taxes			(33.9	)		(33.1	)		(100.3	)		(98.3	)
Income from Operations		$	83.0		$	51.7		$	241.8		$	220.4
Net Income		$	36.8		$	18.2		$	107.1		$	89.3
Special Items Included in Operations (after-tax)
	Workforce reduction costs	$	—		$	(0.1	)	$	—		$	(0.4	)

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 and nine months ended September 30, 2004 compared to the same periods of 2003 mostly because of the following:

•

we incurred $19.2 million after-tax of incremental distribution service restoration expenses associated with Hurricane Isabel in the third quarter of 2003 that had a negative impact in that period,

•

we had increased earnings resulting from the shareholder return portion of the administrative fee included in market-based rates charged to commercial and industrial customers that did not elect alternative suppliers beginning July 1, 2004, and

•

lower interest expense.

        These favorable results were partially offset by the following:

•

excluding the costs associated with Hurricane Isabel, we had increased operations and maintenance expenses primarily due to higher benefit and other inflationary costs, higher Sarbanes-Oxley 404 implementation costs, higher uncollectible expenses, and increased spending on electric system reliability, and

•

increased depreciation and amortization expense.

Electric Revenues

The changes in electric revenues in 2004 compared to 2003 were caused by:

	Quarter Ended September 30, 2004 vs. 2003			Nine Months Ended September 30, 2004 vs. 2003
	(In millions)
Distribution sales volumes	$	0.5		$	16.8
Standard offer service		(2.5	)		20.1
Total change in electric revenues from electric system sales		(2.0	)		36.9
Other		1.7			1.1
Total change in electric revenues	$	(0.3	)	$	38.0

        BGE measures the effect of weather using "degree-days." We show the number of heating and cooling degree-days in the quarters and nine months ended September 30, 2004 and 2003, and the percentage change in the number of degree-days between these periods in the following table:

	Quarter Ended September 30,		Nine Months Ended September 30,
	2004	2003	2004	2003
Heating degree days	49	57	3,111	3,482
Percent change from prior period	(14.0)%		(10.7)%
Cooling degree days	538	580	831	733
Percent change from prior period	(7.2)%		13.4%

39

Distribution Sales Volumes

Distribution sales volumes are sales to customers in BGE's service territory at rates set by the Maryland Public Service Commission (Maryland PSC).

        The percentage changes in our distribution sales volumes, by type of customer, in 2004 compared to 2003 were:

	Quarter Ended September 30, 2004 vs. 2003		Nine Months Ended September 30, 2004 vs. 2003
Residential	6.1	%	5.7	%
Commercial	(1.8	)	1.0
Industrial	(5.9	)	(2.0	)

        During the quarter ended September 30, 2004, we distributed more electricity to residential customers compared to the same period of 2003 mostly due to increased usage per customer partially offset by milder weather. We distributed less electricity to commercial and industrial customers mostly due to decreased usage per customer.

        During the nine months ended September 30, 2004, we distributed more electricity to residential and commercial customers compared to the same period of 2003 due to increased usage per customer, an increased number of customers, and warmer weather during the second quarter of 2004. We distributed less electricity to industrial customers mostly due to a decreased number of customers and decreased usage per customer.

Standard Offer Service

BGE provides standard offer service for customers that do not select an alternative generation supplier as discussed in the Regulated Electric Competition section on page 26.

        Standard offer service revenues decreased during the quarter ended September 30, 2004 compared to the same period of 2003 mostly because of large commercial and industrial customers that left BGE's standard offer service and elected an alternative supplier beginning July 1, 2004.

        Standard offer service revenues increased during the nine months ended September 30, 2004 compared to the same period of 2003 mostly due to increased sales volumes to residential customers.

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 only customers.

Electric Operations and Maintenance Expenses

Regulated electric operations and maintenance expenses decreased $28.3 million for the quarter and $2.4 million for the nine months ended September 30, 2004 compared to the same periods of 2003 primarily because we incurred $31.4 million of incremental distribution service restoration expenses associated with Hurricane Isabel in the third quarter of 2003. Excluding the impact of Hurricane Isabel, regulated electric operations and maintenance expenses increased primarily due to higher benefit and other inflationary costs, higher Sarbanes-Oxley 404 implementation costs, higher uncollectible expenses, and increased spending on electric system reliability.

Electric Depreciation and Amortization Expenses

Regulated electric depreciation and amortization expenses increased $3.4 million for the quarter and $11.0 million for the nine months ended September 30, 2004 compared to the same periods of 2003 mostly because of increased depreciation expense associated with more property being placed in service and accelerated amortization expense associated with the planned replacement of information technology assets.

40

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 September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In millions)
Gas revenues	$	75.3		$	81.0		$	507.4		$	524.5
Gas purchased for resale expenses		(31.6	)		(30.1	)		(307.1	)		(319.5	)
Operations and maintenance expenses		(30.4	)		(24.8	)		(89.4	)		(74.1	)
Workforce reduction costs		—			—			—			(0.1	)
Depreciation and amortization		(12.1	)		(11.7	)		(36.4	)		(34.8	)
Taxes other than income taxes		(7.1	)		(3.3	)		(23.8	)		(19.8	)
(Loss) Income from operations	$	(5.9	)	$	11.1		$	50.7		$	76.2
Net (Loss) Income	$	(8.8	)	$	2.4		$	15.7		$	31.9

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 nine months ended September 30, 2004 decreased compared to the same periods of 2003 mostly because of the following:

•

increased operations and maintenance expenses primarily due to higher benefit and other inflationary costs, higher Sarbanes-Oxley 404 implementation costs, and higher uncollectible expenses,

•

the recovery of a previously disallowed $7.7 million pre-tax regulatory asset following an order issued by the Maryland PSC in the third quarter of 2003 that had a positive impact in that period, and

•

the approval of $3.6 million of property tax refund claims by the State of Maryland resulting from a reclassification of a gas distribution pipeline from real property to personal property in the third quarter of 2003 that had a positive impact in that period.

Gas Revenues

The changes in gas revenues in 2004 compared to 2003 were caused by:

	Quarter Ended September 30, 2004 vs. 2003			Nine Months Ended September 30, 2004 vs. 2003
	(In millions)
Distribution sales volumes	$	0.6		$	(2.7	)
Base rates		(0.1	)		(0.2	)
Weather normalization		(0.1	)		4.7
Gas cost adjustments		1.4			12.6
Total change in gas revenues from gas system sales		1.8			14.4
Off-system sales		(7.5	)		(31.5	)
Other		—			—
Total change in gas revenues	$	(5.7	)	$	(17.1	)

        We show the change in degree-days in the Electric Revenues section on page 39.

Distribution Sales Volumes

The percentage changes in our distribution sales volumes, by type of customer, in 2004 compared to 2003 were:

	Quarter Ended September 30, 2004 vs. 2003		Nine Months Ended September 30, 2004 vs. 2003
Residential	(10.1	)%	(5.3	)%
Commercial	10.1		9.7
Industrial	(15.3	)	(19.7	)

        During the quarter ended September 30, 2004, we distributed less gas to residential and industrial customers compared to the same period in 2003 mostly due to decreased usage per customer. We distributed more gas to commercial customers mostly due to increased usage per customer.

        During the nine months ended September 30, 2004, we distributed less gas to residential customers compared to the same period in 2003 mostly due to milder winter weather, partially offset by an increased number of customers and increased usage per customer. We distributed more gas to commercial customers mostly due to increased usage per customer, partially offset by milder winter weather. We distributed less gas to industrial customers mostly due to decreased usage per customer.

41

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 2003 Annual Report on Form 10-K. 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 only 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 nine months ended September 30, 2004, gas cost adjustment revenues increased compared to the same periods of 2003 mostly because we sold gas at a higher price partially offset by less gas sold.

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 nine months ended September 30, 2004, revenues from off-system gas sales decreased compared to the same periods of 2003 mostly due to 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 only customers.

        During the quarter ended September 30, 2004, gas purchased for resale expenses increased compared to the same period of 2003 primarily due to a $7.7 million recovery of previously disallowed fuel-related costs recognized in the third quarter of 2003 that had a positive impact in that period and higher gas prices, partially offset by less gas sold. In August 2003, the Maryland PSC issued an order authorizing us to recover $7.7 million of disallowed fuel-related costs previously reserved in the fourth quarter of 2002.

        During the nine months ended September 30, 2004, gas purchased for resale expenses decreased compared to the same period of 2003 mostly due to less gas sold partially offset by $7.7 million of previously disallowed fuel-related costs recognized in the third quarter of 2003 that had a positive impact in that period and higher gas prices.

Gas Operations and Maintenance Expenses

Regulated gas operations and maintenance expenses increased $5.6 million for the quarter and $15.3 million for the nine months ended September 30, 2004 compared to the same periods of 2003 mostly due to higher benefit and other inflationary costs, higher Sarbanes-Oxley 404 implementation costs, and higher uncollectible expenses.

42

Other Nonregulated Businesses

Results

		Quarter Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
		(In millions)
Revenues		$	108.2		$	144.5		$	310.8		$	443.3
Operating expenses			(90.4	)		(129.9	)		(259.1	)		(403.0	)
Impairment losses and other costs			(1.1	)		—			(3.7	)		—
Workforce reduction costs			—			—			—			(0.1	)
Depreciation and amortization			(8.8	)		(5.5	)		(24.3	)		(14.1	)
Taxes other than income taxes			(0.1	)		(0.8	)		(1.3	)		(2.6	)
Net (loss) gain on sale of investments and other assets			(7.5	)		2.1			(1.6	)		16.3
Income from Operations		$	0.3		$	10.4		$	20.8		$	39.8
Net (Loss) Income		$	(5.6	)	$	0.7		$	(5.7	)	$	9.6
Special Items Included in Operations (after-tax)
	Net (loss) gain on sale of investments and other assets	$	(4.6	)	$	1.3		$	(0.9	)	$	9.9
	Impairment losses and other costs		(0.7	)		—			(2.3	)		—
	Workforce reduction costs		—			—			—			(0.1	)
	Total Special Items	$	(5.3	)	$	1.3		$	(3.2	)	$	9.8

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 September 30, 2004, net income from our other nonregulated businesses decreased $6.3 million compared to the same period of 2003 primarily due to a $7.5 million pre-tax, or $4.6 million after-tax, loss in the third quarter of 2004 on the sale of a non-core financial investment.

        During the nine months ended September 30, 2004, net income from our other nonregulated businesses decreased compared to the same period of 2003 mostly because we recognized a $16.3 million pre-tax, or $9.9 million after-tax, gain on the sale of non-core assets in 2003 that had a positive impact in that period as follows:

•

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

•

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 in the first quarter on an installment sale of a parcel of real estate,

•

a $0.5 million pre-tax gain in the second quarter on the sale of financial investments,

•

a $1.5 million pre-tax gain during the third quarter from the sale of two parcels of real estate, and

•

a $0.6 million pre-tax gain during the third quarter on the sale of financial investments.

        As previously discussed in our 2003 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.

Consolidated Nonoperating Income
and Expenses

Other Income and Expense

The decrease in other income of $7.2 million during the quarter and $11.7 million during the nine months ended September 30, 2004 compared to the same periods of 2003 is primarily due to lower earnings on decommissioning trust assets, higher charitable contributions, and higher minority interest expense.

        During the quarter and nine months ended September 30, 2004, total other income at BGE decreased compared to the same period of 2003 mostly because of a higher level of charitable contributions.

Fixed Charges

During the quarter ended September 30, 2004, total fixed charges decreased $4.6 million compared to the same period of 2003 primarily due to a lower level of debt outstanding and the benefit of lower interest rates due to floating rate swaps entered into during the third quarter of 2004. We discuss these floating rate swaps in the Notes to Consolidated Financial Statements on page 23.

        During the quarter and nine months ended September 30, 2004, total fixed charges at BGE decreased compared to the same period of 2003 mostly because of a lower level of debt outstanding.

43

Income Taxes

During the quarter ended September 30, 2004, our income taxes decreased $13.0 million compared to the same period of 2003 mostly because of the recognition of synthetic fuel tax credits claimed in 2004 related to our investment in a South Carolina synthetic fuel facility, which reduced our effective tax rate. We discuss our synthetic fuel tax credits in more detail and provide our effective tax rate reconciliation in the Notes to Consolidated Financial Statements on page 16.

        During the nine months ended September 30, 2004, our income taxes decreased $74.2 million compared to the same period of 2003 mostly because of the recognition of synthetic fuel tax credits claimed in 2003 and 2004 related to our investment in a South Carolina synthetic fuel facility, which reduced our effective tax rate.

        During the quarter and nine months ended September 30, 2004, income taxes at BGE increased compared to the same period of 2003 mostly because of higher taxable income.

Financial Condition

Cash Flows

The following table summarizes our 2004 cash flows by business segment, as well as our consolidated cash flows for 2004 and 2003. This table excludes the impact of the refinancing of High Desert Power Project (High Desert) in 2003 and the impact of changes in intercompany balances. We exclude the impact of the High Desert refinancing in 2003 due to the fact that there was no net impact on cash. The financing source of cash we received from the issuance of debt was offset by the investing use of cash we incurred from terminating the lease. We discuss the refinancing of High Desert in more detail in Note 15 of our 2003 Annual Report on Form 10-K.

		2004 Segment Cash Flows									Consolidated Cash Flows
		Nine Months Ended September 30, 2004									Nine Months Ended September 30,
		Merchant			Regulated			Other			2004			2003
		(In millions)
Operating Activities
Net income (loss)		$	287.7		$	122.8		$	(5.7	)	$	404.8		$	158.3
Non-cash adjustments to net income			446.6			223.6			28.7			698.9			741.5
Changes in working capital			(272.4	)		(82.3	)		26.2			(328.5	)		(194.3	)
Pension and postemployment benefits*												(8.8	)		(76.0	)
Other			(23.5	)		(16.2	)		22.4			(17.3	)		(67.2	)
Net cash provided by operating activities			438.4			247.9			71.6			749.1			562.3
Investing Activities (excluding $514.1 million related to the refinancing of the High Desert lease in 2003)
	Investments in property, plant and equipment		(288.5	)		(181.2	)		(26.7	)		(496.4	)		(466.2	)
	Acquisitions, net of cash acquired (excluding High Desert)		(457.0	)		—			—			(457.0	)		(3.2	)
	Contributions to nuclear decommissioning trust funds		(17.7	)		—			—			(17.7	)		(13.2	)
	Proceeds from sale of discontinued operations		72.7			—			—			72.7			—
	Sale of investments and other assets		—			4.9			24.7			29.6			124.3
	Other investments		(14.7	)		—			(1.6	)		(16.3	)		(91.4	)
Net cash used in investing activities (excluding High Desert)			(705.2	)		(176.3	)		(3.6	)		(885.1	)		(449.7	)
Cash flows from operating activities less cash flows from investing activities		$	(266.8	)	$	71.6		$	68.0			(136.0	)		112.6
Financing Activities (excluding $514.1 million related to the refinancing of the High Desert lease in 2003)
	Net repayment of debt (excluding High Desert)*											(188.5	)		(229.7	)
	Proceeds from issuance of common stock*											271.7			62.0
	Common stock dividends paid*											(139.7	)		(125.7	)
	Other*											0.1			(11.1	)
Net cash used in financing activities (excluding High Desert)*												(56.4	)		(304.5	)
Net Decrease in Cash and Cash Equivalents*											$	(192.4	)	$	(191.9	)

*Items are not allocated to the business segments because they are managed for the company as a whole.

