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Related Party Transactions

6 Months Ended

Jun. 30, 2011

Related Party Transactions

Constellation Energy

CENG

We have a unit contingent power purchase agreement (PPA) with CENG under which we will purchase between 85-90% of the output of CENG's nuclear plants that is not sold to third parties under pre-existing PPAs through 2014. Beginning on January 1, 2015 and continuing to the end of the life of the respective plants, we will purchase 50.01% of the output of CENG's nuclear plants, and EDF will purchase 49.99% of that output.

In addition to the PPA, we have a power services agency agreement (PSA) and an administrative service agreement (ASA) with CENG. The PSA is a five-year agreement under which we will provide scheduling, asset management and billing services to CENG and recognize average annual revenue of approximately $16 million. The ASA expires in 2017 and under the agreement we provide certain administrative services to CENG including back office, human resources and information technology. The ASA includes both a consumption-based pricing structure as well as a fixed-price structure which are subject to change in future years based on the level of service needed. The fixed price fee for 2011 is approximately $48 million and will increase annually in line with inflation. The charges under this agreement are intended to represent the actual cost of the services provided to CENG by us.

The impact of transactions under these agreements is summarized below:

	Increase (Decrease) in Earnings																At December 31, 2010 Accounts Receivable/ (Accounts Payable)

	Increase (Decrease) in Earnings													At June 30, 2011 Accounts Receivable/ (Accounts Payable)
	Quarter Ended June 30,						Six Months Ended June 30,
	Quarter Ended June 30,						Six Months Ended June 30,						Income Statement Classification
Agreement	2011			2010			2011			2010			Income Statement Classification

PPA	$	(209.3	)	$	(222.1	)	$	(404.1	)	$	(420.6	)	Fuel and purchased energy expenses	$	(46.5	)	$	(47.6	)
PSA		4.0			4.0			8.0			8.0		Nonregulated revenues		—			—
ASA		12.0			16.5			24.0			33.0		Operating expenses		4.0			5.5

In May 2011, CENG issued an unsecured revolving promissory note to borrow up to an aggregate principal amount of $62.5 million from a subsidiary of Constellation Energy. CENG also issued a promissory note with EDF on substantially identical terms, such that any request for borrowings by CENG must be submitted 50% to Constellation Energy and 50% to EDF.

Interest accrues on the amounts borrowed on a daily basis at a fixed rate per year equal to the rate at which deposits of United States dollars are offered by prime banks in the London interbank market, plus 250 basis points. Amounts are due at the earlier of October 31, 2012 or the date upon which the note is accelerated in accordance with the terms of the agreement.

As of June 30, 2011, CENG has borrowed $15.0 million from Constellation Energy.

In June 2011, CENG executed a settlement agreement with the DOE under which Constellation Energy will receive payment of $35.5 million related to costs incurred through October 31, 2008 to store spent nuclear fuel at the Calvert Cliffs nuclear power plant. As a result, we recorded $35.5 million as an amount due from CENG in "Accounts receivable" on our Consolidated Balance Sheets. We discuss this settlement in more detail on page 12.

BGE—Income Statement

BGE is obligated to provide market-based standard offer service to all of its electric customers for varying periods. Bidding to supply BGE's market-based standard offer service to electric customers will occur from time to time through a competitive bidding process approved by the Maryland PSC.

Our NewEnergy business will supply a portion of BGE's market-based standard offer service obligation to electric customers through September 30, 2013.

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

	Quarter Ended June 30,				Six Months Ended June 30,

	2011		2010		2011		2010

	(In millions)
Purchased energy	$	73.2	$	114.6	$	129.9	$	238.6

In addition, Constellation Energy charges BGE for the costs of certain corporate functions. Certain costs, both capital and expense, are directly assigned to BGE. We allocate other corporate function costs based on a total percentage of expected use by BGE. We believe this method of allocation is reasonable and approximates the cost BGE would have incurred as an unaffiliated entity.

The following table presents all of the costs Constellation Energy charged to BGE in each period, both directly-charged and allocated.

	Quarter Ended June 30,				Six Months Ended June 30,

	2011		2010		2011		2010

	(In millions)
Charges to BGE	$	44.3	$	42.3	$	91.8	$	78.5

Other nonregulated affiliates of BGE also charge BGE for the costs of certain services provided.

BGE—Balance Sheet

BGE's Consolidated Balance Sheets include intercompany amounts related to 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, Constellation Energy and its nonregulated affiliates' charges to BGE, and the participation of BGE's employees in the Constellation Energy defined benefit plans.

- Definition

This element may be used for the entire related party transactions disclosure as a single block of text. Disclosure may include: the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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