UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

  For the quarterly period ended March 31, 2002

OR

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

Commission file number 1-1405

DELMARVA POWER & LIGHT COMPANY

(Exact name of registrant as specified in its charter)

Delaware and Virginia	51-0084283
(States of incorporation)	(I.R.S. Employer Identification No.)

800 King Street, P.O. Box 231, Wilmington, Delaware	19899
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code  302-429-3018

Indicate by check mark whether the registrant (1) has 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

All 1,000 issued and outstanding shares of Delmarva Power & Light Company common stock, $2.25 per share par value, are owned by Conectiv.

DELMARVA POWER & LIGHT COMPANY

TABLE OF CONTENTS

		Page No.
Part I.    Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Income for the three months ended March 31, 2002 and March 31, 2001	1
	Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001	2-3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2002, and March 31, 2001	4
	Notes to Consolidated Financial Statements	5-7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8-12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Part II.    Other Information
Item 6.	Exhibits and Reports on Form 8-K	13
Signature		14

Part 1.    FINANCIAL INFORMATION

Item 1.    Financial Statements

DELMARVA POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31,
	2002			2001
OPERATING REVENUES
Electric	$	237,161		$	260,643
Gains on sales of electric generating plants		11,600			—
Gas		72,177			102,535
Other services		2,674			5,744
		323,612			368,922
OPERATING EXPENSES
Electric fuel and purchased energy and capacity		149,661			139,963
Gas purchased		52,430			79,731
Other services' cost of sales		2,260			5,354
Operation and maintenance		43,684			26,673
Depreciation and amortization		20,906			26,643
Taxes other than income taxes		8,958			8,953
		277,899			287,317
OPERATING INCOME		45,713			81,605
OTHER INCOME		2,359			3,149
INTEREST EXPENSE
Interest charges		11,331			17,758
Allowance for borrowed funds used during construction and capitalized interest		(137	)		(162	)
		11,194			17,596
PREFERRED DIVIDEND REQUIREMENT ON PREFERRED SECURITIES OF A SUBSIDIARY TRUST		1,422			1,422
INCOME BEFORE INCOME TAXES		35,456			65,736
INCOME TAXES		14,601			26,803
NET INCOME		20,855			38,933
DIVIDENDS ON PREFERRED STOCK		409			1,300
EARNINGS APPLICABLE TO COMMON STOCK	$	20,446		$	37,633

See accompanying Notes to Consolidated Financial Statements.

1

DELMARVA POWER & LIGHT COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	March 31, 2002		December 31, 2001
ASSETS
Current Assets
Cash and cash equivalents	$	202,132	$	174,876
Accounts receivable, net of allowances of $17,953 and $17,270, respectively		197,626		187,309
Inventories, at average cost
Fuel (coal, oil and gas)		5,044		16,353
Materials and supplies		14,704		13,636
Prepayments		40,050		35,154
Deferred energy supply costs		2,102		25,525
		461,658		452,853
Investments		4,930		5,192
Property, Plant and Equipment
Electric transmission and distribution		1,532,669		1,510,640
Gas transmission and distribution		294,630		291,053
Other electric and gas facilities		167,569		167,612
Other property, plant and equipment		5,231		5,231
		2,000,099		1,974,536
Less: Accumulated depreciation		783,904		770,287
Net plant in service		1,216,195		1,204,249
Construction work-in-progress		69,726		76,718
Goodwill, net		48,459		48,459
		1,334,380		1,329,426
Deferred Charges and Other Assets
Regulatory assets
Deferred recoverable stranded costs		64,991		65,702
Other regulatory assets		49,601		53,702
Prepaid employee benefits costs		193,168		192,181
Unamortized debt expense		9,753		10,084
Other		1,873		2,586
		319,386		324,255
Total Assets	$	2,120,354	$	2,111,726

See accompanying Notes to Consolidated Financial Statements.

