10-Q

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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 March 31, 2008

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 a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a smaller
reporting company) Smaller reporting company o

         Indicate by check mark whether Baltimore Gas and Electric Company is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer ý
(Do not check if a smaller
reporting company) Smaller reporting company o

         Indicate by check mark whether Constellation Energy Group, Inc. is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o        No ý

         Indicate by check mark whether Baltimore Gas and Electric Company is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o        No ý

Common Stock, without par value 178,381,136 shares outstanding
of Constellation Energy Group, Inc. on April 30, 2008.

         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

			Page
Part I—Financial Information
	Item 1—Financial Statements
		Constellation Energy Group, Inc. and Subsidiaries
		Consolidated Statements of Income	3
		Consolidated Statements of Comprehensive Income	3
		Consolidated Balance Sheets	4
		Consolidated Statements of Cash Flows	6
		Baltimore Gas and Electric Company and Subsidiaries
		Consolidated Statements of Income	7
		Consolidated Balance Sheets	8
		Consolidated Statements of Cash Flows	10
		Notes to Consolidated Financial Statements	11
	Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations
		Introduction and Overview	24
		Business Environment	24
		Events of 2008	25
		Results of Operations	26
		Financial Condition	38
		Capital Resources	39
	Item 3—Quantitative and Qualitative Disclosures About Market Risk		44
	Items 4 and 4(T)—Controls and Procedures		44
Part II—Other Information
	Item 1—Legal Proceedings		45
	Item 1A—Risk Factors		45
	Item 2—Issuer Purchases of Equity Securities		46
	Item 5—Other Information		47
	Item 6—Exhibits		48
	Signature		49

2

PART 1—FINANCIAL INFORMATION

Item 1—Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

		Three Months Ended March 31,
		2008			2007
		(In millions, except per share amounts)
Revenues
	Nonregulated revenues	$	3,726.9		$	4,193.8
	Regulated electric revenues		709.3			514.8
	Regulated gas revenues		391.0			402.5
	Total revenues		4,827.2			5,111.1
Expenses
	Fuel and purchased energy expenses		3,743.1			4,016.7
	Operating expenses		590.1			568.7
	Depreciation, depletion, and amortization		148.3			132.4
	Accretion of asset retirement obligations		16.6			17.7
	Taxes other than income taxes		74.8			73.2
	Total expenses		4,572.9			4,808.7
Income from Operations			254.3			302.4
Other Income, primarily interest income			42.3			42.4
Fixed Charges
	Interest expense		78.8			80.3
	Interest capitalized and allowance for borrowed funds used during construction		(7.1	)		(3.8	)
	BGE preference stock dividends		3.3			3.3
	Total fixed charges		75.0			79.8
Income from Continuing Operations Before Income Taxes			221.6			265.0
Income Tax Expense			75.9			67.7
Income from Continuing Operations			145.7			197.3
	Loss from discontinued operations, net of income taxes of $0.8		—			(1.6	)
Net Income		$	145.7		$	195.7
Earnings Applicable to Common Stock		$	145.7		$	195.7
Average Shares of Common Stock Outstanding—Basic			178.2			180.6
Average Shares of Common Stock Outstanding—Diluted			180.2			182.8
Earnings Per Common Share from Continuing Operations—Basic		$	0.82		$	1.09
	Loss from discontinued operations		—			(0.01	)
Earnings Per Common Share—Basic		$	0.82		$	1.08
Earnings Per Common Share from Continuing Operations—Diluted		$	0.81		$	1.08
	Loss from discontinued operations		—			(0.01	)
Earnings Per Common Share—Diluted		$	0.81		$	1.07
Dividends Declared Per Common Share		$	0.4775		$	0.435

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Constellation Energy Group, Inc. and Subsidiaries

				Three Months Ended March 31,
				2008			2007
				(In millions)
Net Income				$	145.7		$	195.7
	Other comprehensive income (OCI)
		Hedging instruments:
			Reclassification of net loss on hedging instruments from OCI to net income, net of taxes		177.0			399.4
			Net unrealized gain on hedging instruments, net of taxes		361.6			310.3
		Available-for-sale securities:
			Reclassification of net gain on sales of securities from OCI to net income, net of taxes		(0.3	)		(0.9	)
			Net unrealized loss on securities, net of taxes		(45.1	)		(19.5	)
		Defined benefit obligations:
			Amortization of net actuarial loss, prior service cost, and transition obligation included in net periodic benefit cost, net of taxes		5.1			6.3
		Net unrealized (loss) gain on foreign currency, net of taxes			(2.5	)		0.3
Comprehensive Income				$	641.5		$	891.6

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

			March 31, 2008*			December 31, 2007
			(In millions)
Assets
	Current Assets
		Cash and cash equivalents	$	662.6		$	1,095.9
		Accounts receivable (net of allowance for uncollectibles of $139.3 and $44.9, respectively)		4,560.5			4,289.5
		Fuel stocks		609.2			591.3
		Materials and supplies		208.9			207.5
		Derivative assets		1,843.0			760.6
		Unamortized energy contract assets		86.5			32.0
		Deferred income taxes		—			300.7
		Other		445.7			408.1
		Total current assets		8,416.4			7,685.6
Investments and Other Noncurrent Assets
		Nuclear decommissioning trust funds		1,274.4			1,330.8
		Other investments		541.1			542.2
		Regulatory assets (net)		548.6			576.2
		Goodwill		261.3			261.3
		Derivative assets		1,472.4			1,030.2
		Unamortized energy contract assets		194.7			178.3
		Other		366.6			370.6
		Total investments and other noncurrent assets		4,659.1			4,289.6
Property, Plant and Equipment
		Property, plant and equipment		14,605.7			14,138.2
		Nuclear fuel (net of amortization)		347.2			374.3
		Accumulated depreciation		(4,843.7	)		(4,745.4	)
		Net property, plant and equipment		10,109.2			9,767.1
	Total Assets		$	23,184.7		$	21,742.3

* 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

			March 31, 2008*			December 31, 2007
			(In millions)
Liabilities and Equity
	Current Liabilities
		Short-term borrowings	$	—		$	14.0
		Current portion of long-term debt		232.8			380.6
		Accounts payable and accrued liabilities		2,931.8			2,630.1
		Customer deposits and collateral		202.2			146.6
		Derivative liabilities		1,847.4			1,134.3
		Unamortized energy contract liabilities		389.7			392.2
		Deferred income taxes		95.3			—
		Accrued expenses and other		742.0			956.0
		Total current liabilities		6,441.2			5,653.8
	Deferred Credits and Other Noncurrent Liabilities
		Deferred income taxes		1,415.7			1,588.5
		Asset retirement obligations		934.5			917.6
		Derivative liabilities		1,480.3			1,118.9
		Unamortized energy contract liabilities		1,132.2			1,218.6
		Defined benefit obligations		762.3			828.6
		Deferred investment tax credits		48.8			50.5
		Other		167.1			155.9
		Total deferred credits and other noncurrent liabilities		5,940.9			5,878.6
	Long-term Debt, net of current portion			4,686.7			4,660.5
	Minority Interests			19.9			19.2
	BGE Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholders' Equity
		Common stock		2,544.5			2,513.3
		Retained earnings		3,958.3			3,919.5
		Accumulated other comprehensive loss		(596.8	)		(1,092.6	)
		Total common shareholders' equity		5,906.0			5,340.2
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	23,184.7		$	21,742.3

* 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

Three Months Ended March 31,				2008			2007
				(In millions)
Cash Flows From Operating Activities
	Net income			$	145.7		$	195.7
	Adjustments to reconcile to net cash provided by operating activities
		Depreciation, depletion, and amortization			137.6			126.4
		Accretion of asset retirement obligations			16.6			17.7
		Deferred income taxes			(53.7	)		23.2
		Investment tax credit adjustments			(1.6	)		(1.7	)
		Deferred fuel costs			15.9			(173.5	)
		Defined benefit obligation expense			28.8			34.2
		Defined benefit obligation payments			(91.2	)		(138.2	)
		Gains on sale of assets			(21.8	)		—
		Gains on termination of contracts			(65.7	)		—
		Equity in earnings of affiliates (more than) less than dividends received			(3.6	)		15.8
		Derivative power sales contracts classified as financing activities under SFAS No. 149			1.5			1.5
		Changes in
			Accounts receivable		(197.2	)		234.6
			Derivative assets and liabilities		(1.2	)		118.3
			Materials, supplies, and fuel stocks		(19.4	)		155.8
			Other current assets		23.3			(7.4	)
			Accounts payable and accrued liabilities		313.5			(62.6	)
			Other current liabilities		78.3			(196.8	)
			Other		39.3			6.0
	Net cash provided by operating activities				345.1			349.0
Cash Flows From Investing Activities
	Investments in property, plant and equipment				(388.4	)		(272.7	)
	Acquisitions, net of cash acquired				(156.9	)		(212.0	)
	Investments in nuclear decommissioning trust fund securities				(124.7	)		(140.0	)
	Proceeds from nuclear decommissioning trust fund securities				106.0			131.2
	Proceeds from sales of property, plant and equipment				63.8			—
	Increase in restricted funds				(39.3	)		(15.3	)
	Other				(0.6	)		16.1
	Net cash used in investing activities				(540.1	)		(492.7	)
Cash Flows From Financing Activities
	Net repayment of short-term borrowings				(14.0	)		—
	Proceeds from issuance of
		Common stock			3.9			22.1
		Long-term debt			—			10.0
	Repayment of long-term debt				(149.7	)		(126.5	)
	Common stock dividends paid				(79.3	)		(68.5	)
	Reacquisition of common stock				—			(77.6	)
	Proceeds from contract and portfolio acquisitions				—			27.0
	Derivative power sales contracts classified as financing activities under SFAS No. 149				(1.5	)		(1.5	)
	Other				2.3			6.2
	Net cash used in financing activities				(238.3	)		(208.8	)
Net Decrease in Cash and Cash Equivalents					(433.3	)		(352.5	)
Cash and Cash Equivalents at Beginning of Period					1,095.9			2,289.1
Cash and Cash Equivalents at End of Period				$	662.6		$	1,936.6

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 March 31,
			2008			2007
			(In millions)
Revenues
	Electric revenues		$	709.4		$	514.8
	Gas revenues			396.4			407.3
	Total revenues			1,105.8			922.1
Expenses
	Operating expenses
		Electricity purchased for resale		455.3			274.2
		Gas purchased for resale		270.0			284.1
		Operations and maintenance		133.6			123.1
	Depreciation and amortization			62.7			58.9
	Taxes other than income taxes			46.5			45.8
	Total expenses			968.1			786.1
Income from Operations				137.7			136.0
Other Income				8.0			5.2
Fixed Charges
	Interest expense			35.0			28.6
	Allowance for borrowed funds used during construction			(1.0	)		(0.4	)
	Total fixed charges			34.0			28.2
Income Before Income Taxes				111.7			113.0
Income Taxes				35.4			43.7
Net Income				76.3			69.3
Preference Stock Dividends				3.3			3.3
Earnings Applicable to Common Stock			$	73.0		$	66.0

See Notes to Consolidated Financial Statements.

7

CONSOLIDATED BALANCE SHEETS

Baltimore Gas and Electric Company and Subsidiaries

				March 31, 2008*			December 31, 2007
				(In millions)
Assets
	Current Assets
		Cash and cash equivalents		$	30.4		$	17.6
		Accounts receivable (net of allowance for uncollectibles of $21.9 and $20.3, respectively)			397.3			316.7
		Accounts receivable, unbilled (net of allowance for uncollectibles of $0.8 and $0.8, respectively)			178.3			209.5
		Investment in cash pool, affiliated company			41.1			78.4
		Accounts receivable, affiliated companies			3.2			4.2
		Fuel stocks			18.9			98.8
		Materials and supplies			41.0			42.7
		Prepaid taxes other than income taxes			24.8			49.9
		Regulatory assets (net)			61.7			74.9
		Restricted cash			77.9			39.2
		Other			5.8			7.4
		Total current assets			880.4			939.3
	Investments and Other Assets
		Regulatory assets (net)			548.6			576.2
		Receivable, affiliated company			142.3			149.2
		Other			122.8			148.1
		Total investments and other assets			813.7			873.5
	Utility Plant
		Plant in service
			Electric		4,307.7			4,244.4
			Gas		1,192.9			1,181.7
			Common		453.4			456.1
			Total plant in service		5,954.0			5,882.2
		Accumulated depreciation			(2,109.0	)		(2,080.8	)
		Net plant in service			3,845.0			3,801.4
		Construction work in progress			194.4			166.4
		Plant held for future use			2.4			2.4
		Net utility plant			4,041.8			3,970.2
	Total Assets			$	5,735.9		$	5,783.0

* 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

			March 31, 2008*			December 31, 2007
			(In millions)
Liabilities and Equity
	Current Liabilities
		Current portion of long-term debt	$	230.3		$	375.0
		Accounts payable and accrued liabilities		156.1			182.4
		Accounts payable and accrued liabilities, affiliated companies		161.3			164.5
		Customer deposits		86.8			70.5
		Current portion of deferred income taxes		37.9			44.1
		Accrued taxes		68.8			34.4
		Accrued expenses and other		101.4			96.3
		Total current liabilities		842.6			967.2
	Deferred Credits and Other Liabilities
		Deferred income taxes		792.2			785.6
		Payable, affiliated company		245.1			243.7
		Deferred investment tax credits		11.6			11.9
		Other		30.4			33.6
		Total deferred credits and other liabilities		1,079.3			1,074.8
	Long-term Debt
		Rate stabilization bonds		623.2			623.2
		First refunding mortgage bonds		—			119.7
		Other long-term debt		1,189.5			1,214.5
		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 business		25.0			25.0
		Unamortized discount and premium		(2.5	)		(2.6	)
		Current portion of long-term debt		(230.3	)		(375.0	)
		Total long-term debt		1,862.6			1,862.5
	Minority Interest			16.7			16.8
	Preference Stock Not Subject to Mandatory Redemption			190.0			190.0
	Common Shareholder's Equity
		Common stock		912.2			912.2
		Retained earnings		831.8			758.8
		Accumulated other comprehensive income		0.7			0.7
		Total common shareholder's equity		1,744.7			1,671.7
	Commitments, Guarantees, and Contingencies (see Notes)
	Total Liabilities and Equity		$	5,735.9		$	5,783.0

* Unaudited
See Notes to Consolidated Financial Statements.

9

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Baltimore Gas and Electric Company and Subsidiaries

Three Months Ended March 31,				2008			2007
				(In millions)
Cash Flows From Operating Activities
	Net income			$	76.3		$	69.3
	Adjustments to reconcile to net cash provided by (used in) operating activities
		Depreciation and amortization			66.0			62.0
		Deferred income taxes			(6.1	)		58.0
		Investment tax credit adjustments			(0.4	)		(0.4	)
		Deferred fuel costs			15.9			(173.5	)
		Defined benefit plan expenses			9.5			10.1
		Allowance for equity funds used during construction			(1.9	)		(0.7	)
		Changes in
			Accounts receivable		(49.4	)		(84.1	)
			Accounts receivable, affiliated companies		1.0			0.5
			Materials, supplies, and fuel stocks		81.6			83.7
			Other current assets		26.7			39.6
			Accounts payable and accrued liabilities		(26.3	)		(15.8	)
			Accounts payable and accrued liabilities, affiliated companies		(3.2	)		(13.7	)
			Other current liabilities		52.7			1.3
			Long-term receivables and payables, affiliated companies		(1.2	)		(50.0	)
			Other		22.1			12.2
	Net cash provided by (used in) operating activities				263.3			(1.5	)
Cash Flows From Investing Activities
	Utility construction expenditures (excluding equity portion of allowance for funds used during construction)				(114.0	)		(85.4	)
	Change in cash pool at parent				37.3			212.3
	Proceeds from sales of property, plant and equipment				12.9			—
	Increase in restricted funds				(38.7	)		—
	Net cash (used in) provided by investing activities				(102.5	)		126.9
Cash Flows From Financing Activities
	Repayment of long-term debt				(144.7	)		(121.4	)
	Preference stock dividends paid				(3.3	)		(3.3	)
	Net cash used in financing activities				(148.0	)		(124.7	)
Net Increase in Cash and Cash Equivalents					12.8			0.7
Cash and Cash Equivalents at Beginning of Period					17.6			10.9
Cash and Cash Equivalents at End of Period				$	30.4		$	11.6

See Notes to Consolidated Financial Statements.