44

Overview—2004 compared to 2003

Cash flows from operating activities less cash flows from investing activities were a use of cash of $136.0 million in 2004 compared to cash provided of $112.6 million in 2003. The $248.6 million decrease in 2004 compared to 2003 is primarily due to the acquisition of Ginna for $457.0 million in 2004, lower non-cash adjustments to net income of $42.6 million, a use of cash from working capital of $134.2 million and a $94.7 million decrease in the sale of investments and other assets. These decreases were partially offset by higher net income of $246.5 million, a lower pension contribution of approximately $65 million, the proceeds from sale of discontinued operations of $72.7 million, and a decrease in other investing activities of $73.8 million.

Cash Flows from Operating Activities

Cash provided by operating activities was $749.1 million in 2004 compared to $562.3 million in 2003, an increase of $186.8 million. Net income was $246.5 million higher in 2004 compared to 2003. This was partially offset by a decrease in non-cash adjustments to net income of $42.6 million in 2004 compared to 2003. The net decrease in non-cash adjustments to net income was primarily due to cumulative effects of changes in accounting principles of $198.4 million as a result of the adoption of SFAS No. 143 and EITF 02-3 in 2003, which had the effect of reducing net income but were non-cash transactions. This decrease in non-cash adjustments to net income was partially offset by the following increases:

•

a loss from discontinued operations of $49.2 million in 2004,

•

an increase in depreciation and amortization of $40.7 million in 2004 compared to 2003,

•

an increase in deferred income taxes of $25.7 million in 2004 compared to 2003, and

•

an increase in deferred fuel costs of $21.7 million in 2004 compared to 2003.

        Changes in working capital had a negative impact of $328.5 million on cash flow from operations in 2004 compared to a negative impact of $194.3 million in 2003 resulting in a decrease in cash of $134.2 million. Pension and postemployment benefits were a use of cash of $8.8 million in 2004 compared to a use of $76.0 million in 2003. This primarily reflects a $65 million lower contribution to the pension plan in 2004 compared to 2003.

Cash Flows from Investing Activities

Cash used in investing activities was $885.1 million in 2004 compared to $449.7 million in 2003 excluding High Desert. The increase in cash used was primarily due to a $453.8 million increase in cash paid for acquisitions in 2004 compared to 2003 primarily due to the acquisition of Ginna in 2004 for $457.0 million.

Cash Flows from Financing Activities

Cash used in financing activities was $56.4 million in 2004 compared to $304.5 million in 2003 excluding High Desert. The $248.1 million increase in cash was primarily due to proceeds from issuances of common stock of $271.7 million in 2004 as compared to a $62.0 million in 2004. This was primarily the result of the 6 million share equity issuance in 2004 related to the Ginna acquisition which yielded net proceeds of $226.9 million.

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. In March 2004, Standard & Poors rating group reduced Constellation Energy's and BGE's corporate credit rating from A- to BBB+ and reduced certain other ratings as noted in the table below. In October 2004, Fitch-Ratings affirmed Constellation Energy's and BGE's credit ratings. All Constellation Energy and BGE credit ratings have stable outlooks. At the date of this report, our credit ratings were as follows:

		Standard & Poors 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 Preferred Securities*	BBB-	A3	A-
	Preference Stock*	BBB-	Baa1	A-

* In March 2004, Standard & Poors rating group reduced the rating one level to this current rating.

45

Available Sources of Funding

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 September 30, 2004, we had approximately $2.2 billion of credit under several facilities.

        In June 2004, Constellation Energy arranged an $800.0 million three-year revolving credit facility and a $300.0 million five-year revolving credit facility replacing a $447.5 million 364-day revolving credit facility, which expired in the second quarter of 2004. Constellation Energy also has an existing $640.0 million revolving credit facility expiring in June 2005 and a $447.5 million facility expiring in June 2006.

        We use these 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 facilities 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 $2.2 billion. In addition, BGE maintains $200.0 million in credit facilities as discussed below. At September 30, 2004, letters of credit that totaled $761.4 million were issued under our facilities.

        In October 2004, we terminated certain loans under other revolving credit agreements of $41.4 million related to our Latin American power distribution project. We replaced these revolving credit agreements with loans under new revolving credit agreements totaling $100.0 million.

        We expect to fund future acquisitions with an overall goal of maintaining a strong investment grade credit profile. We funded our June 2004 acquisition of Ginna with a mix of cash and equity. On July 1, 2004, we issued 6.0 million shares of common stock for net proceeds of $226.9 million to fund a portion of the acquisition of Ginna. We discuss our acquisition of Ginna in more detail in the Notes to the Consolidated Financial Statements on page 13.

BGE

Through the date of this report, certain credit facilities expired and BGE renewed those facilities. BGE continues to maintain $200.0 million in annual committed credit facilities, expiring May 2005 through November 2005, to ensure adequate liquidity to support its operations. We can borrow directly from the banks or use the facilities to allow commercial paper to be issued. As of September 30, 2004, BGE had no outstanding commercial paper, which results in $200.0 million in unused credit facilities.

Other Nonregulated Businesses

BGE Home Products & Services' program to sell up to $50 million of receivables was not extended beyond its March 2004 expiration date. As of the date of this report, this receivables program has been fully liquidated.

        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.

46

Capital Resources

Our estimated annual amounts of capital requirements for the years 2004 and 2005 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 2004 and 2005 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,

•

the availability of cash from operations, and

•

business decisions to invest in capital projects.

        Our estimates are also subject to additional factors. Please see the Forward Looking Statements section on page 54.

Calendar Year Estimates			2004		2005
			(In millions)
Nonregulated Capital Requirements:
	Merchant energy
		Generation plants	$	180	$	170
		Nuclear fuel		130		85
		Portfolio acquisitions		25		60
		Technology/other		125		90
	Total merchant energy capital requirements			460		405
	Other nonregulated capital requirements			45		50
	Total nonregulated capital requirements			505		455
Regulated Capital Requirements:
	Regulated electric			210		250
	Regulated gas			55		50
	Total regulated capital requirements			265		300
Total capital requirements			$	770	$	755

Above amounts do not include the acquisition of Ginna but do include post-acquisition capital requirements for Ginna. We discuss the acquisition of Ginna in more detail in the Notes to the Consolidated Financial Statements on page 13.

         We discuss our capital requirements and funding for capital requirements in more detail in the Capital Requirements and the Funding for Capital Requirements sections of our 2003 Annual Report on Form 10-K.

Contractual Payment Obligations and
Committed Amounts

Our total contractual payment obligations as of September 30, 2004 are shown in the following table. Certain amounts presented in the table below are estimates and actual future payments may vary from these estimates.

			Payments
			2004		2005- 2006		2007- 2008		There- after		Total
			(In millions)
Contractual Payment Obligations
Long-term debt:1
	Nonregulated
		Principal	$	4.6	$	342.1	$	638.5	$	2,761.9	$	3,747.1
		Interest		93.3		422.3		374.3		1,774.2		2,664.1
	Total			97.9		764.4		1,012.8		4,536.1		6,411.2
	BGE
		Principal		20.0		484.4		418.5		600.7		1,523.6
		Interest		35.3		169.8		103.5		824.4		1,133.0
	Total			55.3		654.2		522.0		1,425.1		2,656.6
BGE preference stock				—		—		—		190.0		190.0
Operating leases				6.9		47.5		33.9		136.2		224.5
Purchase obligations:2
	Purchased capacity and energy3			331.1		1,368.5		469.2		229.1		2,397.9
	Fuel and transportation4			304.4		967.8		277.5		86.4		1,636.1
	Other			42.4		98.1		35.6		292.7		468.8
Other noncurrent liabilities:
	Postretirement and postemployment benefits5			10.5		72.1		77.2		215.7		375.5
	Other			0.4		4.2		1.4		—		6.0
Total contractual payment obligations			$	848.9	$	3,976.8	$	2,429.6	$	7,111.3	$	14,366.6

1 Amounts in long-term debt reflect the original maturity date. Investors may require us to repay $322.1 million early through put options and remarketing features. Interest on variable rate debt is included based on the September 30, 2004 forward curve for interest rates.

2 Contracts to purchase goods or services that specify all significant terms. Amounts related to certain purchase obligations are based on future purchase expectations which may differ from actual purchases.

3 Our contractual obligations for purchased capacity and energy are shown on a gross basis for certain transactions, including both the fixed payment portions of tolling contracts and estimated variable payments under unit-contingent power purchase agreements. We have recorded $23.9 million of liabilities related to purchased capacity and energy obligations at September 30, 2004 in our Consolidated Balance Sheets.

4 We have recorded liabilities of $35.5 million related to fuel and transportation obligations at September 30, 2004 in our Consolidated Balance Sheets.

5 Amounts related to postretirement and postemployment benefits are for unfunded plans and reflect present value amounts consistent with the determination of the related liabilities recorded in our Consolidated Balance Sheets.

47

         The table below presents our contingent obligations. Our contingent obligations increased $2.1 billion during the first nine months of 2004, primarily due to the issuance of additional guarantees and letters of credit by the parent company for subsidiary obligations to third parties in support of the growth of our merchant energy business. These amounts do not represent incremental consolidated Constellation Energy obligations; rather they primarily represent parent company guarantees of certain subsidiary obligations to third parties. Our calculation of the fair value of subsidiary obligations covered by the $5,111.6 million of parent company guarantees was $1,144.7 million at September 30, 2004. Accordingly, if the parent company was required to fund defaulted subsidiary obligations, the total amount at market prices at September 30, 2004 is $1,144.7 million.

	Expiration
	2004		2005- 2006		2007- 2008		There- after		Total
	(In millions)
Contingent Obligations
Letters of credit	$	606.9	$	154.5	$	—	$	—	$	761.4
Guarantees—competitive supply1		2,884.9		1,359.5		305.0		562.2		5,111.6
Other guarantees, net2		0.3		5.3		—		1,245.0		1,250.6
Total contingent obligations	$	3,492.1	$	1,519.3	$	305.0	$	1,807.2	$	7,123.6

1 While the face amount of these guarantees is $5,111.6 million, the parent company would only fund the fair value of any defaulted subsidiary obligations. Our calculation of the fair value of obligations covered by these guarantees was $1,144.7 million at September 30, 2004.

2 Other guarantees in the above table are shown net of liabilities of $25.0 million recorded at September 30, 2004 in our Consolidated Balance Sheets.

Liquidity Provisions

We have certain agreements that contain provisions that 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.

        Under certain counterparty contracts related to our wholesale marketing and risk management operation, we are obligated to post collateral if Constellation Energy's senior, unsecured credit ratings decline below established contractual levels. As a result of the ratings action taken by Standard & Poors rating agency in March 2004, we posted approximately $40 million in additional collateral during the first quarter of 2004 to support our wholesale marketing and risk management operational requirements. We discuss the Standard & Poors ratings action in more detail in the Financial Condition section on page 45.

        Based on contractual provisions at September 30, 2004, 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 Lowest Current Rating	Incremental Obligations		Cumulative Obligations
		(In millions)
BBB-/Baa3	1	$	107	$	107
Below investment grade	2		654		761

        At September 30, 2004, we had approximately $1.6 billion of unused credit facilities and $528.9 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 in the table above, and which could be material.

        We consistently review our liquidity needs to ensure that we have adequate facilities available to meet these requirements. This includes having liquidity available to meet margin requirements for our wholesale marketing and risk management operation and our retail competitive supply activities.

        In many cases, customers of our wholesale marketing and risk management operation rely on the creditworthiness of Constellation Energy. A decline below investment grade of 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 September 30, 2004, the debt to capitalization ratios as defined in the credit agreements were no greater than 51%. Certain credit facilities of BGE contain provisions requiring BGE to maintain a ratio of debt to capitalization equal to or less than 65%. At September 30, 2004, the debt to capitalization ratio for BGE as defined in these credit agreements was 48%. At September 30, 2004, no amount is outstanding under these facilities.

48

        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, Nine Mile Point, and Ginna to ensure these plants have funds to meet expenses and obligations to safely operate and maintain the plants.

Market Risk

Commodity Risk

During the first nine months of 2004, the energy markets continued to be highly volatile with significant changes in fuel prices, primarily natural gas, oil, and coal, and power prices, as well as periods of reduced liquidity in the marketplace.

        We measure the sensitivity of our wholesale marketing and risk management mark-to-market energy contracts to potential changes in market prices using value at risk. Value at risk represents the potential pre-tax loss in the fair value of our wholesale marketing and risk management mark-to-market energy assets and liabilities over one and ten-day holding periods. We discuss value at risk in more detail in the Market Risk section of our 2003 Annual Report on Form 10-K. The table below is the value at risk associated with our wholesale marketing and risk management operation's mark-to-market energy assets and liabilities, including both trading and non-trading activities.

		Nine Months Ended September 30, 2004
		(In millions)
99% Confidence Level, Two-tailed, One-Day Holding Period
	Average	$	3.8
	High		7.8
95% Confidence Level, Two-tailed, One-Day Holding Period
	Average		2.9
	High		5.9
95% Confidence Level, Two-tailed, Ten-Day Holding Period
	Average		9.1
	High		18.7

        The following table details our value at risk for the trading portion of our wholesale marketing and risk management mark-to-market energy assets and liabilities over a one-day holding period at a 99% confidence level (two-tailed) for the first nine months of 2004:

	Nine Months Ended September 30, 2004
	(In millions)
Average	$	2.5
High		6.1

        Due to the inherent limitations of statistical measures such as value at risk and the seasonality of changes in market prices, the value at risk calculation may not reflect the full extent of our commodity price risk exposure. Additionally, actual changes in the value of options may differ from the value at risk calculated using a linear approximation inherent in our calculation method.

        As a result, actual changes in the fair value of mark-to-market energy assets and liabilities could differ from the calculated value at risk, and such changes could have a material impact on our financial results.

Wholesale Credit Risk

We continue to actively manage the credit portfolio of our wholesale marketing and risk management operation to attempt to reduce the impact of the general decline in the overall credit quality of the energy industry and the impact of a potential counterparty default. As of September 30, 2004 and December 31, 2003, the credit portfolio of our wholesale marketing and risk management operation had the following public credit ratings:

		September 30, 2004		December 31, 2003
Rating
	Investment Grade1	64	%	75	%
	Non-Investment Grade	9		4
	Not Rated	27		21

1 Includes counterparties with an investment grade rating by at least one of the major credit rating agencies. If split rating exists, the lower rating is used.

        In addition to the credit ratings provided by the major credit rating agencies, we utilize internal credit ratings to evaluate the creditworthiness of our wholesale customers, including those companies that do not have public credit ratings. The "Not Rated" category in the table above includes counterparties that do not have public credit ratings and includes governmental entities, municipalities, cooperatives, power pools, and other load-serving entities, and marketers for which we determine creditworthiness based on internal credit ratings.

49

        The following table provides the breakdown of the credit quality of our wholesale credit portfolio based on our internal credit ratings.

	September 30, 2004		December 31, 2003
Investment Grade Equivalent	73	%	91	%
Non-Investment Grade	27		9

        Compared to December 31, 2003, we have experienced deterioration in the credit quality of our wholesale marketing and risk management portfolio measured using both public credit ratings and our internal credit ratings. The decline in investment grade equivalent counterparties is primarily due to increased exposure to lower credit quality fuel and power supply counterparties, most notably coal suppliers who tend to be smaller and of

lower credit quality, and lower credit exposure to stronger credit quality transmission and distribution utilities to whom we supply energy to meet their customers' energy needs. These changes are primarily due to higher energy commodity prices.