2

DELMARVA POWER & LIGHT COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	March 31, 2002		December 31, 2001
CAPITALIZATION AND LIABILITIES
Current Liabilities
Long-term debt due within one year	$	47,961	$	75,461
Variable rate demand bonds		104,830		104,830
Accounts payable		61,319		64,407
Accounts payable to affiliated companies		24,996		20,002
Taxes accrued		167,091		119,231
Interest accrued		14,334		11,093
Other		62,275		79,348
		482,806		474,372
Deferred Credits and Other Liabilities
Deferred income taxes, net		288,328		290,319
Deferred investment tax credits		14,268		14,504
Above-market purchased energy contracts and other electric restructuring liabilities		63,611		68,711
Other		13,774		16,258
		379,981		389,792
Capitalization
Common stock, $2.25 par value; 1,000,000 shares authorized; 1,000 shares outstanding		2		2
Additional paid-in-capital		213,405		213,405
Retained earnings		374,768		364,871
Total common stockholder's equity		588,175		578,278
Preferred stock not subject to mandatory redemption		29,583		29,583
Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely company debentures		70,000		70,000
Long-term debt		569,809		569,701
		1,257,567		1,247,562
Commitments and Contingencies (Note 7)
Total Capitalization and Liabilities	$	2,120,354	$	2,111,726

See accompanying Notes to Consolidated Financial Statements.

3

DELMARVA POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31,
	2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	20,855		$	38,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,942			26,670
Deferred income taxes, net		(3,169	)		3,556
Investment tax credit adjustments, net		(236	)		(556	)
Deferred energy supply costs		23,423			(7,103	)
Net change in:
Accounts receivable		(10,317	)		48,351
Inventories		10,241			3,976
Accounts payable		(7,905	)		(7,119	)
Taxes accrued		47,860			21,730
Other current assets and liabilities(1)		(2,981	)		(9,730	)
Other, net		(6,692	)		(8,644	)
Net cash provided by operating activities		92,021			110,064
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(21,619	)		(20,552	)
Other, net		284			330
Net cash used by investing activities		(21,335	)		(20,222	)
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid		(14,371	)		(5,960	)
Preferred dividends paid		(409	)		(1,261	)
Long-term debt redeemed		(27,500	)		—
Other, net		(1,150	)		(27	)
Net cash used by financing activities		(43,430	)		(7,248	)
Net change in cash and cash equivalents		27,256			82,594
Cash and cash equivalents at beginning of period		174,876			94,604
Cash and cash equivalents at end of period	$	202,132		$	177,198

(1) Other than debt and deferred income taxes classified as current.

See accompanying Notes to Consolidated Financial Statements.

4

DELMARVA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.    Financial Statement Presentation

The consolidated condensed interim financial statements contained herein include the accounts of Delmarva Power & Light Company (DPL) and its wholly owned subsidiary and reflect all adjustments, consisting of only normal recurring adjustments, necessary in the opinion of management for a fair presentation of interim results. In accordance with regulations of the Securities and Exchange Commission (SEC), disclosures that would substantially duplicate the disclosures in DPL’s 2001 Annual Report on Form 10-K have been omitted. Accordingly, DPL’s consolidated condensed interim financial statements contained herein should be read in conjunction with DPL’s 2001 Annual Report on Form 10-K.

As previously reported in Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K, under an Agreement and Plan of Merger, Potomac Electric Power Company (Pepco) will acquire Conectiv, and Conectiv and Pepco will become wholly-owned subsidiaries of Pepco Holdings Inc. (the Conectiv/Pepco Merger). The Maryland Public Service Commission (MPSC) and the Delaware Public Service Commission (DPSC) issued orders on April 11 and 16, 2002, respectively, approving the Conectiv/Pepco Merger. The MPSC and DPSC orders also approved conditions provided for in settlement agreements, which are discussed under “Maryland” and “Delaware” in Note 7 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K. Management currently expects the Conectiv/Pepco Merger to close in the second or third quarter of 2002, subject to timely receipt of various statutory and regulatory approvals.

On April 30, 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt (an amendment of APB Opinion No. 30).” SFAS No. 4 had required that material gains and losses on extinguishment of debt be classified as an extraordinary item. Under SFAS No. 145, SFAS No. 4 is rescinded effective for fiscal years beginning after May 15, 2002. Due to the rescission of SFAS No. 4, it is less likely that a gain or loss on extinguishment of debt would be classified as an extraordinary item in DPL’s Consolidated Statement of Income. Among other things, SFAS No. 145 also amends SFAS No. 13, “Accounting for Leases,” to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions.