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 statement of the 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.

Reclassifications

We have reclassified certain prior-period amounts:

•

Revenues for the three months ended March 31, 2007 were increased to reflect the reclassification of $55.7 million from fuel and purchased energy expenses to conform with the current presentation.

•

Derivative assets and liabilities as of December 31, 2007 reflect the adoption of Staff Position FIN No. 39-1, Amendment of FASB Interpretation No. 39, on January 1, 2008. We discuss the adoption of Staff Position No. 39-1 in more detail on page 21.

•

We have separately presented "Restricted cash" that was previously reported within "Other current assets" on BGE's Consolidated Balance Sheet.

Variable Interest Entities

We have a significant interest in the following variable interest entities (VIE) for which we are not the primary beneficiary:

VIE	Nature of Involvement	Date of Involvement
Power projects	Equity investment and guarantees	Prior to 2003
Power contract monetization entities	Power sale agreements, loans, and guarantees	March 2005
Retail power supply	Power sale agreement	September 2006

        We discuss the nature of our involvement with the power contract monetization VIEs in detail in Note 4 of our 2007 Annual Report on Form 10-K.

        The following is summary information available as of March 31, 2008 about the VIEs in which we have a significant interest, but are not the primary beneficiary:

	Power Contract Monetization VIEs		All Other VIEs		Total
	(In millions)
Total assets	$	678.6	$	360.1	$	1,038.7
Total liabilities		535.3		201.6		736.9
Our ownership interest		—		45.0		45.0
Other ownership interests		143.3		113.5		256.8
Our maximum exposure to loss		54.0		148.9		202.9

        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 March 31, 2008 consists of the following:

•

outstanding receivables, loans and letters of credit totaling $155.9 million,

•

the carrying amount of our investment totaling $45.0 million, and

•

debt and performance guarantees totaling $2.0 million.

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

Workforce Reduction Costs

We incurred costs related to workforce reduction efforts initiated in 2006 and 2007. We discuss these costs in more detail in Note 2 of our 2007 Annual Report on Form 10-K.

        The following table summarizes the status of the involuntary severance liability, initiated in 2006, for Nine Mile Point and Calvert Cliffs at March 31, 2008:

	(In millions)
Initial severance liability balance1	$	19.6
Amounts recorded as pension and postretirement liabilities		(7.3	)
Net cash severance liability		12.3
Cash severance payments		(11.2	)
Other		—
Severance liability balance at March 31, 2008	$	1.1

1 The severance liability above includes $1.6 million of costs that the joint owner of Nine Mile Point Unit 2 reimbursed us.

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        The following table summarizes the status of the involuntary severance liability, initiated in 2007, for Nine Mile Point at March 31, 2008:

	(In millions)
Initial severance liability balance1	$	2.6
Amounts recorded as pension and postretirement liabilities		(1.5	)
Net cash severance liability		1.1
Cash severance payments		(0.1	)
Other		(0.1	)
Severance liability balance at March 31, 2008	$	0.9

1 Includes $0.3 million to be reimbursed from co-owner.

Earnings Per Share

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

        Our dilutive common stock equivalent shares consist of stock options and other stock-based compensation awards. The following table presents stock options that were not dilutive and were excluded from the computation of diluted EPS in each period, as well as the dilutive common stock equivalent shares:

	Quarter Ended March 31,
	2008	2007
	(In millions)
Non-dilutive stock options	0.6	—
Dilutive common stock equivalent shares	2.0	2.2

Accretion of Asset Retirement Obligations

We discuss our asset retirement obligations in more detail in Note 1 of our 2007 Annual Report on Form 10-K. The change in our "Asset retirement obligations" liability during 2008 was as follows:

	(In millions)
Liability at January 1, 2008	$	917.6
Accretion expense		16.6
Liabilities incurred		0.3
Liabilities settled		—
Revisions to cash flows		—
Other		—
Liability at March 31, 2008	$	934.5

Asset Acquisition

Hillabee Energy Center

In February 2008, we acquired the Hillabee Energy Center, a partially completed 774MW gas-fired combined cycle power generation facility located in Alabama for $156.9 million (including direct costs), which we accounted for as an asset acquisition. We allocated the purchase price primarily to the equipment with lesser amounts allocated to land and contracts acquired. We plan to complete the construction of this facility and expect it to be ready for commercial operation in early 2010.

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Information by Operating Segment

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

•

Our merchant energy business is nonregulated and includes:

—

full requirements load-serving sales of energy and capacity to utilities, cooperatives, and commercial, industrial, and governmental customers,

—

structured transactions and risk management services for various customers (including hedging of output from generating facilities and fuel costs),

—

deployment of risk capital through portfolio management and trading activities,

—

gas retail energy products and services to commercial, industrial, and governmental customers,

—

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

—

upstream (exploration and production) and downstream (transportation and storage) natural gas operations,

—

coal sourcing and logistics services for the variable or fixed supply needs of global customers, and

—

generation operations and maintenance.



•

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 renewable energy, heating, cooling, and cogeneration facilities for commercial, industrial, and governmental customers throughout North America,

•

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, and

•

develop and deploy new nuclear plants in North America.

        Our Merchant Energy, Regulated Electric, and Regulated Gas reportable segments are strategic businesses based principally upon regulations, products, and services that require different technologies 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)
Quarter ended March 31,
2008
Unaffiliated revenues	$	3,667.8		$	709.3	$	391.0	$	59.1	$	—		$	4,827.2
Intersegment revenues		294.2			0.1		5.4		0.1		(299.8	)		—
Total revenues		3,962.0			709.4		396.4		59.2		(299.8	)		4,827.2
Net income		72.2			33.7		39.4		0.4		—			145.7
2007
Unaffiliated revenues	$	4,119.1		$	514.8	$	402.5	$	74.7	$	—		$	5,111.1
Intersegment revenues		322.9			—		4.8		—		(327.7	)		—
Total revenues		4,442.0			514.8		407.3		74.7		(327.7	)		5,111.1
Loss from discontinued operations		(1.6	)		—		—		—		—			(1.6	)
Net income		120.0			32.2		33.7		9.8		—			195.7

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

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Pension and Postretirement Benefits

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

	Quarter Ended March 31,
	2008			2007
	(In millions)
Components of net periodic pension benefit cost
Service cost	$	15.0		$	12.5
Interest cost		27.5			24.4
Expected return on plan assets		(30.9	)		(26.6	)
Recognized net actuarial loss		5.9			8.0
Amortization of prior service cost		2.9			1.3
Amount capitalized as construction cost		(2.7	)		(3.0	)
Net periodic pension benefit cost1	$	17.7		$	16.6

1 BGE's portion of our net periodic pension benefit cost, excluding amounts capitalized, was $4.5 million in 2008 and $5.2 million in 2007.

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

	Quarter Ended March 31,
	2008			2007
	(In millions)
Components of net periodic postretirement benefit cost
Service cost	$	1.7		$	1.7
Interest cost		6.7			6.2
Amortization of transition obligation		0.5			0.5
Recognized net actuarial loss		1.0			1.4
Amortization of prior service cost		(0.9	)		(0.8	)
Amount capitalized as construction cost		(2.1	)		(2.1	)
Net periodic postretirement benefit cost1	$	6.9		$	6.9

1 BGE's portion of our net periodic postretirement benefit cost, excluding amounts capitalized, was $3.7 million in 2008 and $4.0 million in 2007.

        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 $8.1 million in pension benefit payments for our non-qualified pension plans and approximately $33.9 million for retiree health and life insurance benefit payments during 2008. We contributed $76 million to our qualified pension plans in March 2008.

Financing Activities

Constellation Energy had bank lines of credit under facilities totaling $4.6 billion at March 31, 2008 for short-term financial needs. These facilities can issue letters of credit up to approximately $4.6 billion. Letters of credit issued under all of our facilities totaled $2.6 billion at March 31, 2008.

        BGE had a $400.0 million five-year revolving credit facility expiring in 2011 at March 31, 2008. BGE can borrow directly from the banks, use the facilities to allow commercial paper to be issued or issue letters of credit. As of March 31, 2008, BGE had $1.0 million in letters of credit issued, which results in $399.0 million in unused credit facilities.

Maryland Settlement Agreement

In March 2008, Constellation Energy, BGE and a Constellation Energy affiliate entered into a settlement agreement with the State of Maryland, the Public Service Commission of Maryland (Maryland PSC) and certain State of Maryland officials to resolve pending litigation and to settle other prior legal, regulatory and legislative issues. On April 24, 2008, the Governor of Maryland signed enabling legislation, which will become effective on June 1, 2008. Pursuant to the terms of the settlement agreement:

•

Each party acknowledged that the agreements adopted in 1999 relating to Maryland's electric restructuring law are final and binding and the Maryland PSC will close ongoing proceedings relating to the 1999 settlement.

•

BGE will provide its residential electric customers approximately $187 million in the form of a one-time $170 per customer rate credit by no later than December 31, 2008. We will record the liability and related charge in the second quarter of 2008.

•

BGE customers will be relieved of the potential future liability for decommissioning Constellation Energy's Calvert Cliffs Unit 1 and Unit 2, scheduled to occur no earlier than 2034 and 2036, respectively, and will no longer be obligated to pay a total of $520 million, in 1993 dollars adjusted for inflation, pursuant to the 1999 Maryland PSC order regarding the deregulation of electric generation. BGE will continue to collect $18.7 million annually from all electric customers through 2016 for nuclear decommissioning at Calvert Cliffs and continue to rebate this amount to residential electric customers, as previously required by Senate Bill 1, which had been enacted in June 2006.

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•

BGE will resume collection of the residential return portion of the Provider of Last Resort (POLR) administrative charge, which had been eliminated under Senate Bill 1, from June 1, 2008 through May 31, 2010 without having to rebate it to residential customers. This will total approximately $40 million over this period. This charge will be suspended from June 1, 2010 through December 31, 2016.

•

Any electric distribution base rate case filed by BGE will not result in increased distribution rates prior to October 2009, and any increase in electric distribution revenue awarded will be capped at 5% with certain exceptions. Any subsequent electric distribution base rate case may not be filed prior to August 1, 2010. The agreement does not govern or affect our ability to recover costs associated with gas rates, federally approved transmission rates and charges, electric riders, tax increases or increases associated with standard offer service power supply auctions.

•

Effective June 1, 2008, BGE will implement revised depreciation rates for financial reporting purposes. The revised rates will reduce depreciation expense approximately $22 – $24 million annually.

•

Effective June 1, 2008, Maryland laws governing investments in companies that own and operate regulated gas and electric utilities will be amended to make them less restrictive with respect to certain capital stock acquisition transactions.

•

Constellation Energy will elect two independent directors to the Board of Directors of BGE within six months from the execution of the settlement agreement.

Income Taxes

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 March 31,
		2008			2007
		(In millions)
Income before income taxes (excluding BGE preference stock dividends)		$	224.9		$	268.3
Statutory federal income tax rate			35	%		35	%
Income taxes computed at statutory federal rate			78.7			93.9
(Decreases) increases in income taxes due to:
	Synthetic fuel tax credits flowed through to income		—			(39.7	)
	Synthetic fuel tax credit phase-out		—			11.5
	Synthetic fuel tax credit true-up for prior period flowed through to income		(4.6	)		(7.9	)
	State income taxes, net of federal tax benefit		9.3			11.8
	Other		(7.5	)		(1.9	)
Total income taxes		$	75.9		$	67.7
Effective tax rate			33.7	%		25.3	%

        The increase in our effective tax rate for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007 is primarily due to the absence of synthetic fuel tax credits, which expired at December 31, 2007.

        BGE's effective tax rate was 31.7% for the quarter ended March 31, 2008 compared to 38.7% for the quarter ended March 31, 2007. This reflects the impact of estimated lower 2008 taxable income related to the Maryland settlement agreement, which increased the relative impact of favorable permanent tax adjustments on BGE's effective tax rate.

        In 2007, the State of Maryland increased its corporate tax rate from 7% to 8.25% effective January 1, 2008. As a result, current income taxes for the quarter ended March 31, 2008 were recorded at the new tax rate. Deferred taxes had previously been adjusted to reflect this rate increase at the enactment date in 2007.

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Unrecognized Tax Benefits

The following table summarizes the change in unrecognized tax benefits during 2008 and our total unrecognized tax benefits at March 31, 2008:

At March 31, 2008
	(In millions)
Total unrecognized tax benefits, January 1, 2008	$	114.5
Increases in tax positions related to the current year		6.6
Reductions in tax positions related to prior years		(8.1	)
Total unrecognized tax benefits, March 31, 20081	$	113.0

1 BGE's portion of our total unrecognized tax benefits at March 31, 2008 was $12.2 million.

        Increases in current year tax positions and reductions in prior year tax positions are primarily due to unrecognized tax benefits for repair and depreciation deductions measured at amounts consistent with proposed IRS adjustments for prior years. There was no significant change in tax expense as a result of 2008 activity.

        Interest and penalties recorded in our Consolidated Statements of Income as tax expense relating to liabilities for unrecognized tax benefits were $1.0 million for the quarter ended March 31, 2008. As a result, accrued interest and penalties recognized in our Consolidated Balance Sheets increased from $16.8 million at January 1, 2008 to $17.8 million at March 31, 2008.

        If the total amount of unrecognized tax benefits of $113.0 million, recorded in "Other Liabilities" on our Consolidated Balance Sheets, as of March 31, 2008, were ultimately realized, our income tax expense would decrease by approximately $70 million. Of this amount, approximately $52 million is for tax refund claims that have been disallowed by tax authorities. We believe that there is a remote likelihood of ultimately realizing any benefit from these refund claim amounts.

        In 2007 and 2008, the IRS proposed certain adjustments to our 2002-2004 deductions for repairs and casualty losses. We do not anticipate the adjustments, if any, would result in a material impact to our financial results. However, we anticipate that it is reasonably possible that we will make an additional payment in the range of $15 to $20 million by March 31, 2009, which will reduce our liabilities for unrecognized tax benefits.

Taxes Other Than Income Taxes

BGE collects from certain customers franchise and other taxes that are levied by state or local governments on the sale or distribution of gas and electricity. We include these types of taxes in "Taxes other than income taxes" in our Consolidated Statements of Income. Some of these taxes are imposed on the customer and others are imposed on BGE. The taxes imposed on the customer are accounted for on a net basis, which means we do not recognize revenue and an offsetting tax expense for the taxes collected from customers. The taxes imposed on BGE are accounted for on a gross basis, which means we recognize revenue for the taxes collected from customers. Accordingly, the taxes accounted for on a gross basis are recorded as revenues in the accompanying Consolidated Statements of Income for BGE as follows:

	Quarter Ended March 31,
	2008		2007
	(In millions)
Taxes other than income taxes included in revenues—BGE	$	20.9	$	20.7

Commitments, Guarantees, and Contingencies

We have made substantial commitments in connection with our merchant energy, regulated electric and 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 enters into various long-term contracts for the procurement and delivery of fuels to supply our generating plant requirements. In most cases, our contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. These contracts expire in various years between 2008 and 2020. In addition, our merchant energy business enters into long-term contracts for the capacity and transmission rights for the delivery of energy to meet our physical obligations to our customers. These contracts expire in various years between 2008 and 2024.