        A portion of our wholesale credit risk is related to transactions that are recorded in our Consolidated Balance Sheets. These transactions primarily consist of open positions from our wholesale marketing and risk management operation that are accounted for using mark-to-market accounting, amounts owed by wholesale counterparties for transactions that settled but have not yet been paid, and open positions for contracts not subject to mark-to-market accounting. The following table highlights the credit quality and exposures related to these activities at September 30, 2004:

Rating	Total Exposure Before Credit Collateral		Credit Collateral		Net Exposure		Number of Counterparties Greater than 10% of Net Exposure	Net Exposure of Counterparties Greater than 10% of Net Exposure
	(Dollars in millions)
Investment grade	$	1,088	$	95	$	993	1	$	165
Non-investment grade		247		103		144	—		—
Internally rated — investment grade		178		9		169	—		—
Internally rated — non-investment grade		259		15		244	—		—
Total	$	1,772	$	222	$	1,550	1	$	165

        Due to the possibility of extreme volatility in the prices of energy commodities and derivatives, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If such a counterparty were then to fail to perform its obligations under its contract (for example, fail to deliver the electricity our wholesale marketing and risk management operation had contracted for), we could incur a loss that could have a material impact on our financial results.

        Additionally, if a counterparty were to default and we were to liquidate all contracts with that entity, our credit loss would include the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments, if any, we would have to make to settle unrealized losses on accrual contracts.

        We continue to examine plans to achieve our strategies and to further strengthen our balance sheet and enhance our liquidity. We discuss our liquidity in the Financial Condition section on page 48.

Interest Rate Risk

In July 2004, to optimize the mix of fixed and floating rate debt, we entered into interest rate swaps relating to $450 million of our long-term debt. These fair value hedges will convert our current fixed rate debt to a floating rate instrument tied to the three month London Inter-Bank Offered Rate. Including the $450 million in interest rate swaps, approximately 15% of our long-term debt is floating rate.

Retail Credit Risk and Equity Price Risk

We discuss our exposure to retail credit risk and equity price risk in the Market Risk section of our 2003 Annual Report on Form 10-K.

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 18 and in our 2003 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 Adopted and Issued

We discuss recently adopted and issued accounting standards in the Accounting Standards Issued and Accounting Standards Adopted sections of the Notes to Consolidated Financial Statements beginning on page 24.

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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 wholesale marketing and risk management operation in the Merchant Energy Business section of Management's Discussion and Analysis beginning on page 30,

•

evaluation of commodity risk, wholesale credit risk, and interest rate risk, in the Market Risk section of Management's Discussion and Analysis beginning on page 49, and

•

changes to our business environment in the Business Environment section of Management's Discussion and Analysis beginning on page 26.

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 (as such term is defined in Rules 13a -15(f) and 15d – 15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, either Constellation Energy's or BGE's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Western Power Markets

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 has never been served with process in this case and 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. The court issued an order to the plaintiff asking that he show cause why he had not yet served any of the defendants with process. A hearing is scheduled on December 6, 2004 on the court's show cause order.

James M. Millar v. Allegheny Energy Supply, Constellation Power Source, Inc., High Desert Power Project, LLC, et al.,—On December 19, 2003, plaintiffs filed an amended complaint in Superior Court of California, County of San Francisco, naming for the first time, Constellation Power Source, Inc. (CPS) and High Desert Power Project, LLC (High Desert), two of our subsidiaries, as additional defendants. The complaint is a putative class action on behalf of California electricity consumers and alleges that the defendant power suppliers, including CPS and High Desert, violated California's Unfair Competition Law in connection with certain long-term power contracts that the defendants negotiated with the California Department of Water Resources in 2001 and 2002. Notwithstanding the amended long-term power contracts and the releases and settlement agreements negotiated at the time of such amendments, the plaintiff seeks to have the Court certify the case as a class action and to order the repayment of any monies that were acquired by the defendants under the long-term contracts or the amended long-term contracts by means of unfair competition in violation of California law. The amended complaint was removed to federal court by one of the defendants and a motion to remand the case back to the state court is pending before the federal court. We believe that we have meritorious defenses to this action and intend to defend against it vigorously. However, we cannot predict the timing, or outcome, of this case, or its possible effect on our results.

City of Tacoma v. AEP, et al.,—The City of Tacoma, on June 7, 2004, in the U.S. District Court, Western District of Washington, filed a complaint against over 60 companies, including CPS. The complaint alleges that the defendants engaged in manipulation of electricity markets resulting in prices for power in the western power markets that were substantially above what market prices would have been in the absence of the alleged unlawful contracts, combinations and conspiracy in violation of Section 1 of the Sherman Act. The complaint further alleges that the total amount of damages is unknown, but is estimated to exceed $175 million. We believe that we have meritorious defenses to this action and intend to defend against it vigorously. However, we cannot predict the timing, or outcome, of this case, or its possible effect on our results.

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 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. This case was settled for an immaterial amount.

Mercury Poisoning

Beginning in September 2002, BGE, Constellation Energy, and several other defendants have been involved in numerous actions filed in the Circuit Court for Baltimore City, Maryland 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 66 cases have been filed to date, with each case seeking $90 million in damages from the group of defendants.

        In a ruling applicable to all but several of the cases, the Circuit Court for Baltimore City dismissed with prejudice all claims against BGE and Constellation Energy and entered into a stay of the proceedings as they relate to other defendants. The several cases that were not dismissed were filed subsequent to the ruling by the Circuit Court. Plaintiffs may attempt to pursue appeals of the rulings in favor of BGE and Constellation Energy once the cases are finally concluded as to all defendants. We believe that we have meritorious defenses and intend to defend the actions vigorously. However, we cannot predict the timing, or outcome, of these cases, or their possible effect on our, or BGE's, financial results.

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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 concluded, oral argument on the class certification motion was held on April 16, 2004, and the parties are awaiting the court's decision. 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 510 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.

        To date, 339 asbestos cases were dismissed or resolved for amounts that were not significant. Approximately 20 cases are currently scheduled for trial through the end of 2006.

        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.

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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," "anticipates," "expects," "intends," "plans," and other similar words. We also disclose non-historical information that represents management's expectations, which are based on numerous assumptions. These statements and projections 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 and energy related products including coal, natural gas, oil, electricity, and emission allowances,

•

the timing and extent of deregulation of, and competition in, the energy markets, 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 Group's (Constellation Energy) and Baltimore Gas and Electric Company's (BGE) ability to maintain their current credit ratings,

•

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

•

the liquidity and competitiveness of wholesale markets for energy commodities,

•

operational factors affecting 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 coal or 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 residential 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 increases in 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 activities 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 Securities and Exchange Commission (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

(a)	Exhibit No. 10(a)	Constellation Energy Group, Inc. Management Long-Term Incentive Plan, as amended and restated.
	Exhibit No. 10(b)	Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan, as amended and restated.
	Exhibit No. 10(c)	Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan, as amended and restated.
	Exhibit No. 10(d)	Constellation Energy Group, Inc. Executive Long-Term Incentive Plan, as amended and restated.
	Exhibit No. 10(e)	Change in control severance agreement between Constellation Energy Group, Inc. and Mayo A. Shattuck III.
	Exhibit No. 10(f)	Change in control severance agreement between Constellation Energy Group, Inc. and Michael J. Wallace.
	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)	Certification of Chairman of the Board, President and Chief Executive Officer of Constellation Energy Group, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 31(b)	Certification of Executive Vice President and Chief Financial Officer of Constellation Energy Group, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 31(c)	Certification of President and Chief Executive Officer of Baltimore Gas and Electric Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 31(d)	Certification of Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 32(a)	Certification of Chairman of the Board, President and Chief Executive Officer of Constellation Energy Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 32(b)	Certification of Executive Vice President and Chief Financial Officer of Constellation Energy Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 32(c)	Certification of President and Chief Executive Officer of Baltimore Gas and Electric Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	Exhibit No. 32(d)	Certification of Senior Vice President and Chief Financial Officer of Baltimore Gas and Electric Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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: November 8, 2004	/s/  E. FOLLIN SMITHE. Follin Smith, Executive Vice President of Constellation Energy Group,  Inc. and Senior Vice President of Baltimore Gas and Electric Company, and as Principal Financial Officer of each Registrant

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EX-10.(A)

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Exhibit 10(a)

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, Restricted Stock Units, 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 or Restricted Stock Unit, as the context requires) which the Plan Administrator has determined have been earned and are payable (or, in the case of Restricted Stock or Restricted Stock Units, 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 or Restricted Stock Unit 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.

        "Restricted Stock Unit" means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

        "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 or Restricted Stock Unit 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 or Restricted Stock Unit, as the context requires) which may be earned and payable (or, in the case of Restricted Stock or Restricted Stock Unit, 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.

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.

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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 and Restricted Stock Unit Awards.

        A.    Grants of Restricted Shares or Units.    One or more shares of Restricted Stock or Restricted Stock Units may be granted to any Eligible Employee. The Restricted Stock will be issued or Restricted Stock Unit granted to the Participant on the Date of Grant without the payment of consideration by the Participant. The Restricted Stock will be issued or Restricted Stock Unit granted 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 or Restricted Stock Unit until the expiration of the restriction period.

        The Plan Administrator may also impose such other restrictions and conditions on the Restricted Stock or Restricted Stock Unit 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. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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.    Service-Based Award.

        i.    Restriction Period.    At the time a Service-Based Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit 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 or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy's request, payout of the Restricted Stock or Restricted Stock Unit 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.

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        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 or Restricted Stock Unit 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 or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Unit 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 or Restricted Stock Units (if Target Performance Award performance objectives were not attained), or the issuance of additional shares of Stock or Restricted Stock Units (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 or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit Award is determined at the discretion of the Plan Administrator, or if at Constellation Energy's request, payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Units 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.

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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.

        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

5

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.

        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, times the number of shares called for by the Stock Appreciation Right (or portion thereof) which is so surrendered, or (2) the excess

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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 or Restricted Stock Unit 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 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

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Performance Units or Performance-Based Restricted Stock or Restricted Stock Unit 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)  consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, (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.

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        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 or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Unit 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 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.

9

        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 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:

Corporate Secretary
750 East Pratt Street
18^th Floor
Baltimore, Maryland 21202
(410) 783-3600

10

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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FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the "Award") pursuant to Section 7 of the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.

The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.

The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan). Your execution of this letter will constitute your waiver to make such election under Section 83(b). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A). This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.

As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares. CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award. If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

4.

If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

Attachment A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS
FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award ("the Award").

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made. Rather, the stock is taxable to you at the time the restrictions are removed. The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed. This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes. You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed. Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock. These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly. For tax purposes, the dividends on the restricted stock will not be taxable as dividend income. Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1)

The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed. This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the "Units") under the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.

Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group's relative Total Shareholder Return ("TSR") performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

•

Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD]. In the DJEUI, companies that are rated "non-investment grade" by both Moody's and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.



•

Secondary Measure: If Constellation Energy's percentile rank for the Primary Measure is below the [    ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure TSR v. DJEUI Large & Mid-Cap Investment Grade Companies	Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target	Payout vs. Target
<Threshold	<[    ] Percentile	[    ]%	[    ]%
Threshold	[    ] Percentile	[    ]%	[    ]%
Target	[    ] Percentile	[    ]%	[    ]%
Stretch	[    ] Percentile	[    ]%	[    ]%

Payout levels interpolated between points.
Secondary measure applies only if performance vs. primary measure is below threshold.

2.

The award payout amount is determined by multiplying the "Payout vs. Target" percentage by the number of Units (worth $1 each) that you were granted. This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.

Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount. The Company will be required to withhold applicable taxes at such time. If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.

As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

2

FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the "Company") common stock units with sale restrictions ("Deferred Shares") under the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the following conditions:

1.

Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock ("Common Stock"). Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.

During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price. These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.

The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction Lapse Date
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares. During the Restriction Period, you will have no voting rights with respect to the Deferred Shares. The Restriction Period remains in effect irrespective of your employment status.

4.

Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares). Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date). The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes. The total shares you receive will be rounded to the nearest whole share. You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

FORM OF
STOCK OPTION AGREEMENT

        This Stock Option Agreement ("Agreement") is subject to the terms and conditions of the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the "Plan"). The «Administrator» Constellation Energy Group, Inc. (the "Plan Administrator") has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. ("Constellation Energy").

1.     Grant of Option.

        (a)    The "Participant" is «First» «Middle» «Last».

        (b)   The date of the grant is «GrantDate» ("Grant Date").

        (c)    The number of shares subject to the option ("Option Shares") are «Grant» shares of Constellation Energy common stock ("Stock").

        (d)   The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock ("Exercise Price").

        This Agreement specifies the terms of the option ("Option") granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an "incentive stock option" as that term is used in Internal Revenue Code section 422. The "Option Period" is the period during which the Option is exercisable as provided in this Agreement.

2.     Installment Exercise.

        Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a "Vesting Date"):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3.     Termination of Option.

        (a)    Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date ("Expiration Date").

        (b)   If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant's employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant's Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

        (c)    In the event of Participant's death during the Option Period, vested Option Shares may be exercised by Participant's legal representative(s), or by other person(s) authorized under Participant's will. Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

        (d)   A transfer of Participant's employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4.     Exercise of Option.

        (a)    Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

        (b)   On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc. All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise. Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise. The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

        (c)    Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant's tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market. Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

        (d)   Participant is required to comply with Constellation Energy's Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations. In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

        (e)    As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.     Tax Withholding.

        Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6.     Fair Market Value.

        The "Fair Market Value" of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7.     No Rights of Stockholders.

        Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8.     Non-Transferability of Option.

        The Option is not transferable, except for a transfer to Participant's family member or to a trust established for the benefit of Participant's family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant's death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. During Participant's lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant's family members to whom the Option has been transferred in accordance with the Plan. In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this

2

Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

9.     Employment Not Affected.

        Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10.   Incorporation of Plan by Reference.

        The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Option will in all respects be interpreted in accordance with the Plan. All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan. The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.   Severability.

        The provisions of this Agreement are severable. If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

        IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
[TITLE, DEPARTMENT]		«First» «Middle» «Last»

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QuickLinks

Exhibit 10(a)

Constellation Energy Group, Inc. Management Long-Term Incentive Plan (Plan)
Management Long-Term Incentive Plan Appendix
FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

Attachment A

CONSTELLATION ENERGY GROUP, INC. INCOME TAX CONSEQUENCES TO PARTICIPANTS FOR SERVICE-BASED RESTRICTED STOCK AWARDS
FORM OF PERFORMANCE UNIT AGREEMENT
FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT
FORM OF STOCK OPTION AGREEMENT

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, Restricted Stock Units, 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 or Restricted Stock Unit, as the context requires) which the Committee has determined have been earned and are payable (or, in the case of Restricted Stock or Restricted Stock Units, 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 or Restricted Stock Unit 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.

        "Restricted Stock Unit" means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

        "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 or Restricted Stock Unit 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 or Restricted Stock Unit, as the context requires) which may be earned and payable (or, in the case of Restricted Stock or Restricted Stock Unit, 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 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.