Effective January 1, 2002, DPL implemented SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). Under SFAS No. 142, goodwill that has not been included in the rates of a regulated utility subject to SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” is no longer amortized. The portion of goodwill included in regulated utility rates ($16.8 million as of March 31, 2002 and $17.5 million as of December 31, 2001) has been reclassified from goodwill to “other non-current regulatory assets” and continues to be amortized as a regulatory asset.

For the three months ended March 31, 2001, net income was $38.9 million and net income adjusted to exclude the $0.2 million charge for goodwill amortization was $39.1 million.

5

DELMARVA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

DPL’s goodwill balance of $48.5 million as of March 31, 2002 and December 31, 2001 is associated with Conectiv’s Power Delivery business segment. During the first quarter of 2002, Conectiv redefined its business segments. Conectiv’s Power Delivery business segment, which had previously included the operating results for delivering electricity to DPL’s customers now also includes the operating results for supplying electricity to DPL’s customers. As a result, all material aspects of DPL’s operations are conducted in Conectiv’s Power Delivery business segment.

Based on the requirements of SFAS No. 142, DPL is conducting a test for the impairment of goodwill as of January 1, 2001, by comparing the fair value of its Power Delivery business to its book value carrying amount. If the fair value exceeds the book value carrying amount, then no impairment exists under SFAS No. 142, which requires the test be completed by June 30, 2002.

Note 2.    Related Party Transactions

For background information concerning DPL’s contracts with Conectiv Energy Supply, Inc. (CESI) for the purchase of electric energy and capacity, see Note 2 to the Consolidated Financial Statements included in Item 8 of Part II to DPL’s 2001 Annual Report on Form 10-K.

DPL’s operating expenses and revenues include amounts for transactions with CESI and other Conectiv subsidiaries. DPL purchased electric energy and capacity from CESI in the amounts of $137.3 million during the first quarter of 2002 and $7.9 million during the first quarter of 2001. DPL also leased certain assets to other Conectiv subsidiaries and operating revenues included $2.3 million for the first quarter of 2002 and $5.5 million for the first quarter of 2001 for these transactions.

Note 3.    Supplemental Cash Flow Information

	Three Months Ended March 31,
	2002			2001
	(Dollars in thousands)
Cash paid (received) for:
Interest, net of amounts capitalized	$	7,099		$	13,861
Income taxes, net of refunds	$	(25,931	)	$	360

Note 4.    Income Taxes

The amounts computed by multiplying “Income before income taxes” by the federal statutory rate is reconciled in the table below to income tax expense on continuing operations.

	Three Months Ended March 31,
	2002					2001
	Amount			Rate		Amount			Rate
	(Dollars in Thousands)
Statutory federal income tax expense	$	12,410		35	%	$	23,008		35	%
State income taxes, net of federal benefit		1,916		5			3,625		6
Depreciation		500		1			770		1
Amortization of investment tax credits		(236	)	—			(556	)	(1	)
Other, net		11		—			(44	)	—
Income tax expense	$	14,601		41	%	$	26,803		41	%

6

DELMARVA POWER & LIGHT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 5.    Adjustment to the 2001 Gain on Sales of Electric Generating Plants

As disclosed in Note 8 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K, DPL realized a gain during the second quarter of 2001 on the sale of ownership interests in fossil fuel-fired electric generating plants (954 megawatts of capacity), including the Indian River plant. The gain in the second quarter of 2001 was recorded net of estimated selling expenses, including anticipated environmental clean-up costs for the Indian River electric generating plant. In the first quarter of 2002, DPL reached an agreement with an insurer to settle DPL’s insurance claim for environmental clean-up costs associated with the Indian River electric generating plant. Due to DPL’s insurance claim settlement and revised estimates of certain selling expenses, the estimated 2001 gain on the sale of the plants was increased by $11.6 million before income taxes ($6.9 million after income taxes) in the first quarter of 2002 and is included in operating revenues.

Note 6.    Debt

On February 1, 2002, DPL redeemed $27.5 million of First Mortgage Bonds, due February 1, 2022.