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

        Our regulated electric business enters into various long-term contracts for the procurement of electricity. These contracts expire between 2008 and 2010, representing 100% of our estimated requirements in 2008, approximately 80% of our estimated requirements in 2009, and approximately 30% of our estimated requirements in 2010. The cost of power under these contracts is recoverable under the POLR agreement reached with the Maryland PSC.

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

16

and storage of gas. Our regulated gas business has gas transportation and storage contracts that expire between 2008 and 2028. As discussed in Note 1 of our 2007 Annual Report on Form 10-K, the costs under these contracts are fully recoverable by our regulated gas business.

        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 March 31, 2008, the total amount of commitments was $6,440.4 million. These commitments 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 2019 and provide for the sale of energy to electricity distribution utilities and certain retail customers. Our power sales contracts associated with power plants we own 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.

Guarantees

Our guarantees do not represent incremental Constellation Energy obligations; rather they primarily represent parental guarantees of subsidiary obligations. The following table summarizes the maximum exposure based on the stated limit of our outstanding guarantees at March 31, 2008:

At March 31, 2008	Stated Limit
	(In millions)
Merchant energy guarantees	$	14,318.9
Nuclear guarantees		807.9
BGE guarantees		263.3
Other non-regulated guarantees		116.6
Power project guarantees		47.2
Total guarantees	$	15,553.9

        At March 31, 2008, Constellation Energy had a total of $15,553.9 million in guarantees outstanding related to loans, credit facilities, and contractual performance of certain of its subsidiaries as described below.

•

Constellation Energy guaranteed a face amount of $14,318.9 million on behalf of our subsidiaries for merchant energy activities in order to allow our subsidiaries the flexibility needed to conduct business with counterparties without having to post other forms of collateral. Our calculated fair value of obligations for commercial transactions covered by these guarantees was $4,193.6 million at March 31, 2008, which represents the total amount the parent company could be required to fund based on March 31, 2008 market prices. For those guarantees related to our derivative liabilities, the fair value of the obligation is recorded in our Consolidated Balance Sheets.

•

Constellation Energy guaranteed $807.9 million primarily on behalf of our nuclear generating facilities for nuclear insurance and credit support to ensure these plants have funds to meet expenses and obligations to safely operate and maintain the plants.

•

BGE guaranteed the Trust Preferred Securities of $250.0 million of BGE Capital Trust II.

•

BGE guaranteed two-thirds of certain debt of Safe Harbor Water Power Corporation, an unconsolidated investment. At March 31, 2008, Safe Harbor Water Power Corporation had outstanding debt of $20 million. The maximum amount of BGE's guarantee is $13.3 million.

•

Constellation Energy guaranteed $107.1 million on behalf of our other nonregulated businesses primarily for loans and performance bonds of which $25 million was recorded in our Consolidated Balance Sheets at March 31, 2008.

•

Our other nonregulated business guaranteed $9.5 million primarily for performance bonds.

•

Our merchant energy business guaranteed $47.2 million for loans and other performance guarantees related to certain power projects in which we have an investment.

        We believe it is unlikely that we would be required to perform or incur any losses associated with guarantees of our subsidiaries' obligations.

Contingencies

Environmental Matters

Solid and Hazardous Waste

The Environmental Protection Agency (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 final clean-up costs for all of these sites, but the current estimated costs for, and current status of, each site is described in more detail below.

68th Street Dump

In 1999, the EPA proposed to add the 68th Street Dump in Baltimore, Maryland to the Superfund National Priorities List, 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

17

at the site. In March 2004, we and other potentially responsible parties formed the 68th Street Coalition and entered into consent order negotiations with the EPA to investigate clean-up options for the site under the Superfund Alternative Sites Program. In May 2006, a settlement among the EPA and 19 of the potentially responsible parties, including BGE, with respect to investigation of the site became effective. The settlement requires the potentially responsible parties, over the course of several years, to identify contamination at the site and recommend clean-up options. BGE is fully indemnified by a wholly-owned subsidiary of Constellation Energy for costs related to this settlement, as well as any clean-up costs. The clean-up costs will not be known until the investigation is closer to completion. However, those costs could have a material effect on our financial results.

Spring Gardens

In December 1996, BGE signed a consent order with the Maryland Department of the Environment that requires it to implement remedial action plans for contamination at and around the Spring Gardens site, located in Baltimore, Maryland. The Spring Gardens site was once used to manufacture gas from coal and oil. Based on remedial action plans and cost modeling performed in late 2006, BGE estimates its probable clean-up costs will total $43 million. BGE has recorded these costs as a liability in its Consolidated Balance Sheets and has deferred these costs, net of accumulated amortization and amounts it recovered from insurance companies, as a regulatory asset. Based on the results of studies at this site, it is reasonably possible that additional costs could exceed the amount BGE has recognized by approximately $3 million. Through March 31, 2008, BGE has spent approximately $41 million for remediation at this site.

        BGE also has 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.

Air Quality

In late July 2005, we received two Notices of Violation (NOVs) from the Placer County Air Pollution Control District, Placer County California (District) alleging that the Rio Bravo Rocklin facility located in Lincoln, California had violated certain District air emission regulations. We have a combined 50% ownership interest in the partnership which owns the Rio Bravo Rocklin facility. The NOVs allege a total of 38 violations between January 2003 and March 2005 of either the facility's air permit or federal, state, and county air emission standards related to nitrogen oxide, carbon monoxide, and particulate emissions, as well as violations of certain monitoring and reporting requirements during that time period. The maximum civil penalties for the alleged violations range from $10,000 to $40,000 per violation. Management of the Rio Bravo Rocklin facility is currently discussing the allegations in the NOVs with District representatives. It is not possible to determine the actual liability, if any, of the partnership that owns the Rio Bravo Rocklin facility.

        In May 2007, a subsidiary of Constellation Energy entered into a consent decree with the Maryland Department of the Environment to resolve alleged violations of air quality opacity standards at three fossil fuel plants in Maryland. The consent decree required the subsidiary to pay a $100,000 penalty, provide $100,000 to a supplemental environmental project, and install technology to control emissions from those plants.

Water Quality

In October 2007, a subsidiary of Constellation Energy entered into a consent decree with the Maryland Department of the Environment relating to groundwater contamination at a third party facility that was licensed to accept fly ash, a byproduct generated by our coal-fired plants. The consent decree requires the payment of a $1.0 million penalty, remediation of groundwater contamination resulting from the ash placement operations at the site, replacement of drinking water supplies in the vicinity of the site, and monitoring of groundwater conditions. We recorded a liability in our Consolidated Balance Sheets of approximately $5 million, which includes the $1 million penalty and our estimate of probable costs to remediate contamination, replace drinking water supplies, and monitor groundwater conditions. We estimate that it is reasonably possible that we could incur additional costs of up to approximately $10 million more than the liability that we accrued.

        In November 2007, a class action complaint was filed in Baltimore City Circuit Court alleging that the subsidiary's ash placement operations at the third party site damaged surrounding properties. The complaint seeks injunctive and remedial relief relating to the alleged contamination, unspecified compensatory damages for any personal injuries and property damages associated with the alleged contamination, and unspecified punitive damages. We cannot predict the timing, or outcome, of this proceeding.

Litigation

In the normal course of business, we are involved in various legal proceedings. We discuss the significant matters below.

Mercury

Since 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

18

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 70 cases, involving claims related to approximately 132 children, have been filed to date, with each claimant seeking $20 million in compensatory damages, plus punitive damages, from us.

        In rulings applicable to all but three of the cases, involving claims related to approximately 47 children, the Circuit Court for Baltimore City dismissed with prejudice all claims against BGE and Constellation Energy. 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 remaining actions vigorously. However, we cannot predict the timing, or outcome, of these cases, or their possible effect on our, or BGE's, financial results.

Asbestos

Since 1993, BGE and certain Constellation Energy subsidiaries have been involved in several actions concerning asbestos. The actions are based upon the theory of "premises liability," alleging that BGE and Constellation Energy knew of and exposed individuals to an asbestos hazard. In addition to BGE and Constellation Energy, numerous other parties are defendants in these cases.

        Approximately 536 individuals who were never employees of BGE or Constellation Energy have pending claims each seeking several million dollars in compensatory and punitive damages. Cross-claims and third-party claims brought by other defendants may also be filed against BGE and Constellation Energy in these actions. To date, most asbestos claims against us have been dismissed or resolved without any payment and a small minority have been resolved for amounts that were not material to our financial results. The remaining claims are currently pending in state courts in Maryland and Pennsylvania.

        BGE and Constellation Energy do 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 the facilities at which the plaintiffs allegedly worked as contractors,

•

the names of the plaintiffs' employers,

•

the dates on which and the places where the exposure allegedly occurred, and

•

the facts and circumstances relating to the alleged exposure.

        Until the relevant facts 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.

Insurance

We discuss our nuclear and non-nuclear insurance programs in Note 12 of our 2007 Annual Report on Form 10-K.

SFAS No. 133 Hedging Activities

We are exposed to market risk, including changes in interest rates and the impact of market fluctuations in the price and transportation costs of electricity, natural gas, and other commodities. We discuss our market risk in more detail in our 2007 Annual Report on Form 10-K.

Commodity Prices

Our merchant energy business uses a variety of derivative and non-derivative instruments to manage the commodity price risk of our wholesale and retail activities and our electric generation facilities, including power sales, fuel and energy purchases, gas purchased for resale, emission credits, weather risk, and the market risk of outages. In order to manage these risks, we may enter into fixed-price derivative or non-derivative contracts to hedge the variability in future cash flows from forecasted sales of energy and purchases of fuel and energy. The objectives for entering into such hedges include:

•

fixing the price for a portion of anticipated future electricity sales at a level that provides an acceptable return on our electric generation operations,

•

fixing the price of a portion of anticipated fuel purchases for the operation of our power plants,

•

fixing the price for a portion of anticipated energy purchases to supply our load-serving customers,

•

fixing the price for a portion of anticipated sales of natural gas to customers, and

•

fixing the price for a portion of anticipated sales or purchases of freight and coal.

        The portion of forecasted transactions hedged may vary based upon management's assessment of market, weather, operational, and other factors.

        Our merchant energy business designated certain fixed-price forward contracts as cash-flow hedges of forecasted sales of energy and forecasted purchases of fuel and energy for the years 2008 through 2016 under Statement of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Our merchant energy business had net unrealized pre-tax losses on these cash-flow hedges recorded in "Accumulated other comprehensive loss" of $644.7 million at March 31, 2008 and $1,498.7 million at December 31, 2007.

        We expect to reclassify $165.4 million of net pre-tax gains on cash-flow hedges from "Accumulated other comprehensive loss" into earnings during the next twelve months based on market prices at March 31, 2008. However, the actual amount reclassified into earnings could vary from the amounts recorded at March 31, 2008, due to

19

future changes in market prices. Additionally, for cash-flow hedges settled by physical delivery of the underlying commodity, "Reclassification of net gains or losses on hedging instruments from OCI to net income" represents the fair value of those derivatives, which is realized through gross settlement at the contract price.

        During the quarter ended March 31, 2008, we de-designated contracts previously designated as cash-flow hedges for which the forecasted transactions originally hedged are probable of not occurring and as a result we recognized a pre-tax gain of $0.7 million. During the quarter ended March 31, 2007, we de-designated contracts previously designated as cash-flow hedges and as a result we recognized a pre-tax loss of $21.6 million.

        Our merchant energy business also enters into natural gas storage contracts under which the gas in storage qualifies for fair value hedge accounting treatment under SFAS No. 133. We record changes in fair value of these hedges related to our wholesale supply operations as a component of "Nonregulated revenues" in our Consolidated Statements of Income.

        We recorded in earnings the following pre-tax (losses) gains related to hedge ineffectiveness:

	Quarter Ended March 31,
	2008			2007
	(In millions)
Cash-flow hedges	$	(45.1	)	$	(16.5	)
Fair value hedges		6.5			(2.2	)
Total	$	(38.6	)	$	(18.7	)

        The ineffectiveness amounts in the table above exclude:

•

a $0.2 million pre-tax gain for the quarter ended March 31, 2008 and a $1.3 million pre-tax gain for the quarter ended March 31, 2007 related to the change in value for the portion of our fair value hedges excluded from hedge assessment, and

•

a $24.7 million pre-tax loss related to derivatives that no longer qualify for cash-flow hedge accounting under SFAS No. 133 for the quarter ended March 31, 2008.

Interest Rates

We use interest rate swaps to manage our interest rate exposures associated with new debt issuances, to manage our exposure to fluctuations in interest rates on variable rate debt, 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, with the effective portion of gains and losses, net of associated deferred income tax effects, recorded in "Accumulated other comprehensive loss" in anticipation of planned financing transactions. We reclassify gains and losses on the hedges from "Accumulated other comprehensive loss" 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 "Derivative assets and liabilities" and "Long-term debt", respectively, 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.

        "Accumulated other comprehensive loss" includes net unrealized pre-tax gains on interest rate cash-flow hedges terminated upon debt issuance totaling $11.9 million at March 31, 2008 and $11.9 million at December 31, 2007. We expect to reclassify $0.1 million of pre-tax net gains on these cash-flow hedges from "Accumulated other comprehensive loss" into "Interest expense" during the next twelve months. We had no hedge ineffectiveness on these swaps.

        In order to optimize the mix of fixed and floating-rate debt, we entered into interest rate swaps qualifying as fair value hedges relating to $450.0 million of our fixed-rate debt maturing in 2012 and 2015, and converted this notional amount of debt to floating-rate. The fair value of these hedges was an unrealized gain of $38.6 million at March 31, 2008 and was recorded as an increase in our "Derivative assets" and "Long-term debt." The fair value of these hedges was an unrealized gain of $11.8 million at December 31, 2007 and was recorded as an increase in our "Derivative assets" and "Long-term debt." We had no hedge ineffectiveness on these interest rate swaps.

Accounting Standards Issued

SFAS No. 161

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities. SFAS No. 161 is effective beginning January 1, 2009 and requires entities to provide expanded disclosure about derivative instruments and hedging activities regarding (1) the ways in which an entity uses derivatives, (2) the accounting for derivatives and hedging activities, and (3) the impact that derivatives have (or could have) on an entity's financial position, financial performance, and cash flows. SFAS No. 161 requires expanded disclosures, but does not change the accounting for derivatives. We are currently evaluating the impact of SFAS No. 161, but do not expect the adoption of this standard to have a material impact on our, or BGE's, financial results.

20

Accounting Standards Adopted

FSP FIN 39-1

In April 2007, the FASB issued Staff Position (FSP) FIN 39-1, Amendment of FASB Interpretation No. 39. As amended, FIN 39, Offsetting of Amounts Related to Certain Contracts, requires an entity to report all derivatives recorded at fair value net of any associated fair value cash collateral with the same counterparty under a master netting arrangement. Therefore, effective January 1, 2008, we reported all derivatives recorded at fair value net of the associated fair value cash collateral. We applied the provisions of FSP FIN 39-1 by adjusting all financial statement periods presented, which reduced total assets at December 31, 2007 by $203.4 million. We present the fair value cash collateral that has been offset against our net derivative positions as part of our adoption of SFAS No. 157, Fair Value Measurements, below.

SFAS No. 157

Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. Fair value is the price that we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

        Consistent with the exit price concept, upon adoption we reduced our derivative liabilities to reflect our own credit risk. As a result, during the first quarter of 2008 we recorded a pre-tax increase in "Accumulated other comprehensive income" totaling $10 million for the portion related to cash-flow hedges and a pre-tax gain in earnings totaling $3 million for the remainder of our derivative liabilities. All other impacts of adoption were immaterial.