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        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 and Restricted Stock Unit Awards.

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

        The Committee may also impose such other restrictions and conditions on the Restricted Stock or Restricted Stock Unit 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.. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Committee's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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 or Restricted Stock Unit 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 or Restricted Stock Unit 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 or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit Award is determined at the discretion of the Committee, or if at CEG's request, payout of the Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; provided, however, that the

3

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 or Restricted Stock Unit 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 or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Unit 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.

        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 or Restricted Stock Units (if Target Performance Award performance objectives were not attained), or the issuance of additional shares of Stock or Restricted Stock Units (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 or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit Award is completely forfeited; (b) Retirement, Disability or death—payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit Award is determined at the discretion of the Committee, or if at CEG's request, payout of the Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Units 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.

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        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 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

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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.

        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.

        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

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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.

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 or Restricted Stock Unit 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

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Performance Units or Performance-Based Restricted Stock or Restricted Stock Unit 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 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)  consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving CEG or any of its Subsidiary Companies (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

8

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 (or if earlier upon the termination of the Participant's employment with the Company or a Subsidiary if it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a change in control or (ii) otherwise arose in connection with or anticipation of a change in control) will be determined as follows:

        Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Unit 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 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.

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        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.

        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.

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        L.    Expenses.    The expenses of administering the Plan shall be borne by CEG 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 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:

Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

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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.

12

FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the "Award") pursuant to Section 7 of the Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

2.

The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.

The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan). Your execution of this letter will constitute your waiver to make such election under Section 83(b). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A). This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.

As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares. CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award. If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

4.

If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

Attachment A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS
FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award ("the Award").

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made. Rather, the stock is taxable to you at the time the restrictions are removed. The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed. This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes. You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed. Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock. These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly. For tax purposes, the dividends on the restricted stock will not be taxable as dividend income. Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1)

The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed. This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the "Units") under the Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.

Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group's relative Total Shareholder Return ("TSR") performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

•

Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD]. In the DJEUI, companies that are rated "non-investment grade" by both Moody's and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.



•

Secondary Measure: If Constellation Energy's percentile rank for the Primary Measure is below the [    ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure TSR v. DJEUI Large & Mid-Cap Investment Grade Companies	Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target	Payout vs. Target
<Threshold	<[    ] Percentile	[    ]%	[    ]%
Threshold	[    ] Percentile	[    ]%	[    ]%
Target	[    ] Percentile	[    ]%	[    ]%
Stretch	[    ] Percentile	[    ]%	[    ]%

Payout levels interpolated between points.
Secondary measure applies only if performance vs. primary measure is below threshold.

2.

The award payout amount is determined by multiplying the "Payout vs. Target" percentage by the number of Units (worth $1 each) that you were granted. This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.

Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount. The Company will be required to withhold applicable taxes at such time. If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.

As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

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FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the "Company") common stock units with sale restrictions ("Deferred Shares") under the Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the following conditions:

1.

Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock ("Common Stock"). Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.

During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price. These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.

The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction Lapse Date
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares. During the Restriction Period, you will have no voting rights with respect to the Deferred Shares. The Restriction Period remains in effect irrespective of your employment status.

4.

Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares). Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date). The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes. The total shares you receive will be rounded to the nearest whole share. You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

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FORM OF
STOCK OPTION AGREEMENT

        This Stock Option Agreement ("Agreement") is subject to the terms and conditions of the Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (the "Plan"). The «Administrator» Constellation Energy Group, Inc. (the "Plan Administrator") has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. ("Constellation Energy").

1.     Grant of Option.

        (a)    The "Participant" is «First» «Middle» «Last».

        (b)   The date of the grant is «GrantDate» ("Grant Date").

        (c)    The number of shares subject to the option ("Option Shares") are «Grant» shares of Constellation Energy common stock ("Stock").

        (d)   The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock ("Exercise Price").

        This Agreement specifies the terms of the option ("Option") granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an "incentive stock option" as that term is used in Internal Revenue Code section 422. The "Option Period" is the period during which the Option is exercisable as provided in this Agreement.

2.     Installment Exercise.

        Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a "Vesting Date"):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3.     Termination of Option.

        (a)    Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date ("Expiration Date").

        (b)   If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant's employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant's Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

        (c)    In the event of Participant's death during the Option Period, vested Option Shares may be exercised by Participant's legal representative(s), or by other person(s) authorized under Participant's will. Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

        (d)   A transfer of Participant's employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4.     Exercise of Option.

        (a)    Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

        (b)   On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc. All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise. Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise. The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

        (c)    Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant's tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market. Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

        (d)   Participant is required to comply with Constellation Energy's Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations. In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

        (e)    As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.     Tax Withholding.

        Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6.     Fair Market Value.

        The "Fair Market Value" of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7.     No Rights of Stockholders.

        Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8.     Non-Transferability of Option.

        The Option is not transferable, except for a transfer to Participant's family member or to a trust established for the benefit of Participant's family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant's death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. During Participant's lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant's family members to whom the Option has been transferred in accordance with the Plan. In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this

2

Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

9.     Employment Not Affected.

        Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10.   Incorporation of Plan by Reference.

        The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Option will in all respects be interpreted in accordance with the Plan. All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan. The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.   Severability.

        The provisions of this Agreement are severable. If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

        IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
[TITLE, DEPARTMENT]		«First» «Middle» «Last»

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QuickLinks

Exhibit 10(b)

Constellation Energy Group, Inc. 1995 Long-Term Incentive Plan (Plan)
1995 Long-Term Incentive Plan Appendix
FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

Attachment A

CONSTELLATION ENERGY GROUP, INC. INCOME TAX CONSEQUENCES TO PARTICIPANTS FOR SERVICE-BASED RESTRICTED STOCK AWARDS
FORM OF PERFORMANCE UNIT AGREEMENT
FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT
RE: Stock Unit Award with Sale Restriction
FORM OF STOCK OPTION AGREEMENT

EX-10.(C)

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Exhibit 10(c)

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, Restricted Stock Units, 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" means that in determining the amount of a Restricted Stock or Restricted Stock Unit 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.

        "Restricted Stock Unit" means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

        "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" means that in determining the amount of a Restricted Stock or Restricted Stock Unit 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.

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).

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        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.

7.    Service-Based Restricted Stock and Restricted Stock Unit Awards.

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

        The Plan Administrator may also impose such other restrictions and conditions on the Service-Based Restricted Stock or Restricted Stock Unit 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. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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 or Restricted Stock Unit 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 or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.

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        C.    Forfeiture or Payout of Award.    In the event a Participant ceases employment during a restriction period, a Service-Based Restricted Stock or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock or Restricted Stock Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock or Restricted Stock Unit 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 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

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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 or Restricted Stock Units/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, Performance-Based Restricted Stock Units 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 or Performance-Based Restricted Stock 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.

        B.    Performance-Based Restricted Stock Awards or Restricted Stock Unit Awards.

        (i)    Grants of Performance-Based Restricted Stock or Restricted Stock Units.    Subject to Section 9A, one or more shares of Performance-Based Restricted Stock or Restricted Stock Unit may be granted to any Eligible Person. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit until the expiration of the restriction period.

        The Plan Administrator may also impose such other restrictions and conditions on the Performance-Based Restricted Stock or Restricted Stock Unit 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. Upon issuance to the Participant of the Performance-Based Restricted Stock or grant of the Restricted Stock Unit and subject to the Plan Administrator's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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 or Restricted Stock Unit 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 or Restricted Stock Unit 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.

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        In the event a Participant ceases employment during a Performance Period, the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit 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.

        E.    Form and Timing of Payment.    With respect to shares of Performance-Based Restricted Stock or Restricted Stock Units 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

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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—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, Performance-Based Restricted Stock Units 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 or Restricted Stock Unit 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 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.

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        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)  consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, (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.

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        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 or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Units/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 or Restricted Stock Units/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 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

9

("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.

        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.

10

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:

Corporate Secretary
750 East Pratt Street
18^th Floor
Baltimore, Maryland 21202
(410) 783-3600

11

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

12

FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the "Award") pursuant to Section 7 of the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.

The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.

The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan). Your execution of this letter will constitute your waiver to make such election under Section 83(b). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A). This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.

As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares. CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award. If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

4.

If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

Attachment A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS
FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award ("the Award").

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made. Rather, the stock is taxable to you at the time the restrictions are removed. The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed. This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes. You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed. Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock. These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly. For tax purposes, the dividends on the restricted stock will not be taxable as dividend income. Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1)

The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed. This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the "Units") under the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.

Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group's relative Total Shareholder Return ("TSR") performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

•

Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD]. In the DJEUI, companies that are rated "non-investment grade" by both Moody's and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.



•

Secondary Measure: If Constellation Energy's percentile rank for the Primary Measure is below the [    ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure TSR v. DJEUI Large & Mid-Cap Investment Grade Companies	Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target	Payout vs. Target
<Threshold	<[    ] Percentile	[    ]%	[    ]%
Threshold	[    ] Percentile	[    ]%	[    ]%
Target	[    ] Percentile	[    ]%	[    ]%
Stretch	[    ] Percentile	[    ]%	[    ]%

Payout levels interpolated between points.
Secondary measure applies only if performance vs. primary measure is below threshold.

2.

The award payout amount is determined by multiplying the "Payout vs. Target" percentage by the number of Units (worth $1 each) that you were granted. This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.

Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount. The Company will be required to withhold applicable taxes at such time. If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.

As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the "Company") common stock units with sale restrictions ("Deferred Shares") under the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the following conditions:

1.

Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock ("Common Stock"). Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.

During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price. These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.

The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction Lapse Date
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares. During the Restriction Period, you will have no voting rights with respect to the Deferred Shares. The Restriction Period remains in effect irrespective of your employment status.

4.

Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares). Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date). The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes. The total shares you receive will be rounded to the nearest whole share. You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

FORM OF
STOCK OPTION AGREEMENT

        This Stock Option Agreement ("Agreement") is subject to the terms and conditions of the Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (the "Plan"). The «Administrator» Constellation Energy Group, Inc. (the "Plan Administrator") has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. ("Constellation Energy").

1.     Grant of Option.

        (a)    The "Participant" is «First» «Middle» «Last».

        (b)   The date of the grant is «GrantDate» ("Grant Date").

        (c)    The number of shares subject to the option ("Option Shares") are «Grant» shares of Constellation Energy common stock ("Stock").

        (d)   The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock ("Exercise Price").

        This Agreement specifies the terms of the option ("Option") granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an "incentive stock option" as that term is used in Internal Revenue Code section 422. The "Option Period" is the period during which the Option is exercisable as provided in this Agreement.

2.     Installment Exercise.

        Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a "Vesting Date"):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3.     Termination of Option.

        (a)    Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date ("Expiration Date").

        (b)   If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant's employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant's Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

        (c)    In the event of Participant's death during the Option Period, vested Option Shares may be exercised by Participant's legal representative(s), or by other person(s) authorized under Participant's will. Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

        (d)   A transfer of Participant's employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4.     Exercise of Option.

        (a)    Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

        (b)   On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc. All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise. Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise. The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

        (c)    Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant's tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market. Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

        (d)   Participant is required to comply with Constellation Energy's Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations. In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

        (e)    As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.     Tax Withholding.

        Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6.     Fair Market Value.

        The "Fair Market Value" of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7.     No Rights of Stockholders.

        Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8.     Non-Transferability of Option.

        The Option is not transferable, except for a transfer to Participant's family member or to a trust established for the benefit of Participant's family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant's death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. During Participant's lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant's family members to whom the Option has been transferred in accordance with the Plan. In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this

2

Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

9.     Employment Not Affected.

        Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10.   Incorporation of Plan by Reference.

        The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Option will in all respects be interpreted in accordance with the Plan. All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan. The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.   Severability.

        The provisions of this Agreement are severable. If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

        IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
[TITLE, DEPARTMENT]		«First» «Middle» «Last»

3

QuickLinks

Exhibit 10(c)

Constellation Energy Group, Inc. 2002 Senior Management Long-Term Incentive Plan (Plan)
2002 Senior Management Long-Term Incentive Plan Appendix
FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

Attachment A

CONSTELLATION ENERGY GROUP, INC. INCOME TAX CONSEQUENCES TO PARTICIPANTS FOR SERVICE-BASED RESTRICTED STOCK AWARDS
FORM OF PERFORMANCE UNIT AGREEMENT
FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT
FORM OF STOCK OPTION AGREEMENT

EX-10.(D)

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Exhibit 10(d)

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, Restricted Stock Units, 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" means that in determining the amount of a Restricted Stock or Restricted Stock Unit 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.

        "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.

        "Restricted Stock Unit" means a right granted under Section 7 that is denominated in shares of stock, each of which represents a right to receive the value of a share of stock (or a percentage of such value, which percentage may be higher than 100%) upon the terms and conditions set forth by the Committee.

        "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).

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        "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" means that in determining the amount of a Restricted Stock or Restricted Stock Unit 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 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,

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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 or Restricted Stock Unit Awards under Section 7 of the Plan, Performance-Based Restricted Stock or Restricted Stock Unit 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.

        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 and Restricted Stock Unit Awards.

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

        The Committee may also impose such other restrictions and conditions on the Service-Based Restricted Stock or Restricted Stock Unit 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. Upon issuance to the Participant of the Restricted Stock or grant of the Restricted Stock Unit and subject to the Committee's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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 or Restricted Stock Unit 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 or Restricted Stock Unit 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 or Restricted Stock Unit Award is subject to forfeiture or payout (i.e., removal of restrictions) as follows: (a) Termination—the Service-Based Restricted Stock or

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Restricted Stock Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Service-Based Restricted Stock or Restricted Stock Unit 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.

        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

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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 or Restricted Stock Units/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, Performance-Based Restricted Stock Units or Performance Units 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.

        (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,

6

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 or Restricted Stock Unit Awards.

        (i)    Grants of Performance-Based Restricted Stock or Restricted Stock Units.    Subject to Section 9A, one or more shares of Performance-Based Restricted Stock or Restricted Stock Units may be granted to any Eligible Person. The Performance-Based Restricted Stock or Restricted Stock Unit will be issued to the Participant on the Date of Grant without the payment of consideration by the Participant. The Performance-Based Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Unit until the expiration of the restriction period.

        The Committee may also impose such other restrictions and conditions on the Performance-Based Restricted Stock or Restricted Stock Unit 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. Upon issuance to the Participant of the Performance-Based Restricted Stock or Restricted Stock Unit and subject to the Committee's discretion, the Participant will have the right to receive the cash dividends (or Dividend Equivalents as provided in Section 11) distributable with respect to such shares or units, with such dividends or Dividend Equivalents 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 or Restricted Stock Unit 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 or Restricted Stock Unit 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, Performance-Based Restricted Stock Unit or Performance Unit Award is subject to forfeiture or payout as follows: (a) Termination—the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit or Performance Unit Award is completely forfeited; or (b) Retirement, Disability or death—payout of the Performance-Based Restricted Stock, Performance-Based Restricted Stock Unit 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.