Note 7.    Contingencies

DPL is subject to regulation with respect to the environmental effect of its operations, including air and water quality control, solid and hazardous waste disposal, and limitation on land use by various federal, regional, state, and local authorities. Federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or uncontrolled hazardous waste sites. Costs may be incurred to clean up facilities found to be contaminated due to past disposal practices. DPL’s liability for clean-up costs is affected by the activities of these governmental agencies and private land-owners, the nature of past disposal practices, the activities of others (including whether they are able to contribute to clean-up costs), and the scientific and other complexities involved in resolving clean up-related issues (including whether DPL or a corporate predecessor is responsible for conditions on a particular parcel).

DPL is currently a potentially responsible party at three federal superfund sites. At one of these sites, DPL has resolved its liability for clean up costs through a de minimis settlement with the government. At this site, DPL may be liable for a claim by the state or federal government for natural resource damages. DPL also is alleged to be a third-party contributor at three other federal superfund sites. In addition, DPL has two former coal gasification sites in Delaware and one former coal gasification site in Maryland, each of which is a state superfund site. Also, the Delaware Department of Natural Resources and Environmental Control (DNREC) notified DPL in 1998 that it is a potentially responsible party liable for clean-up of the Wilmington Public Works Yard as a former owner of the property. DPL’s current liabilities included $14.3 million as of March 31, 2002 ($14.5 million as of December 31, 2001) for clean-up and other potential costs related to these sites. The accrued liability as of March 31, 2002 includes $10.8 million for remediation and other costs associated with environmental contamination that resulted from an oil release at the Indian River power plant (which was sold on June 22, 2001) and reflects the terms of a related consent agreement reached with DNREC during 2001. DPL does not expect such future costs to have a material effect on DPL’s financial position or results of operations.

7

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (Litigation Reform Act) provides a “safe harbor” for forward-looking statements to encourage such disclosures without the threat of litigation, provided those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements have been made in this report. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. When used herein, the words “intend,” “will,” “anticipate,” “estimate,” “expect,” “believe,” and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: the effects of deregulation of electricity generation, including the unbundling of delivery services; the ability to purchase power on acceptable terms; volatility in market demand and prices for energy, capacity, and fuel; changes in weather and economic conditions affecting energy usage; competition; asset sales; energy sales retention and growth; federal and state regulatory actions and legislation affecting the energy industry; future litigation results; costs of construction; operating restrictions; effects of environmental regulations on operations and construction; and interest rate fluctuations and credit market concerns. DPL undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing list of factors pursuant to the Litigation Reform Act should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made prior to the effective date of the Litigation Reform Act.

Earnings Results Summary

Earnings applicable to common stock decreased $17.2 million to $20.4 million for the first quarter of 2002, from $37.6 million for the first quarter of 2001. In the second quarter of 2001, gains on sales of electric generating plants were recorded net of estimated selling expenses, including anticipated environmental clean-up costs for the Indian River electric generating plant. Due to an insurance claim settlement for environmental clean-up costs and revised estimates of certain other selling expenses, earnings for the first quarter of 2002 included a $6.9 million after-tax gain for an adjustment to the second quarter 2001 gains on sales of electric generating plants. Earnings for the first quarter of 2001 included a $9.8 million after-tax gain from termination of DPL’s membership in a nuclear mutual insurance company, as discussed in Note 9 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K.

After adjusting earnings to exclude the $6.9 million and $9.8 million gains in the first quarter of 2002 and the first quarter of 2001, respectively, earnings decreased $14.3 million primarily due to warmer winter weather, which resulted in lower retail customer usage of electricity and gas for space heating purposes. The cost of replacing the electricity produced by DPL’s electric generating plants that were sold in the second quarter of 2001 also contributed to the earnings decrease. Lower interest expense mitigated the earnings decrease.

8

Regulatory Matters

As previously reported in Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K, under an Agreement and Plan of Merger, Potomac Electric Power Company (Pepco) will acquire Conectiv, and Conectiv and Pepco will become wholly-owned subsidiaries of Pepco Holdings Inc. (the Conectiv/Pepco Merger). The MPSC and the DPSC issued orders on April 11 and 16, 2002, respectively, approving the Conectiv/Pepco Merger. The MPSC and DPSC orders also approved conditions provided for in settlement agreements, which are discussed under “Maryland” and “Delaware” in Note 7 to the Consolidated Financial Statements included in Item 8 of Part II of DPL’s 2001 Annual Report on Form 10-K. Management currently expects the Conectiv/Pepco Merger to close in the second or third quarter of 2002, subject to timely receipt of various statutory and regulatory approvals.