        Our assets and liabilities measured at fair value on a recurring basis consist of the following:

			As of March 31, 2008
			Assets			Liabilities
			(In millions)
Debt and equity securities			$	1,343.6		$	—
Derivative instruments:
	Classified as derivative assets and liabilities:
		Current		1,843.0			1,847.4
		Noncurrent		1,472.4			1,480.3
		Total classified as derivative assets and liabilities		3,315.4			3,327.7
	Classified as accounts receivable			(246.3	)		—
	Total derivative instruments			3,069.1			3,327.7
Total recurring fair value measurements			$	4,412.7		$	3,327.7

        Derivative instruments represent unrealized amounts related to all derivative positions, including futures, forwards, swaps, and options. We classify exchange-listed contracts, which are settled in cash on a daily basis, as part of "Accounts Receivable" in our Consolidated Balance Sheets. We classify the remainder of our derivative contracts as "Derivative assets" or "Derivative liabilities" in our Consolidated Balance Sheets.

        The table below sets forth by level within the fair value hierarchy the company's assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2008:

At March 31, 2008		Level 1			Level 2			Level 3			Netting and Cash Collateral*			Total Net Fair Value
		(In millions)
Debt and equity securities		$	420.0		$	923.6		$	—		$	—		$	1,343.6
Derivative assets			631.1			31,892.0			2,728.6			(32,182.6	)		3,069.1
Derivative liabilities			(635.3	)		(32,107.6	)		(2,328.2	)		31,743.4			(3,327.7	)
	Net derivative position		(4.2	)		(215.6	)		400.4			(439.2	)		(258.6	)
Total		$	415.8		$	708.0		$	400.4		$	(439.2	)	$	1,085.0

* We present our derivative assets and liabilities in our Consolidated Balance Sheets on a net basis. We net derivative assets and liabilities, including cash collateral, when a legally enforceable master netting agreement exists between us and the counterparty to a derivative contract. At March 31, 2008, we included $446.8 million of cash collateral held and $7.6 million of cash collateral posted in netting amounts in the above table.

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        The fair value hierarchy prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy are as follows:

•

Level 1—Quoted prices available in active markets for identical assets or liabilities as of the reporting date.

•

Level 2—Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

•

Level 3—Pricing inputs include significant inputs that are generally not observable from market activity.

        We determine the fair value of our assets and liabilities using quoted market prices (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available. We use unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available.

        We classify assets and liabilities within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement of each individual asset and liability taken as a whole. We determine fair value using Level 1 inputs by multiplying the market price by the quantity of the asset or liability we hold. We primarily determine fair value measurements classified as Level 2 or Level 3 using the income valuation approach, which involves discounting estimated cash flows.

        Debt and equity securities include our nuclear decommissioning trust funds, trust assets securing certain executive benefits and other marketable securities. Nuclear decommissioning trust funds primarily consist of publicly traded individual securities, which are valued based on unadjusted quoted prices in active markets, and are classified within Level 1; and commingled funds, which are valued based on the fund share price, which is observable on a less frequent basis, and are classified within Level 2. Trust assets securing certain executive benefits consist of mutual funds, which are actively traded and are valued based upon unadjusted quoted prices, and are classified within Level 1. Our other marketable securities consist of publicly traded individual securities, which are valued based on unadjusted quoted prices in active markets, and are classified within Level 1.

        Derivative assets and liabilities include exchange-traded contracts and bilateral contracts. Exchange-traded derivative contracts, including futures and certain options, which are valued based on unadjusted quoted prices in active markets are classified within Level 1. However, some exchange-traded derivatives are valued using pricing inputs based upon market quotes or market transactions. In such cases, these exchange-traded derivatives are classified within Level 2.

        Bilateral derivative instruments include swaps, forwards, certain options and complex structured transactions that may be offset economically with similar positions in exchange-traded markets. In certain instances, we may utilize models to measure the fair value of these instruments. Generally, we use similar models to value similar instruments. Valuation models utilize various inputs which include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability, and market-corroborated inputs, which are inputs derived principally from or corroborated by observable market data by correlation or other means. Where observable inputs are available for substantially the full term and value of the asset or liability, we classify the instrument in Level 2.

        Certain bilateral derivatives trade in less active markets with a lower availability of pricing information. In addition, complex or structured transactions may require us to use internally-developed model inputs, which might not be observable in or corroborated by the market, to determine fair value. When such inputs have more than an insignificant impact on the measurement of fair value, we classify the instrument in Level 3.

        In order to determine fair value, we utilize various factors, including market data and assumptions that market participants would use in pricing assets or liabilities as well as assumptions about the risks inherent in the inputs to the valuation technique. These factors include:

•

commodity prices,

•

price volatility,

•

volumes,

•

location,

•

interest rates,

•

credit quality of counterparties and Constellation Energy, and

•

credit enhancements.

        We regularly evaluate and validate the inputs we use to estimate fair value by a number of methods, including various market price verification procedures as well as review and verification of models and changes to those models. These activities are undertaken by individuals that are independent of those responsible for estimating fair value.

        The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy. Because of the long-term nature of certain assets and liabilities measured at fair value as well as differences in the availability of market prices and market liquidity over their terms, inputs for some assets and liabilities may fall into any one of the three levels in the fair value hierarchy or some combination thereof. While SFAS No. 157 requires us to classify these assets and liabilities in the lowest level in the hierarchy for which inputs are significant to the fair value measurement,

22

a portion of that measurement may be determined using inputs from a higher level in the hierarchy.

        The following table sets forth a reconciliation of changes in Level 3 fair value measurements:

For the quarter ended March 31, 2008
		(In millions)
Balance as of January 1, 2008		$	(147.1	)
Realized and unrealized gains (losses):
	Recorded in income		(15.1	)
	Recorded in other comprehensive income		175.9
Purchases, sales, issuances, and settlements			31.1
Transfers into and out of level 3			355.6
Balance as of March 31, 2008		$	400.4
Change in unrealized losses relating to derivatives still held as of March 31, 2008		$	(34.8	)

        Realized and unrealized gains (losses) are included primarily in "Nonregulated revenues" for our derivative contracts that are marked-to-market in our Consolidated Statements of Income and are included in "Accumulated other comprehensive loss" for our derivative contracts designated as cash-flow hedges in our Consolidated Balance Sheets. We discuss the income statement classification for realized gains and losses related to cash-flow hedges for our various hedging relationships in Note 1 of our 2007 Annual Report on Form 10-K.

        Realized and unrealized gains (losses) include the realization of derivative contracts through maturity. Purchases, sales, issuances, and settlements represent cash paid or received for option premiums, and the acquisition or termination of derivative contracts prior to maturity. Transfers into Level 3 represent existing assets or liabilities that were previously categorized as a higher level for which the inputs to the model became unobservable. Transfers out of Level 3 represent assets and liabilities that were previously classified as Level 3 for which the inputs became observable based on the criteria discussed above for classification in either Level 1 or Level 2. Transfers into and out of Level 3 for the quarter ended March 31, 2008 primarily relate to liabilities transferred into Level 2 due to the availability of observable market information in certain commodity markets that was not present at January 1, 2008 and from the passage of time reducing the period until contract realization.

Related Party Transactions

Constellation Energy

During the first quarter of 2008, our merchant energy business sold its working interest in 83 wells at one oil and gas property to Constellation Energy Partners (CEP), an equity method investment of Constellation Energy, for total proceeds of approximately $53 million. Our merchant energy business recognized a $14.3 million gain on the sale, exclusive of our 28.5% ownership interest in CEP. This gain is recorded in "Nonregulated revenues" in our Consolidated Statements of Income.

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 merchant energy business will supply a portion of BGE's market-based standard offer service obligation to residential electric customers through May 31, 2010.

        The cost of BGE's purchased energy from nonregulated subsidiaries of Constellation Energy to meet its standard offer service obligation was $271.3 million for the quarter ended March 31, 2008 compared to $302.7 million for the same period in 2007.

        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. We believe this method of allocation is reasonable and approximates the cost BGE would have incurred as an unaffiliated entity. These costs were approximately $35.1 million for the quarter ended March 31, 2008 compared to $34.3 million for the quarter ended March 31, 2007.

BGE—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. Under this arrangement, BGE had invested $41.1 million at March 31, 2008 and had invested $78.4 million at December 31, 2007.

        BGE's Consolidated Balance Sheets include intercompany 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 defined benefit plans.

        We believe our allocation methods are reasonable and approximate the costs that would be charged to unaffiliated entities.

23

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 an 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. We discuss our business in more detail in Item 1—Business section of our 2007 Annual Report on Form 10-K and we discuss the risks affecting our business in Item 1A. Risk Factors section on page 45.

        Our 2007 Annual Report on Form 10-K includes a detailed discussion of various items impacting our business, our results of operations, and our 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 of operations and require management's most difficult, subjective, or complex judgment. Our critical accounting policies include derivative accounting, evaluation of assets for impairment and other than temporary decline in value, and asset retirement obligations.

        Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, as discussed in the Notes to Consolidated Financial Statements beginning on page 21. We discuss our accounting policy for determining fair value in more detail in the Notes to Consolidated Financial Statements as well as in our Critical Accounting Policies section and Note 1 in our 2007 Annual Report on Form 10-K.

        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 ended March 31, 2008 and 2007. 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 2008 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, capital resources, commitments, and liquidity.

•

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

Business Environment

With the evolving regulatory environment surrounding customer choice, increasing competition, and the growth of our merchant energy business, various factors affect our financial results. We discuss these various factors in the Forward Looking Statements section on page 47 and in Item 1A. Risk Factors section on page 45. We discuss our market risks in the Market Risk section beginning on page 41.

        In this section, we discuss in more detail events which have impacted our business during 2008.

24

Environmental Matters

Air Quality

National Ambient Air Quality Standards (NAAQS)

In March 2008, the Environmental Protection Agency adopted a stricter NAAQS for ozone. We are unable to determine the impact that complying with the stricter NAAQS for ozone will have on our financial results until the states in which our generating facilities are located adopt plans to meet the new standards.

Capital Expenditures

As discussed in our 2007 Annual Report on Form 10-K, we expect to incur additional environmental capital expenditures to comply with air quality laws and regulations. Based on updated information from vendors, we expect our estimated environmental capital requirements for these air quality projects to be approximately $550 million in 2008, $350 million in 2009, $15 million in 2010 and $25 million from 2011-2012.

        Our estimates may change further as we implement our compliance plan. As discussed in our 2007 Annual Report on Form 10-K, our estimates of capital expenditures continue to be subject to significant uncertainties.

Accounting Standards Issued and Adopted

We discuss recently issued and adopted accounting standards in the Accounting Standards Issued and Accounting Standards Adopted sections of the Notes to Consolidated Financial Statements beginning on page 20.

Events of 2008

Acquisitions

Hillabee Energy Center

In February 2008, we acquired a partially completed gas-fired power generating facility in Alabama. We discuss this acquisition in more detail in the Notes to Consolidated Financial Statements on page 12.

Maryland Settlement Agreement

In March 2008, Constellation Energy, BGE and a Constellation Energy affiliate entered into a settlement agreement with the State of Maryland, the Public Service Commission of Maryland (Maryland PSC) and certain State of Maryland officials to resolve pending litigation and to settle other prior legal, regulatory and legislative issues. We discuss this settlement in more detail in the Notes to Consolidated Financial Statements beginning on page 14.

Commodity Prices

During the first quarter of 2008, the energy markets were affected by higher commodity prices, especially crude oil, coal, and natural gas and, to a lesser extent, power. Higher coal prices primarily resulted from increases in global demand, which created significant operating risk for some coal producers who have highly hedged their output. Further, power prices increased at a rate less than the underlying rate of increase in fuel prices. Within this volatile commodity price environment during the quarter ended March 31, 2008, our results were impacted by the following:

•

One of our domestic coal suppliers was unable to meet production targets and filed for bankruptcy. As a result, we incurred a credit loss related to this supplier. We discuss the impact of this event on our results in more detail on page 29.

•

We executed several contract settlements and amended certain other contracts to reduce our exposure to supplier nonperformance risk and/or credit risk. We discuss these transactions in more detail beginning on page 29.

•

We incurred losses recognized on hedges due to ineffectiveness, and certain cash-flow hedges that no longer qualify for hedge accounting. We discuss hedge ineffectiveness in more detail on page 29.

•

We incurred higher mark-to-market losses, excluding origination gains. We discuss our mark-to-market results in the Mark-to-Market section beginning on page 30.

•

We experienced an increase in our exposure to lower credit quality wholesale counterparties. We discuss our wholesale credit risk exposure in more detail in the Market Risk section beginning on page 42.

25

Results of Operations for the Quarter Ended March 31, 2008 Compared with the Same Period of 2007

In this section, we discuss our earnings and the factors affecting them. We begin with a general overview, then separately discuss earnings for our operating segments. Changes in other income, fixed charges, and income taxes are discussed, as necessary, in the aggregate for all segments in the Consolidated Nonoperating Income and Expenses section on page 37.

Overview

Results

		Quarter Ended March 31,
		2008			2007
		(In millions, after-tax)
Merchant energy		$	72.2		$	121.6
Regulated electric			33.7			32.2
Regulated gas			39.4			33.7
Other nonregulated			0.4			9.8
Income from continuing operations			145.7			197.3
	Loss from discontinued operations		—			(1.6	)
Net Income		$	145.7		$	195.7
Other Items Included in Operations:
	Non-qualifying hedges	$	(34.6	)	$	(9.2	)
Total Other Items		$	(34.6	)	$	(9.2	)

Quarter Ended March 31, 2008

Our total net income for the quarter ended March 31, 2008 decreased $50.0 million, or $0.26 per share, compared to the same period of 2007 mostly because of the following:

•

We had lower earnings of approximately $109 million at our global commodities operation as follows:

•

Approximately $33 million after-tax related to the bankruptcy of one of our domestic coal suppliers. During the first quarter of 2008, as a result of default by the supplier, we terminated our derivative contracts with the supplier, reclassified the related asset to accounts receivable and fully reserved the amount. We discuss this in more detail in the Global Commodities section on page 29.

•

Approximately $29 million after-tax related to lower gross margin at our international coal and freight operations primarily due to rising freight costs, excluding the unfavorable impact of hedge ineffectiveness and the favorable impact of financial settlements discussed below.

•

Approximately $28 million after-tax due to losses recognized on hedges due to ineffectiveness and certain cash-flow hedges that no longer qualified for hedge accounting during the quarter.

•

Approximately $20 million after-tax of lower earnings related to our portfolio of contracts subject to mark-to-market accounting, partially offset by higher earnings of approximately $16 million after-tax related to increased origination gains primarily associated with nonderivative contracts that were amended to reduce counterparty nonperformance risk, resulting in the contracts becoming derivatives for which mark-to-market accounting is required. We discuss these transactions in more detail in the Mark-to-Market section on page 30.

•

Approximately $15 million after-tax due to the absence of earnings from our synthetic fuel facilities. The tax credit associated with production at these facilities ended in 2007, and thus we have ceased operations.

•

We had lower earnings of approximately $16 million after-tax at our merchant energy business related to increased operating and depreciation, depletion, and amortization expenses.

•

We had lower earnings of $9.4 million after-tax at our other nonregulated businesses primarily because the first quarter of 2007 included a gain related to the sale of a leasing arrangement that did not recur in 2008.

        These decreases were partially offset by higher earnings of approximately $90 million after-tax at our global commodities operation due to gains recognized from a number of individually significant financial settlements including:

•

The termination and sale of in-the-money energy purchase contracts for an upfront cash payment received and the cancellation of future performance obligations. This termination and sale, which accounted for about half of the $90 million in financial settlement gains at our global commodities operation, allowed us to eliminate our exposure to operating and performance risk under this contract.