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        E.    Form and Timing of Payment.    With respect to shares of Performance-Based Restricted Stock or Restricted Stock Units 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 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

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(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, Performance-Based Restricted Stock Units 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-Based Restricted Stock or Restricted Stock Unit 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

9

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)  consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies (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 (or if earlier upon the termination of the Participant's employment with the Company or a Subsidiary if it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a change in control or (ii) otherwise arose in connection with or anticipation of a change in control) will be determined as follows:

        Service-Based Restricted Stock or Restricted Stock Unit 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 or Restricted Stock Units 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 or Restricted Stock Units/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 or Restricted Stock Units/Performance Units subject to the Award as established on the Date of

10

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 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 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

11

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 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:

Corporate Secretary
750 East Pratt Street
18th Floor
Baltimore, Maryland 21202
(410) 783-3600

12

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

13

FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Service-Based Restricted Stock Award

Dear Recipient:

Effective date, The Board of Directors Compensation Committee, (The Committee), granted you [#] service-based restricted shares of CEG Common Stock (the "Award") pursuant to Section 7 of the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan (a copy of which is provided to you with this letter), your Award is subject to the following conditions:

1.

The Plan restriction period for these shares expires as show on the restriction lapse dates in the table below:

# Shares Granted	Share Grant Date	Restriction Period	Restriction Lapse Date	Aggregate Shares Lapsed
[#]	mm/dd/yy	[one to five years]	[one to five years after Share Grant Date]	[#]

2.

The Plan requires that as a condition to receiving your Award, you waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7D of the Plan). Your execution of this letter will constitute your waiver to make such election under Section 83(b). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of the grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed (see Attachment A). This waiver allows the Company to treat dividends paid to you during the period of the Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

3.

As provided in the Plan, until the Plan restriction period expires, you may not sell, transfer, pledge or hypothecate the Award shares. CEG will hold the shares for safekeeping until the restriction lapse, unless you let us know that you want a stock certificate for the Award. If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the Award shares and that the shares are subject to certain conditions under the Plan.

4.

If you contemplate the sale or transfer (for example to a family member) of any shares after the restriction period expires, you should contact the SEC-related persons specified below for advice on the timing of any sale or transfer and any reporting obligations you may have.

Please read the Plan carefully as it contains many other provisions relating to your Award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

Attachment A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS
FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set forth is a brief overview of certain income tax consequences associated with your Service-Based Restricted Stock Award ("the Award").

Stock

Because the Plan places certain restrictions on the Award which could lead to forfeiture of the shares prior to lifting the Plan restrictions and because you have agreed to waive the Section 83(b) election(1), the value of the restricted stock is not taxed to you when the initial grant is made. Rather, the stock is taxable to you at the time the restrictions are removed. The amount subject to income tax is the fair market value of the stock on the day that the Plan restrictions are removed. This amount is treated as compensation subject to withholding of income taxes, Medicare taxes and, if applicable, Social Security taxes. You are not taxed on the value of any stock forfeited.

For purposes of determining the gain or loss on any sale of the stock received pursuant to this Award, your basis in the stock is the amount that you included in taxable income when the Plan restrictions were removed. Your tax holding period, for purposes of determining whether a gain or loss on a sale is long-term or short-term, begins on the day after the day that the Plan restrictions were removed.

Dividends

The dividends during the restriction period will be automatically reinvested in additional shares of company common stock. These shares will be subject to the same restrictions as the originally awarded shares and will vest accordingly. For tax purposes, the dividends on the restricted stock will not be taxable as dividend income. Rather, the accumulated shares of stock will be taxable to you in the same manner as stated above.

After the Plan restrictions on the stock are removed, the dividends are treated as regular dividend income (generally not subject to tax withholding).

Tax Planning

You may wish to consult your tax advisor in the year the restrictions are lifted from the Award if you have questions regarding the impact of the Award on your tax withholding or if you have questions about the applicable capital gains holding period and rates for this Award.

(1)

The Plan requires that as a condition to receiving a Restricted Stock Award, you must waive in writing the right to make an election under Section 83(b) of the Internal Revenue Code of 1986 with respect to your Award (see Section 7 D of the Plan). This waiver means that you will not have the option of electing to be taxed on the restricted shares at the time of grant. Instead, you will be taxed on the restricted shares at the time the Plan restrictions are removed. This allows the Company to treat dividends paid during the period of Plan restrictions as compensation, thereby giving the Company a tax deduction for such amounts.

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI» «Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD] Long-Term Incentive Program, you were granted [#] performance units (the "Units") under the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the conditions set forth in this document.

Target Grant (# Units)	Grant Date	Performance Period	Vesting Date
[#]	[MM/DD/YY]	[3-Year Period]	[End of 3-Year Period]

Under current tax law, you are not subject to tax on your Units until the Vesting Date.

1.

Each Unit is worth $1. The final award payout on the Vesting Date will be based on Constellation Energy Group's relative Total Shareholder Return ("TSR") performance over the Performance Period as set forth below. TSR is defined as the stock price change from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE PERIOD] and dividends during that period that are reinvested on the ex-dividend date (date stock trades without its dividend) at the closing price on that date.

The Plan Administrator will determine the award payout soon after the conclusion of the Performance Period. The performance measures used to determine the award payout are as follows:

•

Primary Measure: Constellation Energy TSR for the Performance Period is compared to the TSR performance results of large and mid-size investment grade companies within the Dow Jones Electric Utilities Index (DJEUI) on [END OF PERFORMANCE PERIOD]. In the DJEUI, companies that are rated "non-investment grade" by both Moody's and S&P rating agencies on [END OF PERFORMANCE PERIOD] are excluded.



•

Secondary Measure: If Constellation Energy's percentile rank for the Primary Measure is below the [    ] percentile, then a comparison will be made to the TSR performance results of investment grade companies in the S&P 500 Index on [END OF PERFORMANCE PERIOD].

		Primary Measure TSR v. DJEUI Large & Mid-Cap Investment Grade Companies	Secondary Measure TSR v. S&P 500 Index Comparison Group
Performance Level	Total Shareholder Return	Payout vs. Target	Payout vs. Target
<Threshold	<[    ] Percentile	[    ]%	[    ]%
Threshold	[    ] Percentile	[    ]%	[    ]%
Target	[    ] Percentile	[    ]%	[    ]%
Stretch	[    ] Percentile	[    ]%	[    ]%

Payout levels interpolated between points.
Secondary measure applies only if performance vs. primary measure is below threshold.

2.

The award payout amount is determined by multiplying the "Payout vs. Target" percentage by the number of Units (worth $1 each) that you were granted. This award payout amount may be settled, in the sole discretion of the Plan Administrator, in either restricted or unrestricted stock or stock units, or cash (or any combination thereof).

3.

Under current tax law, you will be subject to tax on the Vesting Date on the award payout amount. The Company will be required to withhold applicable taxes at such time. If the award payout is settled in stock or stock units, the Company will withhold the required number of shares or units to pay these taxes.

4.

As provided in the Plan, until the Vesting Date, you may not sell, transfer, or pledge the Units.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign this letter and return it in the envelope provided, and keep a copy for your records.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of «First» «MI» «Last» DATE

FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT

[DATE]

Recipient Name
Recipient Title
Company
Company Address
City, State Zip Code

RE: Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as part of your [PERFORMANCE YEAR] annual incentive and in recognition of your performance during [PERFORMANCE YEAR], you were granted [#] restricted Constellation Energy Group, Inc. (the "Company") common stock units with sale restrictions ("Deferred Shares") under the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the "Plan"). In addition to other provisions of the Plan, your award is subject to the following conditions:

1.

Each Deferred Share entitles you to receive on the Restriction Lapse Date (set forth below) one share of Constellation Energy Group common stock ("Common Stock"). Under current tax law, you are not subject to tax on your Deferred Shares until the Restriction Lapse Date (see paragraph 4 below).

2.

During the Restriction Period (set forth below), on any date that Constellation Energy Group pays dividends with respect to the Common Stock, the Company shall credit you with a number of Deferred Shares equal to (i) the number of your Deferred Shares on the dividend record date times (ii) the dividend rate per share, divided by (iii) the per share reinvestment price. These dividend-based additional Deferred Shares shall be subject to the same rules and restrictions as Deferred Shares originally granted to you.

3.

The Restriction Period for your Deferred Shares expires on the Restriction Lapse Date as shown in the table below:

# Deferred Shares Granted	Deferred Share Grant Date	Restriction Period	Restriction Lapse Date
[#]	[MM/DD/YY]	[5 years]	[5 years after Grant Date]

Your Deferred Shares are fully and immediately vested, however, during the Restriction Period, you may not sell, transfer, or pledge the Deferred Shares. During the Restriction Period, you will have no voting rights with respect to the Deferred Shares. The Restriction Period remains in effect irrespective of your employment status.

4.

Following the Restriction Lapse Date, the Company shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Deferred Shares (including dividend-based additional Deferred Shares). Under current tax law, you will be subject to tax on the Restriction Lapse Date based on an amount equal to the number of shares of Common Stock issued to you times the Fair Market Value per share (i.e., the average of the high and low price of the Common Stock on the Restriction Lapse Date). The Company will be required to withhold applicable taxes at such time, and will withhold the required number of shares to pay these taxes. The total shares you receive will be rounded to the nearest whole share. You should consult your tax advisor regarding any tax issues.

Please read the Plan carefully as it contains many other provisions relating to your award. If you have any questions, please do not hesitate to call:

General	SEC-related	Tax-related
[NAME]	[NAME]	[NAME]
[PHONE NUMBER]	[PHONE NUMBER]	[PHONE NUMBER]

Please sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

[NAME]
[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and conditions contained in each regarding my Award.

Signature of Recipient Date

2

FORM OF
STOCK OPTION AGREEMENT

        This Stock Option Agreement ("Agreement") is subject to the terms and conditions of the Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (the "Plan"). The «Administrator» Constellation Energy Group, Inc. (the "Plan Administrator") has authorized the option grant under this Agreement by and between Participant (designated below) and Constellation Energy Group, Inc. ("Constellation Energy").

1.     Grant of Option.

        (a)    The "Participant" is «First» «Middle» «Last».

        (b)   The date of the grant is «GrantDate» ("Grant Date").

        (c)    The number of shares subject to the option ("Option Shares") are «Grant» shares of Constellation Energy common stock ("Stock").

        (d)   The exercise price is [OptionPrice = fair market value of stock on grant date] per share of Stock ("Exercise Price").

        This Agreement specifies the terms of the option ("Option") granted to Participant to purchase the Option Shares at the Exercise Price set forth above. The Option is not intended to constitute an "incentive stock option" as that term is used in Internal Revenue Code section 422. The "Option Period" is the period during which the Option is exercisable as provided in this Agreement.

2.     Installment Exercise.

        Subject to the terms of this Agreement, the Option will be exercisable in installments according to the following schedule (each a "Vesting Date"):

INSTALLMENT	VESTING DATE APPLICABLE TO INSTALLMENT
[1/3 of Option Shares] Options	[One year after Grant Date]
[1/3 of Option Shares] Options	[Two years after Grant Date]
[1/3 of Option Shares] Options	[Three years after Grant Date]

3.     Termination of Option.

        (a)    Except as provided in paragraph 3(b) below, the Option will terminate upon the earlier to occur of: (1) when all Option Shares have been exercised; or (2) ten (10) years from the Grant Date ("Expiration Date").

        (b)   If Participant ceases employment, the Option will terminate as to any unvested Option Shares on the effective date of Participant's employment Termination (as defined in the Plan) and as to vested Option Shares 90 days after such effective date; provided that if Participant ceases employment because of Participant's Retirement, Disability (each as defined in the Plan), or death, the Option will terminate as to any unvested Option Shares on the effective date of the Retirement, Disability or death, and as to vested Option Shares, the Option will remain exercisable until the earlier of 60 months after such effective date or the Expiration Date.

        (c)    In the event of Participant's death during the Option Period, vested Option Shares may be exercised by Participant's legal representative(s), or by other person(s) authorized under Participant's will. Alternatively, if Participant fails to make testamentary disposition of the Option or dies intestate, such vested Option Shares may be exercised by persons(s) entitled to receive the Option Shares under the applicable laws of descent and distribution.

        (d)   A transfer of Participant's employment between Constellation Energy and any Subsidiary of Constellation Energy, or between Subsidiaries of Constellation Energy, will not be considered an employment Termination.

4.     Exercise of Option.

        (a)    Subject to this Agreement and the Plan, the Option may be exercised in whole or in part by the method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

        (b)   On or before the exercise date specified pursuant to paragraph 4(a), Participant must fully pay the Exercise Price and the tax withholding obligation for the Option Shares exercised in U.S. dollars by cash or by check payable to Constellation Energy Group, Inc. All or a portion of the Exercise Price and tax withholding obligation may also be paid by Participant: (i) subject to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 6 below) on the date of exercise that is equal to the amount of cash that would otherwise be required; or (ii) by authorizing a third party to sell the Option Shares (or a sufficient portion of the Option Shares), and immediately remit to Constellation Energy the Exercise Price and any tax withholding resulting from such exercise. Further, tax withholding up to the minimum required withholding rate (but not in excess of that rate) may also be satisfied through a holdback by Constellation Energy of some of the Option Shares that would otherwise be deliverable to Participant by reason of the Option exercise. The Option will cease to be exercisable, as to the portion exercised, when Participant purchases the Stock to which the exercised portion of the Option relates.

        (c)    Other shares of Stock owned by Participant may be delivered to satisfy the Exercise Price, or to satisfy Participant's tax withholding obligation above the minimum withholding rate, only if the shares have been held by Participant for at least six months before delivery, except that there shall be no holding period imposed for shares purchased by Participant for cash on the open market. Use of previously-owned shares shall be effected by actual delivery of the Stock certificates to Constellation Energy, and by completing an affidavit available from Constellation Energy affirming that Participant owns the necessary shares and that any applicable holding period has been satisfied.

        (d)   Participant is required to comply with Constellation Energy's Insider Trading Policy at all times, including in connection with exercise of the Option. The Option may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Option be exercisable if and to the extent Constellation Energy determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If Constellation Energy makes such a determination, it will use all reasonable efforts to comply with such laws, rules or regulations. In making any such determinations, Constellation Energy may rely on the opinion of counsel for Constellation Energy.

        (e)    As soon as practicable after the exercise date, Constellation Energy will deliver to Participant a Stock certificate or certificates (or other evidence of ownership) for the purchased Option Shares.

5.     Tax Withholding.

        Constellation Energy will have the right to withhold any applicable federal, state or local taxes, deductions or withholdings due with respect to the Option or its exercise in such form and manner as provided in the Plan.

6.     Fair Market Value.

        The "Fair Market Value" of a share of Stock is the average of the highest and lowest sale price per share of Stock on the New York Stock Exchange-Composite Transactions on the applicable date of reference, or if there are no sales on such date, then the average of such highest and lowest sale price on the last previous day on which sales are reported.

7.     No Rights of Stockholders.

        Participant does not have any of the rights and privileges of a stockholder of Constellation Energy with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, before the date of exercise and purchase of the Option Shares.

8.     Non-Transferability of Option.

        The Option is not transferable, except for a transfer to Participant's family member or to a trust established for the benefit of Participant's family members which has been approved by the Plan Administrator as provided in the Plan, or in case of Participant's death, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. During Participant's lifetime, the Option is exercisable only by Participant, any guardian or legal representative of Participant, or a family member or trustee of a trust established for the benefit of Participant's family members to whom the Option has been transferred in accordance with the Plan. In the event of (a) any attempt by Participant to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided in this

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Agreement, or (b) the levy of any attachment, execution or similar process upon the rights or interest conferred under this Agreement, Constellation Energy may terminate the Option by notice to Participant and it will become null and void.