Related Party Transactions

For background information concerning DPL’s contracts with CESI for the purchase of electric energy and capacity, see Note 2 to the Consolidated Financial Statements included in Item 8 of Part II to DPL’s 2001 Annual Report on Form 10-K.

DPL’s operating expenses and revenues include amounts for transactions with CESI and other Conectiv subsidiaries. DPL purchased electric energy and capacity from CESI in the amounts of $137.3 million during the first quarter of 2002 and $7.9 million during the first quarter of 2001. DPL also leased certain assets to other Conectiv subsidiaries and operating revenues included $2.3 million for the first quarter of 2002 and $5.5 million for the first quarter of 2001 for these transactions.

Electric Revenues

Electric revenues decreased by $23.4 million to $237.2 million for the first quarter of 2002, from $260.6 million for the first quarter of 2001 due to the following: (i) an $8.6 million retail revenue decrease from lower retail sales due to warmer winter weather, (ii) a $1.9 million increase in retail revenues due to customers returning to DPL from alternative suppliers, and (iii) a $16.7 million decrease in revenues from interchange and resale sales, mainly due to the sale of DPL’s electric generating plants and warmer winter weather.

The gross margin earned from total electric revenues is equal to electric revenues less “electric fuel and purchased energy and capacity.” The gross margin earned from electric revenues decreased $33.2 million to $87.5 million for the first quarter of 2002, from $120.7 million for the first quarter of 2001. The $33.2 million decrease in gross margin was attributed to the unfavorable revenue variances discussed above and the cost of replacing the electricity produced by DPL’s electric generating plants that were sold in the second quarter of 2001.

Gas Revenues

	Three Months Ended March 31,
	2002		2001
	(Dollars in millions)
Regulated gas revenues	$	63.6	$	72.1
Non-regulated gas revenues		8.6		30.4
Total gas revenues	$	72.2	$	102.5

9

The table above shows the amounts of gas revenues earned from sources which were subject to price regulation (regulated) and which were not subject to price regulation (non-regulated). DPL’s on-system sales and transportation of natural gas are generally subject to price regulation.

The gross margin (gas revenues less gas purchased) from total gas revenues decreased $3.1 million to $19.7 million for the first quarter of 2002, from $22.8 million for the first quarter of 2001. The decrease was mainly due to a lower margin from regulated gas deliveries, which reflected lower volume.

“Regulated gas revenues” decreased by $8.5 million to $63.6 million for the first quarter of 2002, from $72.1 million for the first quarter of 2001. The $8.5 million revenue decrease was primarily due to a lower volume of natural gas sold to retail customers due to warmer winter weather.

“Non-regulated gas revenues” decreased by $21.8 million to $8.6 million for the first quarter of 2002, from $30.4 million for the first quarter of 2001. The revenue decrease was mainly due to reduced off-system sales opportunities due to the warmer winter weather. The gross margin earned from non-regulated gas revenues was insignificant and the decrease in revenues had little effect on earnings.

Operating Expenses

    Electric Fuel and Purchased Energy and Capacity

“Electric fuel and purchased energy and capacity” increased by $9.7 million to $149.7 million for the first quarter of 2002, from $140.0 million for the first quarter of 2001. This increase was primarily due to the cost of replacing the electricity produced by DPL’s electric generating plants that were sold in the second quarter of 2001, partly offset by a decrease in energy costs associated with lower volumes of electricity supplied to utility customers.

    Gas Purchased

Gas purchased decreased by $27.3 million to $52.4 million for the first quarter of 2002, from $79.7 million for the first quarter of 2001. This decrease was attributed to a lower volume of gas purchased due to the reduction in demand attributed to warmer winter weather.

    Operation and Maintenance Expenses

Operation and maintenance expenses increased $17.0 million for the first quarter of 2002, mainly due to $16.3 million received by DPL in the first quarter of 2001 for termination of its membership in a nuclear mutual insurance company, higher pension and other postretirement benefits expense, and other increases, partly offset by decreases from the sale of electric generating plants during the second quarter of 2001.

    Depreciation and Amortization

Depreciation and amortization expenses decreased $5.7 million for the first quarter of 2002 primarily due to the sale of electric generating plants during the second quarter of 2001.