26

•

The remainder of the $90 million after-tax in higher earnings relates to the following:

•

terminated in-the-money purchase contracts that reduced our exposure to commodity price and credit risk related to coal suppliers, and

•

terminated in-the-money freight contracts that addressed counterparty performance issues.

        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 various customers. We discuss the impact of deregulation on our merchant energy business in Item 1. Business—Competition section of our 2007 Annual Report on Form 10-K.

        Our merchant energy business focuses on delivery of physical, customer-oriented products to producers and consumers, manages the risk and optimizes the value of our owned generation assets, and uses our portfolio management and trading capabilities both to manage risk and to deploy risk capital to generate additional returns. We continue to identify and pursue opportunities which can generate additional returns through portfolio management and trading activities within our business. These opportunities have increased due to the significant growth in scale of our customer supply operations.

        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 2007 Annual Report on Form 10-K. We summarize our revenue and expense recognition 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 earnings in the period in which the change occurs.

        The accounting for derivatives requires us to use judgment to make estimates and assumptions in determining the fair value of certain contracts and in recording revenues from those contracts. We discuss the effects of mark-to-market accounting on our results in the Mark-to-Market section beginning on page 30.

        Our global commodities operation actively transacts in energy and energy-related commodities in order to manage our portfolio of energy purchases and sales to customers through structured transactions. As part of these activities, we trade energy and energy-related commodities and deploy risk capital in the management of our portfolio in order to earn additional returns. These activities are managed through daily value at risk and stop loss limits and liquidity guidelines, and may have a material impact on our financial results. We discuss the impact of our trading activities and value at risk in more detail in the Mark-to-Market section beginning on page 30 and the Market Risk section beginning on page 41.

Results

		Quarter Ended March 31,
		2008			2007
		(In millions)
Revenues		$	3,962.0		$	4,442.0
Fuel and purchased energy expenses			(3,298.9	)		(3,764.4	)
Operating expenses			(429.8	)		(420.2	)
Depreciation, depletion, and amortization			(71.1	)		(62.9	)
Accretion of asset retirement obligations			(16.6	)		(17.7	)
Taxes other than income taxes			(27.7	)		(26.8	)
Income from Operations		$	117.9		$	150.0
Income from continuing operations (after-tax)		$	72.2		$	121.6
	Loss from discontinued operations (after-tax)		—			(1.6	)
Net Income		$	72.2		$	120.0
Other Items Included in Operations (after-tax):
	Non-qualifying hedges	$	(34.6	)	$	(9.2	)
Total Other Items		$	(34.6	)	$	(9.2	)

Certain prior-period amounts have been reclassified to conform with the current period's presentation. 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 13 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 the revenues we realize from the sale of energy and energy-related products to our customers and our costs of procuring fuel and

27

energy. As previously discussed, our merchant energy business uses either accrual or mark-to-market accounting to record our revenues and expenses. Mark-to-market results reflect the net impact of amounts recorded in earnings to recognize the changes in fair value of derivative contracts subject to mark-to-market accounting during the reporting period. We discuss the effects of mark-to-market accounting on our results separately in the Mark-to-Market section beginning on page 30.

        During the quarter ended March 31, 2008, merchant energy revenues and fuel and purchased energy expenses decreased $480.0 million and $465.5 million, respectively, as compared to the same period in 2007. Substantially all of these decreases were attributable to the following:

•

There was a reduction in merchant energy revenues and fuel and purchased energy expenses due to contracts related to our retail gas activities of our customer supply operation that were previously accounted for as cash-flow hedges and recorded in fuel and purchased energy expenses when the contracts settled. These contracts are now being accounted for as derivative contracts subject to mark-to-market accounting for which changes in fair value are recorded in revenues as they occur. This change was implemented in the third quarter of 2007 in conjunction with changes in the management of the wholesale procurement function for retail gas activities whereby the global commodities operation assumed responsibility for this procurement activity.

•

This decrease was partially offset by an increase in revenues of $172.6 million and fuel and purchased energy expenses of $133.1 million at our international coal and freight activities primarily due to the growth of these activities and higher prices during the quarter.

        The difference between revenues and fuel and purchased energy expenses, including all direct expenses, is the gross margin of our merchant energy business, and this measure is a useful tool for assessing 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 gross margin between periods. In managing our portfolio, we may 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.

        We analyze our merchant energy gross margin in the following categories:

•

Generation—our operation that owns, operates, and maintains fossil, nuclear, and renewable generating facilities and holds interests in qualifying facilities, a fuel processing facility and power projects in the United States. We present the gross margin results of this operation based on a 100% hedged assumption for the portfolio, related to both output from the facilities and the fuel used to generate electricity. The assumption is based on executing hedges at current market prices with the global commodities operation at the end of each fiscal year in order to ensure that the generation operation is fully hedged. Therefore, all commodity price risk is managed by and presented in the results of our global commodities operation as discussed below. Changes in gross margin of our generation operation during the period are due to changes in the level of output from the generating assets, and changes in gross margin between years are a result of changes in prices and expected output.

•

Customer Supply—our load-serving operation that provides energy products and services to wholesale and retail electric and natural gas customers, including distribution utilities, cooperatives, aggregators, and commercial, industrial and governmental customers. We present the gross margin results of this operation based on the gross margin value of new customer supply arrangements at the time of execution assuming an estimated level of customer usage and the impact of any changes in the underlying usage of the customers based on actual energy deliveries. Changes in estimated customer usage result from attrition (customers changing suppliers) or variable load risk (changes in actual usage when compared to expected usage). All commodity price risk is presented in and managed by our global commodities operation as discussed below.

•

Global Commodities—our marketing, risk management, and trading operation that manages contractually owned physical assets, including generation facilities, natural gas properties, international coal and freight assets, provides risk management services, and trades energy and energy-related commodities. This operation provides the wholesale risk management function for our generation and customer supply operations and includes our merchant energy business' actual hedged positions with third parties. Therefore,

28

changes in gross margin for this operation result mostly from changes in commodity prices and positions across the various commodities and regions in which we transact.

        We provide a summary of our gross margin for these three components of our merchant energy business as follows:

		Quarter Ended March 31,
		2008				2007
		(Dollar amounts in millions)
				% of Total				% of Total
Gross Margin:
	Generation	$	498	75	%	$	444	66	%
	Customer Supply		99	15			117	17
	Global Commodities		66	10			117	17
	Total	$	663	100	%	$	678	100	%

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

Generation

The $54 million increase in generation gross margin during the quarter ended March 31, 2008 compared to the same period of 2007 is primarily due to the following:

•

approximately $21 million due to a shorter refueling outage for our Calvert Cliffs facility and the absence of forced outages at our Ginna facility. The 2007 Calvert Cliffs refueling outage included the replacement of the reactor vessel head,

•

approximately $22 million from higher energy prices for the output of our generating assets in the PJM and New York regions, and

•

higher earnings of approximately $17 million from our investments in power projects.

Customer Supply

The $18 million decrease in customer supply gross margin during the quarter ended March 31, 2008 compared to the same period of 2007 is primarily due to lower expected realization of contracts executed in prior periods and lower new business originated and realized during the quarter, partially offset by higher mark-to-market results in our retail gas business.

Global Commodities

As previously discussed in the Events of 2008 section on page 25, the energy markets were affected by higher commodity prices. These market impacts are reflected in the $51 million decrease in gross margin from our global commodities activities during the quarter ended March 31, 2008 compared to the same period of 2007. This decrease is primarily due to:

•

approximately $55 million related to the bankruptcy of one of our domestic coal suppliers. During the first quarter of 2008, as a result of default by the supplier, we terminated our derivative contracts with the supplier, reclassified the related asset to accounts receivable and fully reserved the amount. Prior to this default, we had recorded unrealized gains totaling $55 million that remain in "Accumulated other comprehensive loss" and will be reclassified to earnings as the forecasted transactions occur. The majority will be reclassified to earnings during 2008, and the remainder will be fully realized by 2010.

•

approximately $48 million related to lower gross margin at our international coal and freight operations primarily due to rising freight costs, excluding the unfavorable impact of hedge ineffectiveness and the favorable impacts of financial settlements discussed below.

•

approximately $46 million related to losses recognized on hedges due to ineffectiveness, and certain cash-flow hedges that no longer qualified for hedge accounting during the quarter.

•

approximately $60 million of lower earnings related to our portfolio of contracts subject to mark-to-market accounting, partially offset by higher earnings of approximately $28 million related to increased origination gains primarily associated with nonderivative contracts that were amended to reduce counterparty nonperformance risk, resulting in the contracts becoming derivatives for which mark-to-market accounting is required. We discuss these transactions in more detail in the Mark-to-Market section beginning on page 30.

        These decreases were partially offset by approximately $150 million of gains due to a number of individually significant financial settlements including the following:

•

The termination and sale of in-the-money energy purchase contracts for an upfront cash payment and the cancellation of future performance obligations. This termination and sale, which accounted for about half of the $150 million in gains on financial settlements, allowed us to eliminate our exposure to performance risk under this contract and resulted in the realization of earnings.

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•

The remainder of the $150 million of gains relates to the following:

•

terminated in-the-money purchase contracts that reduced our exposure to commodity price and credit risk related to coal suppliers, and

•

terminated in-the-money freight contracts that addressed counterparty performance issues.

Mark-to-Market

Mark-to-market results include net gains and losses from origination, trading, 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 2007 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 earnings will fluctuate. We cannot predict these fluctuations, but the impact on our earnings could be material. We discuss our market risk in more detail in the Market Risk section beginning on page 41. The primary factors that cause fluctuations in our mark-to-market results are:

•

the number, size, and profitability of new transactions, including termination or restructuring 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 results were as follows:

			Quarter Ended March 31,
			2008			2007
			(In millions)
Unrealized mark-to-market results
	Origination gains ]		$	59.7		$	31.6
	Risk management and trading—mark-to-market
		Unrealized changes in fair value		(49.6	)		(23.2	)
		Changes in valuation techniques		—			—
		Reclassification of settled contracts to realized		32.6			13.3
	Total risk management and trading—mark-to-market			(17.0	)		(9.9	)
Total unrealized mark-to-market*				42.7			21.7
Realized mark-to-market				(32.6	)		(13.3	)
Total mark-to-market results			$	10.1		$	8.4

* Total unrealized mark-to-market is the sum of origination gains and total risk management and trading—mark-to-market.

        Origination gains arise primarily from contracts that our global commodities operation structures to meet the risk management needs of our customers or relate to our trading activities. Transactions that result in origination gains may be unique and provide the potential for individually significant revenues and gains from a single transaction. In the first quarter of 2008, our global commodities operation amended certain nonderivative contracts to mitigate counterparty performance risk under the existing contracts. As a result of these amendments, the revised contracts are derivatives subject to mark-to-market accounting under Statement of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The change in accounting for these contracts from nonderivative to derivative resulted in substantially all of the origination gains for 2008 presented in the table above.

        In the first quarter of 2007, our global commodities operation similarly amended certain nonderivative power sales contracts to reduce counterparty nonperformance risk, resulting in the contracts becoming derivatives for which mark-to-market accounting is required. Simultaneous with the amending of the nonderivative contracts, we executed at current market prices several new offsetting derivative power purchase contracts subject to mark-to-market accounting. The combination of these transactions resulted in substantially all of the origination gains in 2007 presented in the table above, as well as mitigated our risk exposure under the amended contracts. The origination gain from these 2007 transactions was partially offset by approximately $12 million of losses in our accrual portfolio due to the reclassification of losses related to cash-flow hedges previously established for the amended nonderivative contracts from "Accumulated other comprehensive loss" into earnings.

        Risk management and trading—mark-to-market represents both realized and unrealized gains and losses from changes in the value of our portfolio, including the recognition of gains and losses associated with changes in the unobservable input valuation adjustment. In addition, we use derivative contracts subject to mark-to-market accounting to manage our exposure to changes in market prices for certain non-trading activities, while in general the underlying physical transactions relating to these activities are accounted for on an accrual basis. We discuss the changes in mark-to-market results on the next page. We show the relationship between our mark-to-market results and the change in our net mark-to-market energy asset later in this section.

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        Total mark-to-market results increased $1.7 million during the quarter ended March 31, 2008 compared to the same period of 2007 primarily due to the increase in origination gains previously discussed, partially offset by higher losses from unrealized changes in fair value. Unrealized changes in fair value represented increased losses of $26.4 million primarily due to:

•

Approximately $42 million related to the unfavorable impact of certain economic hedges that do not qualify for or are not designated as cash-flow hedges, and

•

Approximately $16 million for losses on open positions resulting from an unfavorable price environment in the first quarter of 2008 as compared to the same period in 2007.

        These unfavorable items were partially offset by the favorable impact of approximately $32 million of gains in our retail gas business when comparing first quarter 2008 to the same period in 2007.

Derivative Assets and Liabilities

As discussed in our 2007 Annual Report on Form 10-K, our "Derivative assets and liabilities" include contracts accounted for as hedges and those accounted for on a mark-to-market basis.

        Derivative assets and liabilities consisted of the following:

	March 31, 2008			December 31, 2007
	(In millions)
Current Assets	$	1,843.0		$	760.6
Noncurrent Assets		1,472.4			1,030.2
Total Assets		3,315.4			1,790.8
Current Liabilities		1,847.4			1,134.3
Noncurrent Liabilities		1,480.3			1,118.9
Total Liabilities		3,327.7			2,253.2
Net Derivative Position	$	(12.3	)	$	(462.4	)
Composition of net derivative position:
Hedges	$	(335.8	)	$	(937.6	)
Mark-to-market	$	762.7		$	673.0
Net cash collateral included in derivative balances	$	(439.2	)	$	(197.8	)
Net Derivative Position	$	(12.3	)	$	(462.4	)

        The decrease in our net derivative liability subject to hedge accounting since December 31, 2007 of $601.8 million was due primarily to increases in power prices that increased the fair value of our cash-flow hedge positions and settlements of cash-flow hedges during the first quarter of 2008.

        The following are the primary sources of the change in the net mark-to-market energy asset during the quarter ended March 31, 2008:

		(In millions)
Fair value beginning of period					$	673.0
Changes in fair value recorded in earnings
	Origination gains	$	59.7
	Unrealized changes in fair value		(49.6	)
	Changes in valuation techniques		—
	Reclassification of settled contracts to realized		32.6
Total changes in fair value						42.7
Changes in value of exchange-listed futures and options						33.7
Net change in premiums on options						(15.1	)
Contracts acquired						—
Other changes in fair value						28.4
Fair value at end of period					$	762.7

        Changes in our net derivative asset that affected earnings were as follows:

•

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

•

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

•

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

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        The net derivative asset also changed due to the following items recorded in accounts other than in our Consolidated Statements of Income:

•

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 "Derivative 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 derivative asset and premiums on options sold as a decrease in the net derivative asset.

•

Contracts acquired represents the initial fair value of acquired derivative contracts recorded in "Derivative assets and liabilities" in our Consolidated Balance Sheets.

•

Other changes in fair value include transfers of derivative assets and liabilities between accounting methods resulting from the designation and de-designation of cash-flow hedges.

        Effective January 1, 2008, we adopted SFAS No. 157, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. Fair value is the price that we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

        Consistent with the exit price concept, upon adoption we reduced our derivative liabilities to reflect our own credit risk. As a result, during the first quarter of 2008 we recorded a pre-tax increase in "Accumulated other comprehensive income" totaling $10 million for the portion related to cash-flow hedges and a pre-tax gain in earnings totaling $3 million for the remainder of our derivative liabilities. All other impacts of adoption were immaterial. We discuss SFAS No. 157 and how we determine fair value in more detail in the Notes to Consolidated Financial Statements beginning on page 21.