9.     Employment Not Affected.

        Neither this Agreement nor the grant of the Option constitutes a contract of employment between Constellation Energy or any Subsidiary and Participant, and neither will be deemed to be consideration for, or a condition of, continued employment of Participant.

10.   Incorporation of Plan by Reference.

        The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Option will in all respects be interpreted in accordance with the Plan. All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan. The Plan Administrator will interpret and construe the Plan and this Agreement, and its interpretations and determinations will be conclusive and binding on the parties and any other person claiming an interest with respect to any issue arising under this Agreement.

11.   Severability.

        The provisions of this Agreement are severable. If any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

        IN WITNESS WHEREOF, Constellation Energy Group, Inc. and Participant have executed this Stock Option Agreement effective as of the Grant Date.

Constellation Energy Group, Inc	ACCEPTED AND AGREED TO:
[NAME]	By:
[TITLE, DEPARTMENT]		«First» «Middle» «Last»

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FORM OF DIRECTOR STOCK GRANT AGREEMENT

[DATE]

[NAME]

Dear [NAME]:

        Effective [GRANT DATE], [#] shares of Constellation Energy common stock were granted to you as a non-employee Director of the Company. This grant was made under the [YEAR] Director compensation program.

        The number of shares you were granted was determined by dividing $[    ] by $[    ](1), rounded to the nearest ten shares. These shares vest on December 31, [YEAR]. If your Constellation Energy Board service ceases during [YEAR], you will forfeit a number of shares equal to [#] times a fraction, the numerator of which is the number of full calendar months in [YEAR] after your Board membership ceases, and the denominator is 12. Once your shares are vested, they may be sold or otherwise transferred by you.

(1)

The average closing stock price for the prior 20 trading days (including [DATE])

        You will be subject to income tax based on the average of the high and low price of your shares on the vesting date. This fair market value of the vested shares on December 31, [YEAR] will be included in the [YEAR] Form 1099 issued to you for your Director compensation.

        Constellation Energy will hold these shares for you in safekeeping until the shares vest, unless you let us know that you want a stock certificate for these shares. If you prefer a certificate, it will be issued in your name with a legend to the effect that you may not sell, transfer, pledge, or hypothecate the shares until the shares vest.

        You have the option of electing to have your dividends on these shares paid by check each quarter or to have your dividends reinvested. Your dividends will be subject to income tax regardless of whether you elect to have them paid by check or to reinvest them. We have enclosed a dividend reinvestment authorization form and a Prospectus that explains the features of Constellation Energy's Shareholder Investment Plan. If you want to reinvest your dividends, you must execute and return the authorization form when Constellation Energy's trading window is open. The authorization form should be returned to:

[NAME]
[ADDRESS]

        If you do not return the enclosed authorization form by [DATE], your dividends will automatically be paid to you by check each quarter.

        If you have any questions or need additional information, please call me.

Very truly yours,

QuickLinks

Exhibit 10(d)

Constellation Energy Group, Inc. Executive Long-Term Incentive Plan (Plan)
Executive Long-Term Incentive Plan Appendix
FORM OF SERVICE-BASED RESTRICTED STOCK AWARD AGREEMENT

Attachment A

CONSTELLATION ENERGY GROUP, INC. INCOME TAX CONSEQUENCES TO PARTICIPANTS FOR SERVICE-BASED RESTRICTED STOCK AWARDS
FORM OF PERFORMANCE UNIT AGREEMENT
FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION AGREEMENT
FORM OF STOCK OPTION AGREEMENT
FORM OF DIRECTOR STOCK GRANT AGREEMENT

EX-10.(E)

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Exhibit 10(e)

CHANGE IN CONTROL SEVERANCE AGREEMENT

        This Agreement is made the 16th day of August, 2004, by and between CONSTELLATION ENERGY GROUP, INC. (the "Company") and Mayo A. Shattuck III (the "Executive").

        WHEREAS, the Company wishes to encourage the orderly succession of management in the event of a Change in Control (as hereinafter defined); and

        WHEREAS, the Company desires to maintain a severance benefit for the Executive covering the period from the date of a Change in Control until the end of the twenty-four month period following the date of a Change in Control, to avoid the loss or the serious distraction of the Executive to the detriment of the Company and its stockholders prior to and during such period when the Executive's undivided attention and commitment to the needs of the Company would be particularly important; and

        WHEREAS, the Executive desires to devote the Executive's time and energy for the benefit of the Company and its stockholders and not to be distracted as a result of a Change in Control.

        NOW, THEREFORE, the parties agree as follows:

1.    Definitions.

        1.1    Annual Award Amount.    The term "Annual Award Amount" means the average of the two highest annual incentive awards under the Company's annual incentive plan (or the annual incentive plan maintained by a successor company or a Subsidiary) payable under the terms of such annual incentive plan for the performance year during which the Qualifying Termination occurs, and paid in the last four years to the Executive prior to the occurrence of the Qualifying Termination; provided, however, that (a) if the Executive has not been employed by the Company or a Subsidiary for a sufficient length of time to have been eligible for payment of at least two full annual incentive awards, deemed target award payout shall be used for the one or two years for which the Executive was not so eligible; (b) for any year during which an annual incentive award was paid or is payable to the Executive that was prorated because of less than a full year of plan participation, such award shall be annualized; and (c) for any year during which a guaranteed minimum annual incentive award amount was paid or is payable to the Executive, such full (not prorated because of less than a full year of plan participation) guaranteed annual incentive amount shall be used for such year.

        1.2    Board.    The term "Board" means the Board of Directors of the Company.

        1.3    Cause.    The term "Cause" means the occurrence of any one or more of the following:

        (a)    The Executive is convicted of a felony involving moral turpitude; or

        (b)   The Executive engages in conduct or activities that constitutes disloyalty to the Company or a Subsidiary and such conduct or activities are materially damaging to the property, business or reputation of the Company or a Subsidiary; or

        (c)    The Executive persistently fails or refuses to comply with any written direction of an authorized representative of the Company other than a directive constituting an assignment described in Section 1.7(a); or

        (d)   The Executive embezzles or knowingly, and with intent, misappropriates property of the Company or a Subsidiary, or unlawfully appropriates any corporate opportunity of the Company or a Subsidiary.

        A termination of the Executive's employment for Cause for purposes of this Agreement shall be effected in accordance with the following procedures. The Company shall give the Executive written notice ("Notice of Termination for Cause") of its intention to terminate the Executive's employment for Cause, setting forth in reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provision(s) of this Agreement on which it relies, and stating the date, time and place of the Board Meeting for Cause. The "Board Meeting for Cause" means a meeting of the Board at which the Executive's termination for Cause will be considered, that takes place not less than ten (10) and not more than twenty (20) business days after the Executive receives the Notice of Termination for Cause. The Executive shall be given an opportunity, together with counsel, to be heard at the Board Meeting for Cause. The Executive's Termination for Cause shall be effective when and if a resolution is duly adopted at the Board Meeting for Cause by a two-thirds vote of the entire membership of the Board, excluding employee directors, stating that in the good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination for Cause, and that conduct constitutes Cause under this Agreement.

        1.4    Change in Control.    The term "Change in Control" means the occurrence of any one of the following events:

        (a)    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;

        (b)   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  (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (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 (c)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);

        (c)    there is consummated a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (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

        (d)   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.

        1.5    Effective Date.    The term "Effective Date" means the first date during the term of this Agreement on which a Change in Control occurs provided that the Executive is employed by the Company or a Subsidiary on such date. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company or a Subsidiary has terminated for any reason prior to the first date on which a Change in Control occurs, this Agreement shall

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be null and void as of the date of such termination of employment; provided, however, that if it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination.

        1.6    Eligible to Retire.    The term "Eligible to Retire" means an Executive who has met the eligibility requirements for retirement under any Company or Subsidiary supplemental executive non-qualified defined benefit retirement plan in which the Executive participated immediately prior to the occurrence of a Qualifying Termination.

        1.7    Good Reason.    The term "Good Reason" means, without the Executive's express written consent, the occurrence after the Effective Date of any one or more of the following:

        (a)    The assignment to the Executive of duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices, title and reporting relationships) as an executive and/or officer of the Company or a Subsidiary immediately prior to the Effective Date, or a material reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately prior to the Effective Date, (including as a type of such reduction or alteration for an Executive who is an officer of a publicly traded company immediately prior to the Effective Date, the Executive occupying the same position or title but with a company whose stock is not publicly traded), unless such act is remedied by the Company or such Subsidiary within 10 business days after receipt of written notice thereof given by the Executive; or

        (b)   A reduction by the Company or a Subsidiary of the Executive's base salary in effect immediately prior to the Effective Date or as the same shall be increased from time to time, unless such reduction is less than ten percent (10%) and it is either (i) replaced by an incentive opportunity equal in value; or is (ii) consistent and proportional with an overall reduction in management compensation due to extraordinary business conditions, including but not limited to reduced profitability and other financial stress (i.e., the base salary of the Executive will not be singled out for reduction in a manner inconsistent with a reduction imposed on other executives of the Company or such Subsidiary); or

        (c)    The relocation of the Executive's office more than 50 miles from the Executive's office immediately prior to the Effective Date; or

        (d)   Failure of the Company or a Subsidiary (whichever is the Executive's employer) to provide (i) the Executive the opportunity to participate in all applicable incentive, savings and retirement plans, practices, policies and programs of the Company or such Subsidiary to the same extent as other senior executives (or, where applicable, retired senior executives) of the Company or such Subsidiary, and (ii) the Executive and/or the Executive's family, as the case may be, the opportunity to participate in, and receive all benefits under, all applicable welfare benefit plans, practices, policies and programs provided by the Company or such Subsidiary, including, without limitation, medical, prescription, dental, disability, sick benefits, accidental death and travel insurance plans and programs, to the same extent as other senior executives (or, where applicable, retired senior executives) of the Company or such Subsidiary; or

        (e)    Failure of the Company or a Subsidiary (whichever is the Executive's employer) to provide the Executive such perquisites as the Company or such Subsidiary may establish from time to time which are commensurate with the Executive's position and at least comparable to those received by other senior executives at the Company or such Subsidiary; or

        (f)    The failure by the Company to comply with paragraph (c) of Section 11 of this Agreement; or

        (g)    Any other substantial breach of this Agreement by the Company that either is not taken in good faith or is not remedied by the Company promptly after receipt of notice thereof from the Executive.

        The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein; provided, however, a termination of employment by the Executive for Good Reason for purposes of this Agreement shall be effectuated by giving the Company written notice ("Notice of Termination for Good Reason") of the termination within six (6) months of the occurrence of the event constituting Good Reason or, if such event is not immediately recognizable by the Executive, within six (6) months of the date the Executive became or reasonably should have become aware of such event, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which

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the Executive relies. A termination of employment by the Executive for Good Reason shall be effective on the thirtieth (30^th) day following the date when the Notice of Termination for Good Reason is given, unless the notice sets forth a later date (which date shall in no event be later than sixty (60) days after the notice is given); provided, however, that no event described hereunder shall constitute Good Reason if such event is a result of an isolated, insubstantial and inadvertent action that is not taken in bad faith and that is remedied by the Company within ten (10) days after receipt of the Notice of Termination for Good Reason by the Company from the Executive. If the Company disputes the existence of Good Reason, the burden of proof is on the Company to establish that Good Reason does not exist.

        1.8    Ineligible to Retire.    The term "Ineligible to Retire" means an Executive who has not met the eligibility requirements for retirement under any Company or Subsidiary supplemental executive non-qualified defined benefit retirement plan in which the Executive participated immediately prior to the occurrence of a Qualifying Termination.

        1.9    Qualifying Termination.    The term "Qualifying Termination" means

        (a)    The occurrence of any one or more of the following employment termination events during the period beginning with the Effective Date and ending on the second anniversary of such date, shall constitute a "Qualifying Termination":

          (i)  The Company's termination of the Executive's employment without Cause (as defined in Section 1.3); or

         (ii)  The Executive's resignation for Good Reason (as defined in Section 1.7).

        (b)   A Qualifying Termination shall not include a termination of employment by reason of death, disability, the Executive's voluntary termination of employment without Good Reason, or the Company's termination of the Executive's employment for Cause.

        1.10    Subsidiary.    The term "Subsidiary" means 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.

2.    Severance Benefits for an Executive Ineligible to Retire.    Upon the occurrence of a Qualifying Termination with respect to an Executive who is Ineligible to Retire:

        (a)    Severance Payment.    The Company shall pay to the Executive an amount equal to three times the sum of the Executive's annual base salary (as in effect on the date of the Qualifying Termination, not reduced by any reduction described in Section 1.7(b) above) and Annual Award Amount. The payment shall be made in a lump sum after the Qualifying Termination, and within approximately 10 business days after the Company receives the executed agreement referred to in 2(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (b)    Supplemental Retirement Benefits.    For purposes of determining the Executive's supplemental retirement benefits which the Executive is entitled to under the Company's supplemental non-qualified retirement plan in which the Executive participated immediately prior to the Qualifying Termination (or the supplemental retirement plan maintained by a successor company or a Subsidiary), (i) the Executive's service percentage shall be computed by adding three years of executive-level service to the Executive's actual service; (ii) any minimum age and service eligibility requirements for such benefits shall be waived and such benefits shall be fully vested; and (iii) Annual Award Amount shall be used to compute such benefits in lieu of any other annual incentive award amount under such plan.

        (c)    Severance Health Benefits.    The Company shall provide to the Executive a lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to active employees (with such cash payment based on the amount of such subsidy in effect immediately prior to the date of the Qualifying Termination), assuming such deemed subsidy is provided to the Executive for three years after the date of the Qualifying Termination. Also, (i) for an Executive who is at least age 55 with seven or more years of service on the date of the Qualifying Termination, the Company shall provide to the Executive an additional lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to a retiree of the Company who has the deemed service used to compute supplemental retirement benefits in Section 2(b) above (based on the amount of such subsidy in effect as of the date of the Qualifying Termination), assuming such subsidy is provided to the Executive beginning immediately after the three year period referenced in the first sentence of this paragraph until the end of the estimated life expectancy of the Executive; and (ii) for an Executive who is not at least

4

age 55 with seven or more years of service on the date of the Qualifying Termination, no additional health benefits payment shall be provided by the Company. Such payment(s) shall be made within approximately 10 business days after the Company receives the executed agreement referred to in 2(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (d)    Outplacement.    For a 60-day period commencing on the date of the Qualifying Termination, the Executive is entitled to receive outplacement services from one or more organizations that are offered by the Company from time to time, with such services capped at a Company cost of $50,000.

        (e)    Release.    The benefits described in this Section 2 are payable by the Company to the Executive only if after the date of the Qualifying Termination, the Executive executes (and does not subsequently revoke) in writing and submits to the Company, in the form, manner, and subject to the timing established by the Company, an agreement releasing legal claims, including those against the Company and its Subsidiaries, including but not limited to claims arising out of the Executive's Company or Subsidiary employment or termination of such employment. Such agreement shall be furnished by the Company to the Executive as soon as possible, but no later than ten (10) business days, after the date of the Qualifying Termination.