Income Taxes

Income taxes decreased $12.2 million for the first quarter of 2002 mainly due to lower income before income taxes.

10

Liquidity and Capital Resources

Due to $92.0 million of cash provided by operating activities, $21.3 million of cash used by investing activities, and $43.4 million of cash used by financing activities, cash and cash equivalents increased by $27.3 million during the first quarter of 2002.

The net cash provided by operating activities decreased by $18.0 million to $92.0 million for the first quarter of 2002, from $110.1 million for the first quarter of 2001. The decrease in cash flow was primarily due to lower revenues and the sale of the electric generating plants which caused more electricity to be purchased. Also, cash flow in the first quarter of 2001 had benefited from the collection of accounts receivable associated with discontinued competitive retail energy activities.

DPL’s capital expenditures during the first quarter of 2002 of $21.6 million were primarily for the electric transmission and distribution systems of DPL.

The $43.4 million of net cash used by financing activities for the first quarter of 2002 included $14.4 million of dividends on common stock paid to Conectiv, $0.4 million of dividends paid to preferred stockholders, redemption of $27.5 million of First Mortgage Bonds (due February 1, 2022), and $1.1 million of other miscellaneous uses.

DPL’s capital structure expressed as a percentage of total capitalization, is shown below as of March 31, 2002, and December 31, 2001.

	March 31, 2002		December 31, 2001
Common stockholder’s equity	41.7	%	40.5	%
Preferred stock	2.1	%	2.1	%
Preferred trust securities	5.0	%	4.9	%
Long-term debt and variable rate demand bonds	47.8	%	47.2	%
Current maturities of long-term debt	3.4	%	5.3	%

DPL’s ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred dividends under the SEC Methods are shown below. See Exhibit 12-A, Ratio of Earnings to Fixed Charges, and Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends, for additional information.

	3 Months Ended March 31, 2002	Year Ended December 31,
		2001	2000	1999	1998	1997
Ratio of Earnings to Fixed Charges (SEC Method)	3.58	5.74	3.47	3.65	2.92	2.83
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (SEC Method)	3.41	5.28	3.20	3.37	2.72	2.63

11

On May 8, 2002, Moody’s Investor Service (Moody’s) issued a press release confirming the securities ratings of DPL. The ratings confirmation makes the assumption that the Conectiv/Pepco Merger will occur as planned.

On May 14, 2002, Standard & Poor’s (S&P) issued a press release lowering the corporate credit ratings of DPL and announcing ratings actions for DPL’s securities, some of which include downgrades. S&P stated that the ratings are based upon the receipt of the remaining regulatory approvals for the Conectiv/Pepco Merger. S&P also stated that the ratings actions reflect the consolidated credit measures of Pepco and Conectiv and also reflects the expected issuance of additional debt at Pepco Holdings, Inc. to finance the Conectiv/Pepco merger.

The credit ratings assigned to securities of DPL are shown in the table below:

Type of Security	Moody’s	S&P
Corporate credit rating	A3	A-
Senior secured debt	A2	A
Senior unsecured debt	A3	BBB+
Short-term debt	P-1	A-2
Preferred stock	Baa2	BBB
Preferred trust securities	Baa1	BBB

The previous ratings for securities of DPL can be found in Item 7 of Part II of DPL’s 2001 Annual Report on Form 10-K. Securities ratings are not a recommendation to buy, sell or hold securities. Ratings are subject to revision or withdrawal at any time by the respective rating agencies. Each rating should be evaluated independently of any other rating. Changes in credit ratings could affect DPL’s cost of capital and access to capital markets.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

As previously disclosed under “Quantitative and Qualitative Disclosures About Market Risk” beginning on page II-13 to DPL’s 2001 Annual Report on Form 10-K, DPL is subject to certain market risks. There were no material changes in DPL’s level of market risks as of March 31, 2002 compared to December 31, 2001.

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PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K

(a)  Exhibits

Exhibit 12-A, Ratio of Earnings to Fixed Charges

Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends

(b)  Reports on Form 8-K

None.

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SIGNATURE

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

DELMARVA POWER & LIGHT COMPANY (Registrant)
By:	/s/    JOHN C. VAN RODEN
	John C. van Roden, Senior Vice President and Chief Financial Officer

Date:    May 15, 2002

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