        The settlement terms of the portion of our net derivative asset subject to mark-to-market accounting and sources of fair value based on the fair value hierarchy established by SFAS No. 157 are as follows as of March 31, 2008:

	Settlement Term
	2008			2009			2010			2011		2012		2013		Thereafter			Fair Value
	(In millions)
Level 1	$	(94.4	)	$	(32.9	)	$	—		$	—	$	—	$	—	$	—		$	(127.3	)
Level 2		65.4			365.9			(64.9	)		1.1		15.4		3.8		(0.2	)		386.5
Level 3		123.6			74.7			211.2			76.9		8.2		1.1		7.8			503.5
Total net derivative asset subject to mark-to-market accounting	$	94.6		$	407.7		$	146.3		$	78.0	$	23.6	$	4.9	$	7.6		$	762.7

        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. 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. Future market prices and actual quantities will vary from those used in recording mark-to-market energy assets and liabilities, and it is possible that such variations could be material.

        We 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 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).

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        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 are direct contracts between market participants and are not exchange-traded or financially settling contracts that can be readily offset 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.

        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 on the preceding page. However, based upon the nature of the global commodities 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. Generally, we do not expect to realize the value of these contracts and related hedges by selling or assigning the contracts themselves in total.

Operating Expenses

Our merchant energy business operating expenses increased $9.6 million during the quarter ended March 31, 2008 compared to the same period of 2007 primarily due to higher outage costs and ash handling expenses at our fossil generating facilities.

Depreciation, Depletion and Amortization Expense

Our merchant energy business incurred higher depreciation, depletion and amortization expenses of $8.2 million during the quarter ended March 31, 2008 compared to the same period of 2007 primarily due to increased depletion expenses of $9.9 million related to our upstream natural gas operations as a result of acquisitions made in 2007.

Regulated Electric Business

Our regulated electric business is discussed in detail in Item 1. Business—Electric Business section of our 2007 Annual Report on Form 10-K.

Results

	Quarter Ended March 31,
	2008			2007
	(In millions)
Revenues	$	709.4		$	514.8
Electricity purchased for resale expenses		(455.3	)		(274.2	)
Operations and maintenance expenses		(94.7	)		(86.3	)
Depreciation and amortization		(50.8	)		(46.9	)
Taxes other than income taxes		(36.2	)		(35.2	)
Income from Operations	$	72.4		$	72.2
Net Income	$	33.7		$	32.2
Other Items Included in Operations:
Effective tax rate impact of Maryland settlement agreement	$	3.0		$	—

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 13 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

Maryland Settlement Agreement

As discussed in more detail in the Notes to Consolidated Financial Statements beginning on page 14, the provisions of the Maryland settlement agreement will impact future revenues and expenses of BGE, primarily including the approximately $187 million in customer credits, for which the liability and related charge will be recorded in the second quarter of 2008, the implementation of lower depreciation rates, and the collection of the residential return portion of the Provider of Last Resort (POLR) administrative charge.

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Electric Revenues

The changes in electric revenues during the quarter ended March 31, 2008 compared to the same period of 2007 were caused by:

	Quarter Ended March 31, 2008 vs. 2007
	(In millions)
Distribution volumes	$	(3.8	)
Revenue decoupling		5.3
Standard offer service		(10.5	)
Rate stabilization credits		192.3
Rate stabilization recovery		19.0
Financing credits		(4.5	)
Senate Bill 1 credits		(5.4	)
Total change in electric revenues from electric system sales		192.4
Other		2.2
Total change in electric revenues	$	194.6

Distribution Volumes

Distribution volumes are the amount of electricity that BGE delivers to customers in its service territory.

        The percentage changes in our electric distribution volumes, by type of customer, during the quarter ended March 31, 2008 compared to the same period of 2007 were:

	Quarter Ended March 31, 2008 vs. 2007
Residential	(2.8	)%
Commercial	(4.4	)
Industrial	(1.0	)

        During the quarter ended March 31, 2008, we distributed less electricity to residential and commercial customers compared to the same period of 2007 mostly due to milder weather and decreased usage per customer, partially offset by an increased number of customers. We distributed essentially the same amount of electricity to industrial customers.

Revenue Decoupling

Beginning in January 2008, the Maryland PSC allows us to record a monthly adjustment to our electric distribution revenues from residential and small commercial customers to eliminate the effect of abnormal weather and usage patterns per customer on our electric distribution volumes. This means our monthly electric distribution revenues for residential and small commercial customers are based on weather and usage that is considered "normal" for the month. Therefore, while these revenues are affected by customer growth, they will not be affected by actual weather or usage conditions.

Standard Offer Service

BGE provides standard offer service for customers that do not select an alternative supplier. We discuss the provisions of Maryland's Senate Bill 1 related to residential electric rates in Item 7. Management's Discussion and Analysis—Business Environment—Regulation—Maryland—Senate Bills 1 and 400 section of our 2007 Annual Report on Form 10-K.

        Standard offer service revenues decreased during the quarter ended March 31, 2008 compared to the same period of 2007 mostly due to lower standard offer service volumes, partially offset by an increase in the standard offer service rates.

Rate Stabilization Credits

As a result of Senate Bill 1, we were required to defer from July 1, 2006 until May 31, 2007 a portion of the full market rate increase resulting from the expiration of the residential rate freeze. In addition, we offered a plan also required under Senate Bill 1 allowing residential customers the option to defer the transition to market rates from June 1, 2007 until January 1, 2008. The decrease in rate stabilization credits during the quarter ended March 31, 2008 compared to the same period in 2007 was due to the expiration of the rate stabilization plan which began on July 1, 2006 and ended on May 31, 2007.

Rate Stabilization Recovery

In late June 2007, BGE began recovering amounts deferred during the first rate deferral period that ended on May 31, 2007.

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Financing Credits

Concurrent with the recovery of the deferred amounts related to the first rate deferral period, we are providing credits to residential customers to compensate them primarily for income tax benefits associated with the financing of the deferred amounts with rate stabilization bonds.

Senate Bill 1 Credits

As a result of Senate Bill 1, beginning January 1, 2007, we were required to provide to residential electric customers a credit equal to the amount collected from all BGE electric customers for the decommissioning of our Calvert Cliffs nuclear power plant and to suspend collection of the residential return component of the POLR administrative charge collected through residential rates through May 31, 2007. Under an order issued by the Maryland PSC in May 2007, as of June 1, 2007, we were required to reinstate collection of the residential return component of the POLR administration charge in rates and to provide all residential electric customers a credit for the residential return component of the administrative charge. Under the Maryland settlement agreement, which is discussed in more detail beginning on page 14 of Notes to Consolidated Financial Statements, BGE will be allowed to resume collection of the residential return portion of the POLR administrative charge from June 1, 2008 through May 31, 2010 without having to rebate it 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.

	Quarter Ended March 31,
	2008		2007
	(In millions)
Actual costs	$	441.2	$	466.5
Deferral under rate stabilization plan		—		(192.3	)
Recovery under rate stabilization plan		14.1		—
Electricity purchased for resale expenses	$	455.3	$	274.2

Actual Costs

BGE's actual costs for electricity purchased for resale decreased $25.3 million during the quarter ended March 31, 2008 compared to the same period of 2007 primarily due to lower volumes and lower contract prices to purchase electricity for our customers.

Deferral under Rate Stabilization Plan

The deferral of the difference between our actual costs of electricity purchased for resale and what we are allowed to bill customers under Senate Bill 1 ended on January 1, 2008. These deferred expenses, plus carrying charges, are included in "Regulatory Assets (net)" in our, and BGE's, Consolidated Balance Sheets.

Recovery under Rate Stabilization Plan

In late June 2007, we began recovering previously deferred amounts from customers. We recovered $14.1 million during the quarter ended March 31, 2008 in deferred electricity purchased for resale expenses. These collections secure the payment of principal and interest and other ongoing costs associated with rate stabilization bonds issued by a subsidiary of BGE in June 2007.

Electric Operations and Maintenance Expenses

Regulated operations and maintenance expenses increased $8.4 million in the quarter ended March 31, 2008 compared to the same period in 2007 primarily due to $6.3 million in higher labor and benefit costs and the impact of inflation on other costs and increased uncollectible accounts receivable expense of $3.1 million.

Electric Depreciation and Amortization

Regulated electric depreciation and amortization expense increased $3.9 million during the quarter ended March 31, 2008 compared to the same period in 2007 primarily due to increased amortization expense associated with demand response programs, which are discussed in more detail in Item 1. Business—Baltimore Gas & Electric Company—Electric Load Management section of our 2007 Annual Report on Form 10-K.

        As a result of the Maryland settlement agreement, which is discussed in more detail beginning on page 14 of Notes to Consolidated Financial Statements, BGE will implement revised depreciation rates for financial reporting purposes effective June 1, 2008 that are expected to reduce annual depreciation expense by approximately $16 to $18 million for its electric business.

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Regulated Gas Business

Our regulated gas business is discussed in detail in Item 1. Business—Gas Business section of our 2007 Annual Report on Form 10-K.

Results

	Quarter Ended March 31,
	2008			2007
	(In millions)
Revenues	$	396.4		$	407.3
Gas purchased for resale expenses		(270.0	)		(284.1	)
Operations and maintenance expenses		(38.9	)		(36.8	)
Depreciation and amortization		(11.9	)		(12.0	)
Taxes other than income taxes		(10.4	)		(10.6	)
Income from operations	$	65.2		$	63.8
Net Income	$	39.4		$	33.7
Other Items Included in Operations:
Effective tax rate impact of Maryland settlement agreement	$	3.6		$	—

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 13 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

        Net income from the regulated gas business increased $5.7 million in the quarter ended March 31, 2008 compared to the same period in 2007 primarily due to an increase in revenues less gas purchased for resale expenses of $1.1 million after-tax and the impact of reduced earnings from the Maryland settlement agreement on our effective tax rate of $3.6 million.

Gas Revenues

The changes in gas revenues during the quarter ended March 31, 2008 compared to the same period of 2007 were caused by:

	Quarter Ended March 31, 2008 vs. 2007
	(In millions)
Distribution volumes	$	(5.9	)
Base rates		(0.1	)
Gas revenue decoupling		6.5
Gas cost adjustments		(24.7	)
Total change in gas revenues from gas system sales		(24.2	)
Off-system sales		12.7
Other		0.6
Total change in gas revenues	$	(10.9	)

Distribution Volumes

The percentage changes in our distribution volumes, by type of customer, during the quarter ended March 31, 2008 compared to the same period of 2007 were:

	Quarter Ended March 31, 2008 vs. 2007
Residential	(8.9	)%
Commercial	(2.9	)
Industrial	21.9

        During the quarter ended March 31, 2008, we distributed less gas to residential and commercial customers compared to the same period of 2007 mostly due to decreased usage per customer and milder weather, partially offset by an increased number of customers. We distributed more gas to industrial customers mostly due to increased usage per customer.

Base Rates

In December 2005, the Maryland PSC issued an order granting BGE a $35.6 million annual increase in its gas base rates. In December 2006, the Baltimore City Circuit Court upheld the rate order. However, certain parties have filed an appeal with the Court of Special Appeals. We cannot provide assurance that the Maryland PSC's order will not be reversed in whole or in part or that certain issues will not be remanded to the Maryland PSC for reconsideration.

Gas Revenue Decoupling

The Maryland PSC allows us to record a monthly adjustment to our gas distribution revenues to eliminate the effect of abnormal weather and usage patterns per customer on our gas distribution sales volumes. This means our monthly gas distribution revenues are based on weather and usage that is considered "normal" for the month. Therefore, while these revenues are affected by customer growth, they will not be affected by actual weather or usage 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 2007 Annual Report on Form 10-K.

36

        Gas cost adjustment revenues decreased $24.7 million during the quarter ended March 31, 2008 compared to the same period of 2007 because we sold less gas at lower rates. Although gas prices were higher in the first quarter of 2008 than in the first quarter of 2007, the gas cost adjustment rates charged to BGE customers were lower in 2008 than 2007. This was due to the fact that the gas cost adjustment rates charged to BGE customers in the first quarter of 2007 reflected catch-up adjustments for 2006 gas cost increases that were deferred for future collection under the Maryland PSC gas cost adjustment clause.

Off-System Sales

Off-system sales are low-margin direct sales of gas to wholesale suppliers of natural gas. 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.

        Revenues from off-system gas sales increased $12.7 million during the quarter ended March 31, 2008 compared to the same period of 2007 because we sold more gas at higher prices.

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.

        Gas costs decreased $14.1 million during the quarter ended March 31, 2008 compared to the same period of 2007 because we purchased less gas, partially offset by higher prices.

Gas Depreciation and Amortization

As a result of the Maryland settlement agreement, which is discussed in more detail beginning on page 14 of Notes to Consolidated Financial Statements, BGE will implement revised depreciation rates for financial reporting purposes effective June 1, 2008 that are expected to reduce annual depreciation expense by approximately $6 million for its gas business.

Other Nonregulated Businesses

Results

	Quarter Ended March 31,
	2008			2007
	(In millions)
Revenues	$	59.2		$	74.7
Operating expenses		(45.4	)		(47.2	)
Depreciation and amortization		(14.5	)		(10.6	)
Taxes other than income taxes		(0.5	)		(0.6	)
(Loss) income from Operations	$	(1.2	)	$	16.3
Net Income	$	0.4		$	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 13 provides a reconciliation of operating results by segment to our Consolidated Financial Statements.

        During the quarter ended March 31, 2008, net income decreased $9.4 million compared to the same period of 2007 primarily because the first quarter of 2007 included a gain related to the sale of a leasing arrangement that did not occur in 2008.

Consolidated Nonoperating Income and Expenses

Fixed Charges

Our fixed charges decreased $4.8 million during the quarter ended March 31, 2008 compared to the same period of 2007 mostly due to lower average level of debt outstanding.

        Fixed charges at BGE increased $5.8 million during the quarter ended March 31, 2008 compared to the same period of 2007 mostly due to interest expense recognized on the rate stabilization bonds that were issued in June 2007.

Income Taxes

During the quarter ended March 31, 2008, our income tax expense increased $8.2 million compared to the same period of 2007 mostly because of the absence of synthetic fuel tax credits, which expired in 2007, partially offset by lower income before income taxes.

        During the quarter ended March 31, 2008, BGE's income tax expense decreased $8.3 million mostly due to its lower effective tax rate. BGE projects a reduction in its 2008 taxable income, which increased the relative impact of the favorable permanent tax adjustments in its effective tax rate, as a result of the impact of certain provisions of the Maryland settlement agreement. We discuss the Maryland settlement agreement in more detail beginning on page 14.

37

Financial Condition

Cash Flows

The following table summarizes our cash flows for the quarter ended March 31, 2008 and 2007, excluding the impact of changes in intercompany balances.