3.    Severance Benefits for an Executive Eligible to Retire.    Upon the occurrence of a Qualifying Termination with respect to an Executive who is Eligible to Retire:

        (a)    Severance Payment.    The Company shall pay to the Executive an amount equal to three times the sum of the Executive's annual base salary (as in effect on the date of the Qualifying Termination, not reduced by any reduction described in Section 1.7(b) above) and Annual Award Amount. The payment shall be made in a lump sum after the Qualifying Termination, and within approximately 10 business days after the Company receives the executed agreement referred to in 3(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (b)    Supplemental Retirement Benefits.    For purposes of determining the Executive's supplemental retirement benefits which the Executive is entitled to under the Company's supplemental non-qualified retirement plan in which the Executive participated immediately prior to the Qualifying Termination (or the supplemental retirement plan maintained by a successor company or a Subsidiary), (i) the Executive's service percentage shall be computed by adding three years of executive-level service to the Executive's actual service; and (ii) Annual Award Amount shall be used to compute such benefits in lieu of any other annual incentive award amount under such plan.

        (c)    Severance Health Benefits.    The Company shall provide to the Executive a lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to active employees, less the Executive's actual Company subsidy toward such benefits (based on the amount of such subsidies in effect as of the date of the Qualifying Termination), assuming such subsidies are provided to the Executive for three years after the date of the Qualifying Termination. Also, the Company shall provide to the Executive an additional lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to a retiree of the Company who has attained age 65 and completed the greater of 20 years or actual years of service, less the Executive's actual Company subsidy toward such benefits (based on the amount of such subsidies in effect as of the date of the Qualifying Termination), assuming such subsidies are provided to the Executive beginning immediately after the three year period referenced in the first sentence of this paragraph until the end of the estimated life expectancy of the Executive. Such payments shall be made within approximately 10 business days after the Company receives the executed agreement referred to in 3(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (d)    Outplacement.    For a 60-day period commencing on the date of the Qualifying Termination, the Executive is entitled to receive outplacement services from one or more organizations that are offered by the Company from time to time, with such services capped at a Company cost of $50,000.

        (e)    Release.    The benefits described in this Section 3 are payable by the Company to the Executive only if after the date of the Qualifying Termination, the Executive executes (and does not subsequently revoke) in writing and submits to the Company, in the form, manner, and subject to the timing established by the Company, an agreement releasing legal claims, including those against the Company and its Subsidiaries, including but not limited to claims arising out of the Executive's Company or Subsidiary employment or termination of such employment. Such

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agreement shall be furnished by the Company to the Executive as soon as possible, but no later than ten (10) business days, after the date of the Qualifying Termination.

4.    Non-Exclusivity of Rights.    Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or a successor company or a Subsidiary (whichever is the Executive's employer) for which the Executive may qualify, nor shall anything in this Agreement limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or a successor Company or such Subsidiary. However, if the Executive receives severance benefits under this Agreement, the Executive is not also entitled to any benefit under any other severance plan, program, arrangement or agreement maintained by the Company or a Subsidiary. Vested benefits and other amounts that the Executive is otherwise entitled to receive under any incentive compensation (including, but not limited to any restricted stock or stock option agreements), deferred compensation and other benefit programs listed in Section 1.7(d), life insurance coverage, or any other plan, policy, practice or program of, or any contract or agreement with, the Company or a successor Company or such Subsidiary on or after the date of the Qualifying Termination shall be payable in accordance with the terms of each such plan, policy, practice, program, contract or agreement, as the case may be, except as explicitly modified by this Agreement.

5.    Full Settlement.    The Company's obligation to make the payments provided for in, and otherwise to perform its obligations under, this Agreement shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced, regardless of whether the Executive obtains other employment.

6.    Certain Additional Payments by the Company.

        (a)    Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereon) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

        (b)   Subject to the provisions of paragraph (c) of this Section 6, all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by one of the major internationally recognized certified public accounting firms (commonly referred to, as of the date hereof, as a Big Four firm) designated by the Executive and approved by the Company (which approval shall not be unreasonably withheld) (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group affecting the change of control, the Executive shall designate another Big Four accounting firm (subject to the approval of the Company, which approval shall not be unreasonably withheld) to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to paragraph (c) of this Section 6 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

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        (c)    The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

          (i)  give the Company any information reasonably requested by the Company relating to such claim,

         (ii)  take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

        (iii)  cooperate with the Company in good faith in order effectively to contest such claim, and

         (iv)  permit the Company to participate in any proceedings relating to such claim;

PROVIDED, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph (c) of Section 6, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; PROVIDED, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and PROVIDED, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

        (d)   If, after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c) of this Section 6, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly take all necessary action to obtain such refund and (subject to the Company's complying with the requirements of paragraph (c) of this Section 6) upon receipt of such refund shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c) of this Section 6, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

7.    Termination of Agreement.    This Agreement shall remain in effect from the date hereof until the last day of the twenty-fourth calendar month following the date of a Change in Control. Further, upon a Qualifying Termination, this Agreement shall continue until the Company or its successor shall have fully performed all of its obligations thereunder with respect to the Executive, with no future performance being possible. This Agreement may be terminated at any time by the Board with the written consent of the Executive. Notwithstanding the foregoing, this Agreement shall automatically terminate upon cessation of Executive's employment with the Company and its Subsidiaries prior to the Effective Date.

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8.    Amendment of Agreement.    This Agreement may be amended at any time by the Board with the written consent of the Executive.

9.    Construction.    Wherever any words are used herein in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply.

10.    Governing Law.    This Agreement shall be governed by the laws of Maryland.

11.    Successors and Assigns.

        (a)    This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

        (b)   This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

        (c)    The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise.

12.    Indemnification.    The Company will pay all reasonable fees and expenses, if any, (including, without limitation, legal fees and expenses) that are incurred by the Executive to enforce this Agreement and that result from a breach of this Agreement by the Company.

13.    Notice.    Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address the Executive has filed in writing with the Company, or in the case of the Company, to its principal offices.

14.    Severability.    The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

15.    Withholding.    Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

16.    Entire Agreement.    Unless otherwise specifically provided in this Agreement, the Executive and the Company acknowledge that this Agreement supersedes any other agreement between them or between the Executive and the Company or a Subsidiary, concerning the subject matter hereof.

17.    Alienability.    The rights and benefits of the Executive under this Agreement may not be anticipated, alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process except as required by law. Any attempt by the Executive to anticipate, alienate, assign, sell, transfer, pledge, encumber or charge the same shall be void. Payments hereunder shall not be considered assets of the Executive in the event of insolvency or bankruptcy.

18.    Counterparts.    This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.

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        IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of the Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

CONSTELLATION ENERGY GROUP, INC.
By:	/s/
/s/ Mayo A. Shattuck III

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Exhibit 10(e)

CHANGE IN CONTROL SEVERANCE AGREEMENT

EX-10.(F)

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Exhibit 10(f)

CHANGE IN CONTROL SEVERANCE AGREEMENT

        This Agreement is made the 9th day of August, 2004, by and between CONSTELLATION ENERGY GROUP, INC. (the "Company") and Michael J. Wallace (the "Executive").

        WHEREAS, the Company wishes to encourage the orderly succession of management in the event of a Change in Control (as hereinafter defined); and

        WHEREAS, the Company desires to maintain a severance benefit for the Executive covering the period from the date of a Change in Control until the end of the twenty-four month period following the date of a Change in Control, to avoid the loss or the serious distraction of the Executive to the detriment of the Company and its stockholders prior to and during such period when the Executive's undivided attention and commitment to the needs of the Company would be particularly important; and

        WHEREAS, the Executive desires to devote the Executive's time and energy for the benefit of the Company and its stockholders and not to be distracted as a result of a Change in Control.

        NOW, THEREFORE, the parties agree as follows:

1.    Definitions.

        1.1    Annual Award Amount.    The term "Annual Award Amount" means the average of the two highest annual incentive awards under the Company's annual incentive plan (or the annual cash incentive plan maintained by a successor company or a Subsidiary) payable under the terms of such annual incentive plan for the performance year during which the Qualifying Termination occurs, and paid in the last four years to the Executive prior to the occurrence of the Qualifying Termination; provided, however, that (a) if the Executive has not been employed by the Company or a Subsidiary for a sufficient length of time to have been eligible for payment of at least two full annual incentive awards, deemed target award payout shall be used for the one or two years for which the Executive was not so eligible; (b) for any year during which an annual incentive award was paid or is payable to the Executive that was prorated because of less than a full year of plan participation, such award shall be annualized; and (c) for any year during which a guaranteed minimum annual incentive award amount was paid or is payable to the Executive, such full (not prorated because of less than a full year of plan participation) guaranteed annual incentive amount shall be used for such year.

        1.2    Board.    The term "Board" means the Board of Directors of the Company.

        1.3    Cause.    The term "Cause" means the occurrence of any one or more of the following:

        (a)    The Executive is convicted of a felony involving moral turpitude; or

        (b)   The Executive engages in conduct or activities that constitutes disloyalty to the Company or a Subsidiary and such conduct or activities are materially damaging to the property, business or reputation of the Company or a Subsidiary; or

        (c)    The Executive persistently fails or refuses to comply with any written direction of an authorized representative of the Company other than a directive constituting an assignment described in Section 1.7(a); or

        (d)   The Executive embezzles or knowingly, and with intent, misappropriates property of the Company or a Subsidiary, or unlawfully appropriates any corporate opportunity of the Company or a Subsidiary.

        A termination of the Executive's employment for Cause for purposes of this Agreement shall be effected in accordance with the following procedures. The Company shall give the Executive written notice ("Notice of Termination for Cause") of its intention to terminate the Executive's employment for Cause, setting forth in reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provision(s) of this Agreement on which it relies, and stating the date, time and place of the Board Meeting for Cause. The "Board Meeting for Cause" means a meeting of the Board at which the Executive's termination for Cause will be considered, that takes place not less than ten (10) and not more than twenty (20) business days after the Executive receives the Notice of Termination for Cause. The Executive shall be given an opportunity, together with counsel, to be heard at the Board Meeting for Cause. The Executive's Termination for Cause shall be effective when and if a resolution is duly adopted at the Board Meeting for Cause by a two-thirds vote of the entire membership of the Board, excluding employee directors, stating that in the good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination for Cause, and that conduct constitutes Cause under this Agreement.

        1.4    Change in Control.    The term "Change in Control" means:

        (a)    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;

        (b)   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  (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (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 (c)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);

        (c)    there is consummated a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries (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

        (d)   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.

        1.5    Effective Date.    The term "Effective Date" means the first date during the term of this Agreement on which a Change in Control occurs provided that the Executive is employed by the Company or a Subsidiary on such date. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company or a Subsidiary has terminated for any reason prior to the first date on which a Change in Control occurs, this Agreement shall

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be null and void as of the date of such termination of employment; provided, however, that if it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination.

        1.6    Eligible to Retire.    The term "Eligible to Retire" means an Executive who has met the eligibility requirements for retirement under any Company or Subsidiary supplemental executive non-qualified defined benefit retirement plan in which the Executive participated immediately prior to the occurrence of a Qualifying Termination.

        1.7    Good Reason.    The term "Good Reason" means, without the Executive's express written consent, the occurrence after the Effective Date of any one or more of the following:

        (a)    The assignment to the Executive of duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices, title and reporting relationships) as an executive and/or officer of the Company or a Subsidiary immediately prior to the Effective Date, or a material reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately prior to the Effective Date (including as a type of such reduction or alteration for an Executive who is an officer of a publicly traded company immediately prior to the Effective Date, the Executive occupying the same position or title but with a company whose stock is not publicly traded), unless such act is remedied by the Company or such Subsidiary within 10 business days after receipt of written notice thereof given by the Executive; or

        (b)   A reduction by the Company or a Subsidiary of the Executive's base salary in effect immediately prior to the Effective Date or as the same shall be increased from time to time, unless such reduction is less than ten percent (10%) and it is either (i) replaced by an incentive opportunity equal in value; or is (ii) consistent and proportional with an overall reduction in management compensation due to extraordinary business conditions, including but not limited to reduced profitability and other financial stress (i.e., the base salary of the Executive will not be singled out for reduction in a manner inconsistent with a reduction imposed on other executives of the Company or such Subsidiary); or

        (c)    The relocation of the Executive's office more than 50 miles from the Executive's office immediately prior to the Effective Date; or

        (d)   Failure of the Company or a Subsidiary (whichever is the Executive's employer) to provide (i) the Executive the opportunity to participate in all applicable incentive, savings and retirement plans, practices, policies and programs of the Company or such Subsidiary to the same extent as other senior executives (or, where applicable, retired senior executives) of the Company or such Subsidiary, and (ii) the Executive and/or the Executive's family, as the case may be, the opportunity to participate in, and receive all benefits under, all applicable welfare benefit plans, practices, policies and programs provided by the Company or such Subsidiary, including, without limitation, medical, prescription, dental, disability, sick benefits, accidental death and travel insurance plans and programs, to the same extent as other senior executives (or, where applicable, retired senior executives) of the Company or such Subsidiary; or

        (e)    Failure of the Company or a Subsidiary (whichever is the Executive's employer) to provide the Executive such perquisites as the Company or such Subsidiary may establish from time to time which are commensurate with the Executive's position and at least comparable to those received by other senior executives at the Company or such Subsidiary; or

        (f)    The failure by the Company to comply with paragraph (c) of Section 11 of this Agreement; or

        (g)    Any other substantial breach of this Agreement by the Company that either is not taken in good faith or is not remedied by the Company promptly after receipt of notice thereof from the Executive.

        The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein; provided however, a termination of employment by the Executive for Good Reason for purposes of this Agreement shall be effectuated by giving the Company written notice ("Notice of Termination for Good Reason") of the termination within six (6) months of the occurrence of the event constituting Good Reason or, if such event is not immediately recognizable by the Executive, within six (6) months of the date the Executive became or reasonably should have become aware of such event, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which

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the Executive relies. A termination of employment by the Executive for Good Reason shall be effective on the thirtieth (30^th) day following the date when the Notice of Termination for Good Reason is given, unless the notice sets forth a later date (which date shall in no event be later than sixty (60) days after the notice is given); provided, however, that no event described hereunder shall constitute Good Reason if such event is a result of an isolated, insubstantial and inadvertent action that is not taken in bad faith and that is remedied by the Company within ten (10) days after receipt of the Notice of Termination for Good Reason by the Company from the Executive. If the Company disputes the existence of Good Reason, the burden of proof is on the Company to establish that Good Reason does not exist.

        1.8    Ineligible to Retire.    The term "Ineligible to Retire" means an Executive who has not met the eligibility requirements for retirement under any Company or Subsidiary supplemental executive non-qualified defined benefit retirement plan in which the Executive participated immediately prior to the occurrence of a Qualifying Termination.

        1.9    Qualifying Termination.    The term "Qualifying Termination" means

        (a)    The occurrence of any one or more of the following employment termination events during the period beginning with the Effective Date and ending on the second anniversary of such date, shall constitute a "Qualifying Termination":

          (i)  The Company's termination of the Executive's employment without Cause (as defined in Section 1.7); or

         (ii)  The Executive's resignation for Good Reason (as defined in Section 1.7).

        (b)   A Qualifying Termination shall not include a termination of employment by reason of death, disability, the Executive's voluntary termination of employment without Good Reason, or the Company's termination of the Executive's employment for Cause.