		2008 Segment Cash Flows									Consolidated Cash Flows
		Quarter Ended March 31, 2008									Quarter Ended March 31,
		Merchant			Regulated			Other			2008			2007
		(In millions)
Operating Activities
	Net income	$	72.2		$	73.1		$	0.4		$	145.7		$	195.7
	Non-cash adjustments to net income		(70.6	)		74.5			21.3			25.2			9.4
	Changes in working capital		255.7			91.5			(149.9	)		197.3			241.9
	Defined benefit obligations*											(62.4	)		(104.0	)
	Other		32.6			13.3			(6.6	)		39.3			6.0
Net cash provided by (used in) operating activities			289.9			252.4			(134.8	)		345.1			349.0
Investing activities
	Investments in property, plant and equipment		(262.0	)		(112.8	)		(13.6	)		(388.4	)		(272.7	)
	Acquisitions, net of cash acquired		(156.9	)		—			—			(156.9	)		(212.0	)
	Contributions to nuclear decommissioning trust funds		(18.7	)		—			—			(18.7	)		(8.8	)
	Sales of property, plant and equipment		50.9			12.9			—			63.8			—
	Increase in restricted funds		—			(38.7	)		(0.6	)		(39.3	)		(15.3	)
	Other		(0.6	)		—			—			(0.6	)		16.1
Net cash used in investing activities			(387.3	)		(138.6	)		(14.2	)		(540.1	)		(492.7	)
Cash flows from operating activities less cash flows from investing activities		$	(97.4	)	$	113.8		$	(149.0	)		(195.0	)		(143.7	)
Financing Activities*
	Net repayment of debt											(163.7	)		(116.5	)
	Proceeds from issuance of common stock											3.9			22.1
	Common stock dividends paid											(79.3	)		(68.5	)
	Reacquisition of common stock											—			(77.6	)
	Proceeds from contract and portfolio acquisitions											—			27.0
	Other											0.8			4.7
Net cash used in financing activities												(238.3	)		(208.8	)
Net decrease in cash and cash equivalents											$	(433.3	)	$	(352.5	)

* Items are not allocated to the business segments because they are managed for the company as a whole.
Certain prior-period amounts have been reclassified to conform to the current period presentation.

Cash Flows from Investing Activities

Cash used in investing activities was $540.1 million in 2008 compared to $492.7 million in 2007. The $47.4 million increase in cash used in 2008 compared to 2007 was primarily due to a $115.7 million increase in cash paid for investments in property, plant and equipment, which includes spending related to environmental controls at our generating facilities.

        These increases in the use of cash were partially offset by a $63.8 million increase in proceeds from sales of property, plant and equipment at our merchant energy business and our regulated energy business and a $55.1 million decrease in cash paid for acquisitions.

Cash Flows from Financing Activities

Cash used in financing activities was $238.3 million in 2008 compared to $208.8 million in 2007. The increase in cash used for financing activities of $29.5 million was primarily due to a net increase in cash used to repay short-term borrowings and long-term debt of $47.2 million, a $10.8 million increase in our dividends paid in 2008 compared to 2007, and a decrease in proceeds from contract and portfolio acquisitions of $27 million. These increases in cash used for financing activities were partially offset by a net decrease in cash used for common stock activity of $59.4 million.

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Security Ratings

In April 2008, Fitch Ratings affirmed the ratings of both Constellation Energy and BGE and removed the ratings from Ratings Watch Negative upon the passage of legislation by the Maryland legislature relating to the Maryland settlement agreement discussed in more detail beginning on page 14 of Notes to Consolidated Financial Statements. We discuss the impact of our security ratings on our liquidity in more detail on page 41.

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 March 31, 2008, we had a $3.85 billion five-year credit facility that expires in July 2012 and a $250.0 million one-year credit facility that expires in December 2008.

        These revolving credit facilities allow the issuance of letters of credit up to $4.1 billion. At March 31, 2008, letters of credit that totaled $2.6 billion were issued under these facilities, which results in approximately $1.5 billion of unused credit facilities.

        Additionally, in January 2008, we entered into a new six month line of credit totaling $500.0 million. This line of credit expires in July 2008 and has an option to be extended for an additional six months, subject to the lender's approval. No amounts were outstanding under this line of credit at March 31, 2008.

        We enter into these facilities to ensure adequate liquidity to support our operations. Currently, we use the facilities to issue letters of credit primarily for our merchant energy business.

        We expect to fund future acquisitions with an overall goal of maintaining a strong investment grade credit profile.

BGE

BGE currently maintains a $400.0 million five-year revolving credit facility expiring in 2011. BGE can borrow directly from the banks, use the facilities to allow commercial paper to be issued or issue letters of credit. As of March 31, 2008, BGE had $1.0 million in letters of credit issued, which results in $399.0 million in unused credit facilities.

Capital Resources

Our estimated annual cash requirement amounts for the years 2008 and 2009 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 2008 and 2009 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 beginning on page 47 and Item 1A. Risk Factors section on page 45. We discuss the potential impact of environmental legislation and regulation in more detail in Business Environment section on page 25 and Item 1. Business—Environmental Matters section of our 2007 Annual Report on Form 10-K.

Calendar Year Estimates			2008		2009
			(In millions)
Nonregulated Capital Requirements:
	Merchant energy
		Generation plants	$	670	$	510
		Environmental controls		545		335
		Portfolio acquisitions/investments		455		115
		Technology/other		135		125
		Nuclear Fuel		200		270
	Total merchant energy capital requirements			2,005		1,355
	Other nonregulated capital requirements			80		65
	Total nonregulated capital requirements			2,085		1,420
Regulated Capital Requirements:
	Regulated electric			410		465
	Regulated gas			80		95
	Total regulated capital requirements			490		560
Total Capital Requirements			$	2,575	$	1,980

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Capital Requirements

Merchant Energy Business

Our merchant energy business' capital requirements consist of its continuing requirements, including expenditures for:

•

improvements to generating plants,

•

nuclear fuel costs,

•

upstream gas investments,

•

portfolio acquisitions and other investments,

•

costs of complying with the EPA, Maryland, and Pennsylvania environmental regulations and legislation, and

•

enhancements to our information technology infrastructure.

Regulated Electric and Gas

Regulated electric and gas construction expenditures primarily include new business construction needs and improvements to existing facilities, including projects to improve reliability and support demand response and conservation initiatives.

Funding for Capital Requirements

We discuss our funding for capital requirements in our 2007 Annual Report on Form 10-K.

Contractual Payment Obligations and Committed Amounts

We enter into various agreements that result in contractual payment obligations in connection with our business activities. These obligations primarily relate to our financing arrangements (such as long-term debt, preference stock, and operating leases), purchases of capacity and energy to support the growth in our merchant energy business activities, and purchases of fuel and transportation to satisfy the fuel requirements of our power generating facilities.

        We detail our contractual payment obligations at March 31, 2008 in the following table:

			Payments
			2008		2009- 2010		2011- 2012		There- after		Total
			(In millions)
Contractual Payment Obligations
Long-term debt:1
	Nonregulated
		Principal	$	1.9	$	501.9	$	757.4	$	1,592.7	$	2,853.9
		Interest		115.3		272.8		232.5		1,207.2		1,827.8
	Total			117.2		774.7		989.9		2,799.9		4,681.7
	BGE
		Principal		205.3		121.6		254.2		1,489.3		2,070.4
		Interest		86.3		215.6		197.4		1,411.5		1,910.8
	Total			291.6		337.2		451.6		2,900.8		3,981.2
BGE preference stock				—		—		—		190.0		190.0
Operating leases2				436.8		507.7		318.7		575.2		1,838.4
Purchase obligations:3
	Purchased capacity and energy4			408.0		540.9		214.3		268.1		1,431.3
	Fuel and transportation			1,394.1		1,706.4		641.8		923.5		4,665.8
	Other			258.9		45.6		19.6		19.2		343.3
Other noncurrent liabilities:
	FIN 48 tax liability			11.8		28.3		—		13.6		53.7
	Pension benefits5			6.1		200.2		162.9		—		369.2
	Postretirement and postemployment benefits6			32.4		99.6		116.2		242.2		490.4
Total contractual payment obligations			$	2,956.9	$	4,240.6	$	2,915.0	$	7,932.5	$	18,045.0

1

Amounts in long-term debt reflect the original maturity date. Investors may require us to repay $339.8 million early through put options and remarketing features. Interest on variable rate debt is included based on the forward curve for interest rates.

2

Our operating lease commitments include future payment obligations under certain power purchase agreements as discussed further in Note 11 of our 2007 Annual Report on Form 10-K.

3

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.

4

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.

5

Amounts related to pension benefits reflect our current 5-year forecast of contributions for our qualified pension plans and participant payments for our nonqualified pension plans. Refer to Note 7 of our 2007 Annual Report on Form 10-K for more detail on our pension plans.

6

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.

40

Liquidity Provisions

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

        We regularly review our liquidity needs to ensure that we have adequate facilities available to meet collateral requirements. This includes having liquidity available to meet margin requirements for our customer supply and global commodities activities.

        We have certain agreements that contain provisions that would require additional collateral upon significant credit rating decreases in 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 counterparty contracts related to our wholesale marketing, risk management, and trading operation, we are obligated to post collateral if Constellation Energy's senior unsecured credit ratings declined below established contractual levels. Based on contractual provisions at March 31, 2008, we estimate that if Constellation Energy's senior unsecured debt were downgraded we would have the following additional collateral obligations:

Credit Ratings Downgraded to	Level Below Current Rating	Incremental Obligations		Cumulative Obligations
	(In millions)
BBB/Baa2	1	$	320	$	320
BBB-/Baa3	2		306		626
Below investment grade	3		982		1,608

        Based on market conditions and contractual obligations at the time of a downgrade, we could be required to post collateral in an amount that could exceed the amounts specified above, which could be material. We discuss our credit ratings in the Security Ratings section on page 39 and in our 2007 Annual Report on Form 10-K. We discuss our credit facilities in the Available Sources of Funding section on page 39.

        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 March 31, 2008, the debt to capitalization ratios as defined in the credit agreements were no greater than 48%.

        The credit agreement of BGE contains a provision requiring BGE to maintain a ratio of debt to capitalization equal to or less than 65%. At March 31, 2008, the debt to capitalization ratio for BGE as defined in this credit agreement was 43%.

Off-Balance Sheet Arrangements

We discuss our off-balance sheet arrangements in our 2007 Annual Report on Form 10-K.

        At March 31, 2008, Constellation Energy had a total face amount of $15,553.9 million in guarantees outstanding, of which $14,318.9 million related to our merchant energy business. These amounts do not represent incremental consolidated Constellation Energy obligations; rather, they primarily represent parental guarantees of certain subsidiary obligations to third parties in order to allow our subsidiaries the flexibility needed to conduct business with counterparties without having to post other forms of collateral. Our calculated fair value of obligations for commercial transactions covered by these guarantees was $4,193.6 million at March 31, 2008, which represents the total amount the parent company could be required to fund based on March 31, 2008 market prices. For those guarantees related to our derivative liabilities, the fair value of the obligation is recorded in our Consolidated Balance Sheets. We believe it is unlikely that we would be required to perform or incur any losses associated with guarantees of our subsidiaries' obligations.

        We discuss our other guarantees in the Notes to Consolidated Financial Statements on page 17.

Market Risk

Commodity Risk

We measure the sensitivity of the mark-to-market energy contracts of our global commodities operation 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 global commodities operation derivative assets and liabilities subject to mark-to-market accounting over one- and ten-day holding periods. We discuss value at risk in more detail in the Market Risk section of our 2007 Annual Report on Form 10-K. The table on the next page is the value at risk associated with our global commodities operation's derivative assets and liabilities subject to mark-to-market accounting, including both trading and non-trading activities.

41

        We discuss our mark-to-market results in more detail in the Mark-to-Market section beginning on page 30.

		Quarter Ended March 31, 2008
		(In millions)
99% Confidence Level, One-Day Holding Period
	Average	$	22.4
	High		29.2
95% Confidence Level, One-Day Holding Period
	Average		17.0
	High		22.3
95% Confidence Level, Ten-Day Holding Period
	Average		53.9
	High		70.4

        The following table details our value at risk for the trading portion of our global commodities operation's derivative assets and liabilities subject to mark-to-market accounting over a one-day holding period at a 99% confidence level for the first quarter of 2008:

	Quarter Ended March 31, 2008
	(In millions)
Average	$	18.5
High		22.1

        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 derivative contracts subject to mark-to-market accounting could differ from the calculated value at risk, and such changes could have a material impact on our financial results.

Wholesale Credit Risk

We actively monitor the credit portfolio of our global commodities operation to attempt to reduce the impact of potential counterparty default. The wholesale derivative and nonderivative portfolio of our global commodities operation had the following public credit ratings:

		March 31, 2008		December 31, 2007
Rating
	Investment Grade1	41	%	44	%
	Non-Investment Grade2	22		7
	Not Rated	37		49

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.

2 The change is primarily due to increased credit exposures from higher commodity prices during the quarter ended March 31, 2008, rather than new business with non-investment grade counterparties.

        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 for which we determine creditworthiness based on internal credit ratings. These counterparties include governmental entities, municipalities, cooperatives, power pools, and certain load-serving entities, marketers, and coal and freight suppliers.

        The following table provides the breakdown of the credit quality of our wholesale business based on our internal credit ratings:

	March 31, 2008		December 31, 2007
Investment Grade Equivalent	48	%	62	%
Non-Investment Grade	52		38

        The decrease in wholesale credit quality during the first quarter of 2008 primarily reflects factors impacting our global coal and freight businesses. Due to a dramatic increase in coal prices from the beginning of the year, our total exposure to these counterparties increased during the quarter ended March 31, 2008. As a result, the credit quality of our wholesale portfolio declined.

        By location, approximately 72% of our wholesale credit risk exposure is with domestic (U.S. and Canada) counterparties, and 28% is with international counterparties, which includes exposure to emerging markets such as Indonesia.

        Our total exposure, net of collateral, to counterparties across our entire wholesale portfolio is $5.2 billion as of March 31, 2008. The top ten counterparties account for approximately 35% of our total exposure.

42

        If a counterparty were to default on its contractual obligations and we were to liquidate all contracts with that entity, our potential credit loss would include the loss in value of these contracts. This would include contracts accounted for using the mark-to-market, hedge, and accrual accounting methods, the amount owed or due from settled transactions, and a reduction for any collateral held from the counterparty. In addition, if a counterparty were to default under an accrual contract that is currently favorable to us, we may recognize a material adverse impact on our results in the future delivery period to the extent that we are required to replace the contract that is in default with another contract at current market prices. To reduce our credit risk with counterparties we attempt to enter into agreements that allow us to obtain collateral on a contingent basis, seek third-party guarantees of the counterparty's obligation, and enter into netting agreements that allow us to offset receivables and payables.

        Our total exposure of $5.2 billion, net of collateral, includes both accrual positions prior to being settled and recorded in our Consolidated Balance Sheets and derivatives that are recorded at fair value in our Consolidated Balance Sheets. The portion of our wholesale credit risk related to transactions that are recorded in our Consolidated Balance Sheets primarily relates to open energy commodity positions from our global commodities operation that are accounted for using mark-to-market accounting, derivatives that qualify for designation as hedges under SFAS No. 133, as well as amounts owed by wholesale counterparties for transactions that settled but have not yet been paid.

        The following table highlights the credit quality and exposures related to those activities recorded in our Consolidated Balance Sheets at March 31, 2008:

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
	(In millions)
Investment grade	$	1,738	$	564	$	1,174	—	$	—
Split rating		33		7		26	—		—
Non-investment grade		800		121		679	1		572
Internally rated—investment grade		197		1		196	—		—
Internally rated—non-investment grade		495		61		434	—		—
Total	$	3,263	$	754	$	2,509	1	$	572

        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 global commodities operation had contracted), we could incur a loss that could have a material impact on our financial results. We discuss our actual credit losses in more detail in the Global Commodities section on page 29.

Interest Rate Risk, Retail Credit Risk, Foreign Currency Risk, and Equity Price Risk

We discuss our exposure to interest rate risk, retail credit risk, foreign currency risk, and equity price risk in the Market Risk section of our 2007 Annual Report on Form 10-K.

43

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We discuss the following information related to our market risk:

•

SFAS No. 133 hedging activities section in the Notes to Consolidated Financial Statements beginning on page 19,

•

activities of our global commodities operation in the Merchant Energy Business section of Management's Discussion and Analysis beginning on page 27,

•

evaluation of commodity and credit risk in the Market Risk section of Management's Discussion and Analysis beginning on page 41, and

•

changes to our business environment in the Business Environment section of Management's Discussion and Analysis beginning on page 24.