        1.10.    Subsidiary.    The term "Subsidiary" means 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.

2.    Severance Benefits for an Executive Ineligible to Retire.    Upon the occurrence of a Qualifying Termination with respect to an Executive who is Ineligible to Retire:

        (a)    Severance Payment.    The Company shall pay to the Executive an amount equal to three times the sum of the Executive's annual base salary (as in effect on the date of the Qualifying Termination, not reduced by any reduction described in Section 1.7(b) above) and Annual Award Amount. The payment shall be made in a lump sum after the Qualifying Termination, and within approximately 10 business days after the Company receives the executed agreement referred to in 2(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (b)    Supplemental Retirement Benefits.    For purposes of determining the Executive's supplemental retirement benefits which the Executive is entitled to under the Company's supplemental non-qualified retirement plan in which the Executive participated immediately prior to the Qualifying Termination (or the supplemental retirement plan maintained by a successor company or a Subsidiary), (i) the Executive's age shall be deemed equal to the greater of (A) age 55 or (B) the Executive's actual age, (ii) the Executive's service percentage shall be deemed equal to 40%, (iii) any minimum service eligibility requirements for such benefits shall be waived and such benefits shall be fully vested, and (iv) Annual Award Amount shall be used to compute such benefits in lieu of any other annual incentive award amount under such plan.

        (c)    Severance Health Benefits.    The Company shall provide to the Executive a lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to active employees (with such cash payment based on the amount of such subsidy in effect immediately prior to the date of the Qualifying Termination), assuming such deemed subsidy is provided to the Executive for three years after the date of the Qualifying Termination. Also, (i) for an Executive who is at least age 55 with seven or more years of service on the date of the Qualifying Termination, the Company shall provide to the Executive an additional lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to a retiree of the Company who has the deemed service used to compute supplemental retirement benefits in Section 2(b) above (based on the amount of such subsidy in effect as of the date of the Qualifying Termination), assuming such subsidy is provided to the Executive beginning immediately after the three year period referenced in the first sentence of this

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paragraph until the end of the estimated life expectancy of the Executive; and (ii) for an Executive who is not at least age 55 with seven or more years of service on the date of the Qualifying Termination, no additional health benefits payment shall be provided by the Company. Such payment(s) shall be made within approximately 10 business days after the Company receives the executed agreement referred to in 2(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (d)    Outplacement.    For a 60-day period commencing on the date of the Qualifying Termination, the Executive is entitled to receive outplacement services from one or more organizations that are offered by the Company from time to time, with such services capped at a Company cost of $50,000.

        (e)    Release.    The benefits described in this Section 2 are payable by the Company to the Executive only if after the date of the Qualifying Termination, the Executive executes (and does not subsequently revoke) in writing and submits to the Company, in the form, manner, and subject to the timing established by the Company, an agreement releasing legal claims, including those against the Company and its Subsidiaries, including but not limited to claims arising out of the Executive's Company or Subsidiary employment or termination of such employment. Such agreement shall be furnished by the Company to the Executive as soon as possible, but no later than ten (10) business days, after the date of the Qualifying Termination.

3.    Severance Benefits for an Executive Eligible to Retire.    Upon the occurrence of a Qualifying Termination with respect to an Executive who is Eligible to Retire:

        (a)    Severance Payment.    The Company shall pay to the Executive an amount equal to three times the sum of the Executive's annual base salary (as in effect on the date of the Qualifying Termination, not reduced by any reduction described in Section 1.7(b) above) and Annual Award Amount. The payment shall be made in a lump sum after the Qualifying Termination, and within approximately 10 business days after the Company receives the executed agreement referred to in 3(f) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (b)    Supplemental Retirement Benefits.    For purposes of determining the Executive's supplemental retirement benefits which the Executive is entitled to under the Company's supplemental non-qualified retirement plan in which the Executive participated immediately prior to the Qualifying Termination (or the supplemental retirement plan maintained by a successor company or a Subsidiary), (i) the Executive's service percentage shall be deemed equal to 40% or the Executive's actual service percentage (whichever is greater); (ii) the Executive's supplemental retirement benefit shall not be reduced for early receipt; and (iii) Annual Award Amount shall be used to compute such benefits in lieu of any other annual incentive award amount under such plan.

        (c)    Severance Health Benefits.    The Company shall provide to the Executive a lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to active employees, less the Executive's actual Company subsidy toward such benefits (based on the amount of such subsidies in effect as of the date of the Qualifying Termination), assuming such subsidies are provided to the Executive for three years after the date of the Qualifying Termination. Also, the Company shall provide to the Executive an additional lump sum payment equal to the present value of the Company subsidy toward medical and dental benefits provided to a retiree of the Company who has attained age 65 and completed the greater of 20 years or actual years of service, less the Executive's actual Company subsidy toward such benefits (based on the amount of such subsidies in effect as of the date of the Qualifying Termination), assuming such subsidies are provided to the Executive beginning immediately after the three year period referenced in the first sentence of this paragraph until the end of the estimated life expectancy of the Executive. Such payments shall be made within approximately 10 business days after the Company receives the executed agreement referred to in 3(e) below but in no case prior to the expiration of any period during which the Executive is permitted to revoke such agreement.

        (d)    Outplacement.    For a 60-day period commencing on the date of the Qualifying Termination, the Executive is entitled to receive outplacement services from one or more organizations that are offered by the Company from time to time, with such services capped at a Company cost of $50,000.

        (e)    Release.    The benefits described in this Section 3 are payable by the Company to the Executive only if after the date of the Qualifying Termination, the Executive executes (and does not subsequently revoke) in writing and submits to the Company, in the form, manner, and subject to the timing established by the Company, an agreement releasing legal claims, including those against the Company and its Subsidiaries, including but not limited to claims

5

arising out of the Executive's Company or Subsidiary employment or termination of such employment. Such agreement shall be furnished by the Company to the Executive as soon as possible, but no later than ten (10) business days, after the date of the Qualifying Termination.

4.    Non-Exclusivity of Rights.    Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or a successor company or a Subsidiary (whichever is the Executive's employer) for which the Executive may qualify, nor shall anything in this Agreement limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or a successor Company or such Subsidiary. However, if the Executive receives severance benefits under this Agreement, the Executive is not also entitled to any benefit under any other severance plan, program, arrangement or agreement maintained by the Company or a Subsidiary except under the Employment Agreement made December 20, 2001 between the Company and the Executive (Employment Agreement); provided, however the Base Salary and performance bonus payments under Sections 7(d)(i) and (ii), and 7(e)(i) and (ii) of the Employment Agreement shall be offset by any cash payment made under Section 2(a) or 3(a) of this Agreement, and the Senior Executive Supplemental Plan benefit under Sections 7(d)(vi) and 7(e)(vi) of the Employment Agreement shall be offset by any such benefit under Section 2(b) or 3(b) of this Agreement. Vested benefits and other amounts that the Executive is otherwise entitled to receive under any incentive compensation (including, but not limited to any restricted stock or stock option agreements), deferred compensation and other benefit programs listed in Section 1.7(d), life insurance coverage, or any other plan, policy, practice or program of, or any contract or agreement with, the Company or a successor Company or such Subsidiary on or after the date of the Qualifying Termination shall be payable in accordance with the terms of each such plan, policy, practice, program, contract or agreement, as the case may be, except as explicitly modified by this Agreement.

5.    Full Settlement.    The Company's obligation to make the payments provided for in, and otherwise to perform its obligations under, this Agreement shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced, regardless of whether the Executive obtains other employment.

6.    Certain Additional Payments by the Company.

        (a)    Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereon) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

        (b)   Subject to the provisions of paragraph (c) of this Section 6, all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by one of the major internationally recognized certified public accounting firms (commonly referred to, as of the date hereof, as a Big Four firm) designated by the Executive and approved by the Company (which approval shall not be unreasonably withheld) (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group affecting the change of control, the Executive shall designate another Big Four accounting firm (subject to the approval of the Company, which approval shall not be unreasonably withheld) to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the

6

Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to paragraph (c) of this Section 6 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

        (c)    The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

          (i)  give the Company any information reasonably requested by the Company relating to such claim,

         (ii)  take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

        (iii)  cooperate with the Company in good faith in order effectively to contest such claim, and

         (iv)  permit the Company to participate in any proceedings relating to such claim;

PROVIDED, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph (c) of Section 6, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; PROVIDED, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and PROVIDED, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

        (d)   If, after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c) of this Section 6, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall promptly take all necessary action to obtain such refund and (subject to the Company's complying with the requirements of paragraph (c) of this Section 6) upon receipt of such refund shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c) of this Section 6, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

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7.    Termination of Agreement.    This Agreement shall remain in effect from the date hereof until the last day of the twenty-fourth calendar month following the date of a Change in Control. Further, upon a Qualifying Termination, this Agreement shall continue until the Company or its successor shall have fully performed all of its obligations thereunder with respect to the Executive, with no future performance being possible. This Agreement may be terminated at any time by the Board with the written consent of the Executive. Notwithstanding the foregoing, this Agreement shall automatically terminate upon cessation of Executive's employment with the Company and its Subsidiaries prior to the Effective Date.

8.    Amendment of Agreement.    This Agreement may be amended at any time by the Board with the written consent of the Executive.

9.    Construction.    Wherever any words are used herein in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply.

10.    Governing Law.    This Agreement shall be governed by the laws of Maryland.

11.    Successors and Assigns.

        (a)    This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

        (b)   This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

        (c)    The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise.

12.    Indemnification.    The Company will pay all reasonable fees and expenses, if any, (including, without limitation, legal fees and expenses) that are incurred by the Executive to enforce this Agreement and that result from a breach of this Agreement by the Company.

13.    Notice.    Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address the Executive has filed in writing with the Company, or in the case of the Company, to its principal offices.

14.    Severability.    The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

15.    Withholding.    Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

16.    Entire Agreement.    Unless otherwise specifically provided in this Agreement, the Executive and the Company acknowledge that this Agreement supersedes any other agreement between them or between the Executive and the Company or a Subsidiary, concerning the subject matter hereof; provided, however, that this Agreement shall not supersede the Employment Agreement made December 20, 2001 referenced in Section 4 of this Agreement but such agreements shall be coordinated as set forth in Section 4 of this Agreement.

17.    Alienability.    The rights and benefits of the Executive under this Agreement may not be anticipated, alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process except as required by law. Any attempt by the Executive to anticipate, alienate, assign, sell, transfer, pledge, encumber or charge the same shall be void. Payments hereunder shall not be considered assets of the Executive in the event of insolvency or bankruptcy.

18.    Counterparts.    This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.

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        IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of the Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

CONSTELLATION ENERGY GROUP, INC.
By:	/s/
/s/ Michael J. Wallace

9

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Exhibit 10(f)

CHANGE IN CONTROL SEVERANCE AGREEMENT

EX-12.(A)

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Exhibit 12(a)

CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

		9 Months Ended		Twelve Months Ended
		September 2004		December 2003		December 2002		December 2001		December 2000		December 1999
		(In millions)
Income from Continuing Operations (Before Extraordinary Loss, Cumulative Effects of Changes in Accounting Principles and Loss from Discontinued Operations)		$	454.0	$	475.7	$	525.6	$	82.4	$	345.3	$	326.4
Taxes on Income, Including Tax Effect for BGE Preference Stock Dividends			124.5		261.0		301.0		29.7		221.4		182.5
Adjusted Income		$	578.5	$	736.7	$	826.6	$	112.1	$	566.7	$	508.9
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness	$	242.2	$	329.3	$	270.2	$	226.1	$	261.5	$	245.7
	Earnings Required for BGE Preference Stock Dividends		16.2		21.7		21.8		21.4		21.9		21.0
	Capitalized Interest		7.4		12.2		42.5		55.8		21.1		2.7
	Interest Factor in Rentals		3.1		3.5		2.1		2.0		2.2		1.8
	Total Fixed Charges	$	268.9	$	366.7	$	336.6	$	305.3	$	306.7	$	271.2
Amortization of Capitalized Interest		$	2.8	$	3.1	$	1.3	$	0.1	$	—	$	—
Earnings (1)		$	842.8	$	1,094.3	$	1,122.0	$	361.7	$	852.3	$	777.4
Ratio of Earnings to Fixed Charges			3.13		2.98		3.33		1.18		2.78		2.87

(1)

Earnings are deemed to consist of income from continuing operations (before extraordinary loss, cumulative effects of changes in accounting principles, and loss from discontinued operations) 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 (including the amortization of capitalized interest but excluding the capitalization of interest).

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Exhibit 12(a)

CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

EX-12.(B)

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Exhibit 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

		9 Months Ended		12 Months Ended
		September 2004		December 2003		December 2002		December 2001		December 2000		December 1999
		(In Millions of Dollars)
Income from Continuing Operations (Before Extraordinary Loss)		$	132.6	$	163.2	$	143.1	$	97.3	$	143.5	$	328.4
Taxes on Income			84.8		105.2		93.3		60.3		94.2		182.0
Adjusted Income		$	217.4	$	268.4	$	236.4	$	157.6	$	237.7	$	510.4
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness	$	73.6	$	112.8	$	142.1	$	158.8	$	186.8	$	206.4
	Capitalized Interest		—		—		—		—		—		0.4
	Interest Factor in Rentals		0.4		0.7		0.5		0.7		0.9		1.0
	Total Fixed Charges	$	74.0	$	113.5	$	142.6	$	159.5	$	187.7	$	207.8
Preferred and Preference
	Dividend Requirements: (1)
	Preferred and Preference Dividends	$	9.9	$	13.2	$	13.2	$	13.2	$	13.2	$	13.5
	Income Tax Required		6.3		8.6		8.6		8.2		8.7		7.5
	Total Preferred and Preference Dividend Requirements	$	16.2	$	21.8	$	21.8	$	21.4	$	21.9	$	21.0
Total Fixed Charges and Preferred and Preference Dividend Requirements		$	90.2	$	135.3	$	164.4	$	180.9	$	209.6	$	228.8
Earnings (2)		$	291.4	$	381.9	$	379.0	$	317.1	$	425.4	$	717.8
Ratio of Earnings to Fixed Charges			3.94		3.36		2.66		1.99		2.27		3.45
Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements			3.23		2.82		2.31		1.75		2.03		3.14

(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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Exhibit 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

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: November 8, 2004

/s/  MAYO A. SHATTUCK III Chairman of the Board, President and Chief Executive Officer

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Exhibit 31(a)

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: November 8, 2004

/s/  E. FOLLIN SMITH Executive Vice President and Chief Financial Officer

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Exhibit 31(b)

CONSTELLATION ENERGY GROUP, INC. CERTIFICATION

EX-31.(C)

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Exhibit 31(c)

BALTIMORE GAS AND ELECTRIC COMPANY

CERTIFICATION

I, Kenneth W. DeFontes, Jr., 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: November 8, 2004

/s/  KENNETH W. DEFONTES, JR. President and Chief Executive Officer

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Exhibit 31(c)

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: November 8, 2004

/s/  E. FOLLIN SMITH Senior Vice President and Chief Financial Officer

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Exhibit 31(d)

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, President and Chief Executive 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 September 30, 2004 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, President and
Chief Executive Officer

Date: November 8, 2004

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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

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, Executive 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 September 30, 2004 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
Executive Vice President and
Chief Financial Officer

Date: November 8, 2004

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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

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, Kenneth W. DeFontes, Jr., 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 September 30, 2004 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/  KENNETH W. DEFONTES, JR. Kenneth W. DeFontes, Jr.
President and Chief Executive Officer

Date: November 8, 2004

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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

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 September 30, 2004 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: November 8, 2004

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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