Items 4 and 4(T). 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 errors by personnel in executing controls due to faulty judgment or simple mistakes, which could occur in situations such as when personnel performing controls are new to a job function or when inadequate resources are applied to a process. 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 personnel, 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.

Evaluation of Disclosure Controls and Procedures

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.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2008, 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.

44

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We discuss our Legal Proceedings in the Notes to Consolidated Financial Statements beginning on page 18.

Item 1A. Risk Factors

You should consider carefully the following risks, along with the risks described under Item 1A. Risk Factors in our 2007 Annual Report on Form 10-K and the other information contained in this Form 10-Q. The risks and uncertainties described below and in our 2007 Annual Report on Form 10-K are not the only ones that may affect us. Additional risks and uncertainties also may adversely affect our business and operations including those discussed in Item 2. Management's Discussion and Analysis. If any of the following events occur, our business and financial results could be materially adversely affected.

We, and BGE in particular, are subject to extensive local, state and federal regulation that could affect our operations and costs.

We are subject to regulation by federal and state governmental entities, including the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Maryland PSC and the utility commissions of other states in which we have operations. In addition, changing governmental policies and regulatory actions can have a significant impact on us. Regulations can affect, for example, allowed rates of return, requirements for plant operations, recovery of costs, limitations on dividend payments and the regulation or reregulation of wholesale and retail competition (including but not limited to retail choice and transmission costs).

        BGE's distribution rates are subject to regulation by the Maryland PSC, and such rates are effective until new rates are approved. If the Maryland PSC does not approve new rates, BGE might not be able to recover certain costs it incurs. In addition, limited categories of costs are recovered through adjustment charges that are periodically reset to reflect current and projected costs. Inability to recover material costs not included in rates or adjustment clauses, including increases in uncollectible customer accounts that may result from higher gas and electric costs, could have an adverse effect on our, or BGE's, cash flow and financial position.

        Energy legislation enacted in Maryland in June 2006 and April 2007 mandated that the Maryland PSC review Maryland's deregulated electricity market. Although the settlement agreement reached with the State of Maryland terminated certain studies relating to the 1999 deregulation settlement, the State of Maryland and the Maryland PSC may still undertake a review of the Maryland electric industry and market structure and consider options for reregulation. We cannot at this time predict the final outcome of this review or how such outcome may affect our, or BGE's financial results, but it could be material.

        The regulatory process may restrict our ability to grow earnings in certain parts of our business, cause delays in or affect business planning and transactions and increase our, or BGE's, costs.

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Item 2. Issuer Purchases of Equity Securities

The following table discloses purchases of shares of our common stock made by us or on our behalf for the periods shown below.

Period	Total Number of Shares Purchased1	Average Price Paid for Shares		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Amounts of Shares that May Yet Be Purchased Under the Plans and Programs (at month end)2
January 1 – January 31, 2008	251	$	106.10	514,376	3	$	750 million
February 1 – February 29, 2008	198,575		94.78	—			750 million
March 1 – March 31, 2008	—		—	—			750 million
Total	198,826	$	94.79	514,376			—

1 Represents shares surrendered by employees to satisfy tax withholding obligations on vested restricted stock and restricted stock units.

2 In October 2007, our board of directors approved a common share repurchase program for up to $1 billion of our outstanding common shares. The program is expected to be executed over the 24 months following approval in a manner that preserves flexibility to pursue additional strategic investment opportunities.

3 Represents additional shares delivered by a financial institution to complete an accelerated share repurchase transaction entered into in October 2007. In total, 2,537,903 shares were repurchased pursuant to the accelerated share repurchase transaction at a final per share price determined based on a discount to the volume-weighted average trading price of $100.53 per share of our common stock.

        See Note 9 of our 2007 Annual Report on Form 10-K for a further description of our common share repurchase program and the accelerated share repurchase agreement.

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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, nuclear fuel, freight, and emission allowances,

•

the liquidity and competitiveness of wholesale markets for energy commodities,

•

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

•

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

•

the timing and extent of deregulation of, and competition in, the energy markets, and the rules and regulations adopted in those markets,

•

uncertainties associated with estimating natural gas reserves, developing properties, and extracting natural gas,

•

regulatory or legislative developments federally, in Maryland, or in other states that affect deregulation, the price of energy, 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 ability of our regulated and nonregulated businesses to comply with complex and/or changing market rules and regulations,

•

the ability of BGE to recover all its costs associated with providing customers service,

•

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

•

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

•

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 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,

•

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,

•

the ability to successfully identify and complete acquisitions and sales of businesses and 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 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

Exhibit No. 10(a)		2007 Long-Term Incentive Plan of Constellation Energy Group, Inc., as amended and restated to February 21, 2008.
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.
Exhibit No. 99(a)	*	Settlement Agreement dated March 27, 2008 (Designated as Exhibit 99.1 to the Current Report on Form 8-K dated March 28, 2008, File Nos. 1-12869 and 1-1910.)

*

Incorporated by reference.

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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: May 9, 2008	/s/  JOHN R. COLLINSJohn R . Collins, 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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QuickLinks

PART 1—FINANCIAL INFORMATION
Item 1—Financial Statements
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management's Discussion
Introduction and Overview
Business Environment
Events of 2008
Results of Operations for the Quarter Ended March 31, 2008 Compared with the Same Period of 2007
Financial Condition
Capital Resources
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Items 4 and 4(T). Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Issuer Purchases of Equity Securities
Item 5. Other Information
Item 6. Exhibits
SIGNATURE

EX-10.(A)

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.

2007 Long-Term Incentive Plan

(Plan)

Amended and Restated Effective February 21, 2008

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, consultants and 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.  .  Upon the adoption of this Plan, no new Awards shall be granted under any prior long-term incentive plan.

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, Cash-Based Award, Restricted Stock, Restricted Stock Units, Options, Performance Units, Stock Appreciation Rights, Dividend Equivalents, or Other Equity granted under this Plan.

“Board” means the Board of Directors of the Company.

“Cash-Based Award” means an Award granted to a Participant as described in Section 12A.

“Change in Control” means the occurrence of any one of the following events:

(i)individuals who, on the effective date of the adoption of the Plan, 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 such adoption date, 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 1934 Act and as used in Sections 13(d)(3) and 14(d)(2) of the 1934 Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the 1934 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 a Participant or any group of persons including a Participant (or any entity controlled by a Participant or any group of persons including a Participant);

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

“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 Compensation Committee of the Board or such other committee as the Board shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan, at least two members of which qualify as non-employee directors (within the meaning of Rule 16b-3 promulgated under Section 16 of the 1934 Act), and as “outside directors” within the meaning of Treasury Regulation Section 1.162-27(e)(3) and as “independent” within the meaning of any rules or regulations promulgated by an applicable stock exchange or similar regulatory authority.

“Company” means Constellation Energy Group, Inc., a Maryland corporation, or its successor, including any “New Company” as provided in Section 16J.

“Covered Employee” means a Participant, who at the time of reference, is a “covered employee”, as described in Code Section 162(m).

“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.

“Disability” means the determination that a Participant is “disabled” under the Company disability plan in effect at that time or, if applicable to such Participant, a Subsidiary 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.

“Exercise Period” means the period or periods during which a Stock Appreciation Right is exercisable.

“Fair Market Value” means the value of the Stock determined by such methods or procedures as shall be established from time to time by the Plan Administrator; provided, that to the extent required to avoid the imposition of a

3

tax under Section 409A of the Code in respect of an Award, such method shall conform to the requirements of Section 409A.

“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.

“Option Period” or “Option Periods” means the period or periods during which an Option is exercisable.

“Other Equity” means an Award granted under Section 12B.

“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, or other qualified retirement plan of Constellation Energy Group, Inc. or a Subsidiary designated by the Committee from time to time.

“Performance-Based Compensation” means compensation under an award that satisfies the requirements of Section 162(m) of the code for deductibility of remuneration paid to Covered Employees.

“Performance Measures” means measures as described in Section 13 on which the performance goals are based and which are approved by the Company’s shareholders pursuant to the Plan in order to qualify Awards as Performance-Based Compensation.

“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 Target(s)” means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 13B for each Participant for the applicable Performance Period in respect of any one or more of the Performance Measures.

“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 or market value shares.

“Plan Administrator” means, as set forth in Section 4, the Committee or its designee.

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“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 as described in Section 7.

“Restricted Stock Unit” means a right granted 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 Plan Administrator.

“Retirement” means retirement on or after the earlier of: (i) eligibility to receive an early retirement benefit under a Pension Plan, (ii) eligibility to receive retirement benefits under a Company supplemental retirement plan; or (iii) such time as is specified in an applicable employment arrangement.

“Stock” means the common stock, without par value, of the Company.

“Stock Appreciation Right” means an Award granted under Section 10.

“Subsidiary” means any entity that is directly or indirectly controlled by the Company or any entity, including an acquired entity, in which the Company has a significant equity interest, as determined by the Plan Administrator, in its discretion.

“Termination” means resignation or discharge from employment (or cessation of board membership in the case of a director or cessation of the performance of services in the case of a consultant) 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 May 18, 2007 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 the Company’s shareholders in accordance with Maryland law at the Company’s 2007 Annual Meeting of Stockholders, the Plan will be effective as of May 18, 2007.

B.Period for Grants of Awards.  Awards may be made as provided herein for a period of 10 years after May 18, 2007.

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

5

Plan to achieve its stated purpose.  Without limiting the generality of the foregoing, on or after the date of grant of an Award the Plan Administrator may modify, amend, extend, renew or accelerate the vesting or settlement of outstanding Awards, or accept the surrender of outstanding Awards and substitute new Awards or otherwise amend an outstanding Award in whole or in part from time-to-time in such manner as the Committee determines, in its sole and absolute discretion, to be necessary or appropriate, which amendments may be made retroactively or prospectively, provided, however, that, (i) no modification, amendment or substitution that results in repricing a Stock Option or Stock Appreciation Right that is settled in shares to a lower exercise price, other than to reflect an adjustment made pursuant to Section 14, shall be made without prior stockholder approval; (ii) except as provided in Section 14 of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the Participant and, (iii) the Committee shall not have any such authority to the extent that the grant or exercise of such authority would cause any tax to become due under Section 409A of the Code).  In addition, the Committee will have the authority to determine whether an authorized leave of absence, absence in the military or government service, or other break in the continuous service of an employee or consultant constitutes a termination of employment (or provision of services, in the case of a consultant).  The employment of an employee (or provision of services in respect of a consultant) with the Company shall be deemed to have terminated for all purposes of the Plan if such person is employed by or provides services to an entity that is a Subsidiary of the Company and such entity ceases to be a Subsidiary of the Company, unless the Committee determines otherwise.

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 Plan 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 to one or more subcommittees, which may be comprised of one or more directors, officers or employees of the Company to the extent permitted by applicable law, with respect to Participants who are not directors or executive officers of the Company.

5.Eligibility.  Each officer, employee, consultant or director 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 officer, employee, consultant 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, employee, consultant or director), retention or otherwise[, prior to the date the individual first performs services for the Company or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable prior to the date the individual first commences performance of such services

6

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 14, the aggregate number of shares of Stock subject to Awards that may be delivered under this Plan may not exceed 9,000,000 shares.  Shares delivered by the Company under the Plan may be authorized and unissued Stock 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 are forfeited or canceled, expire or are not issued due to the cash-settlement of such Award, shall be deemed not to have been delivered for purposes of determining the maximum number of shares available for delivery under the Plan.  Any shares of Stock covered by an Award (or portion of an Award) granted under a prior long-term incentive plan that are forfeited or canceled, expire or are not issued due to the cash-settlement of such prior long-term incentive plan Award shall be available for delivery under this Plan.

The maximum number of shares of Stock that may be issued in conjunction with  Restricted Stock or Restricted Stock Unit Awards under Section 7 of the Plan,  Performance Unit Awards under Section 9 of the Plan and other Equity Awards under Section 12 of the Plan shall in the aggregate be 4,500,000.  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 2,000,000 and the maximum amount of cash that may be granted pursuant to an Award during any calendar year under the Plan to any one person is $20,000,000; 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.   Shares of Stock covered by Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual or any successor provision) shall not count as used under the Plan for purposes of this Section 6..

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.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 Person.  The Restricted Stock may 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

7

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.  Each Restricted Stock or Restricted Stock Unit Award may have a different restriction period, at the discretion of the Plan Administrator.

The Plan Administrator may also impose such other restrictions and conditions on the Restricted Stock or Restricted Stock Unit as it deems appropriate including, without limitation, a requirement that a Participant pay a stipulated purchase price for each share of Restricted Stock or Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, service-based restrictions on vesting following attainment of performance goals or service-based restrictions.

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 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 Plan Administrator.

B.Forfeiture or Payout of Award.  For Awards that are subject to restrictions based upon achievement of specific performance goals, as soon as practicable after the end of each Performance Period, the Plan Administrator will determine whether the performance objectives and other material terms of the Award were satisfied.  The Plan Administrator’s determination of all such matters will be final and conclusive.

As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Award payment for each Participant. In the event a Participant ceases employment (or ceases board membership in the case of a director or ceases the performance of services in the case of a consultant) 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) involuntary Termination by the Company without cause (as determined in the sole discretion of the Company) - payout of the Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; (b) Retirement, Disability or death - payout of the Restricted Stock or Restricted Stock Unit Award is prorated for service during the period; or (c) other Termination - the Restricted Stock or Restricted Stock Unit Award is completely forfeited.  Notwithstanding the foregoing, the Plan Administrator may modify the above in its sole discretion in the actual Award.

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

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C.Form and Timing of Payment.  With respect to shares of Restricted Stock, upon completion of the restriction period and satisfaction of any other conditions related to the Award, all Award restrictions will expire and new certificates representing the Award will be issued (the payout) without the restrictive legend described in Section 7A.  With respect to Restricted Stock Units, upon completion of the restriction period and satisfaction of any other conditions related to the Award, such Units may be paid out in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in its sole discretion.  Such payouts will be made as soon as practicable after the Award payment is determined.

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

8.Stock Options.

A.Grants of Options.  One or more Options may be granted to any Eligible Person on the Date of Grant with or 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 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.

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D.Form of Payment.  At the time of the exercise of the Option, the Option price will be payable in cash or in shares of Stock or in a combination of cash and shares of Stock, in a form and manner as required by the Plan Administrator 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 vested Option may be exercised in whole or in part at any time.  In the event of a Change in Control, any vested option will remain exercisable for the duration of the Option Period.

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 or ceases the performance of services in the case of a consultant) within the Option Period and prior to the lapse of the Option, the Option will lapse as follows: (a) Retirement (for Awards granted on or after February 21, 2008) – any unvested Option shall continue to vest in accordance with the schedule set forth in the Stock Option Agreement and all Options will lapse on the earlier of the expiration date of the Option Period specified in the Stock Option Agreement or 5 years from the effective date of Retirement; (b) Retirement (for Awards granted before February 21, 2008), Disability or death – any unvested Option will lapse on the effective date of the Retirement, Disability or death and any vested Option will lapse at the expiration of the Option Period set by the Grant; or (c) other 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.  Notwithstanding the foregoing, the Plan Administrator may modify the above in its sole discretion in the actual Award.

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.Grants of Performance Units.  One or more Performance Units may be granted to any Eligible Person.  The Performance Units may be issued to the Participant on the Date of Grant without the payment of consideration by the Participant.  One or more Performance Units may be earned by an Eligible Person based on the achievement of performance objectives during a Performance Period, in the sole discretion of the Plan Administrator.  The Plan Administrator may also impose such other restrictions and conditions on the Performance Units as it deems appropriate.  Each Performance Unit Award may be subject to different restrictions and conditions, at the discretion of the Plan Administrator.

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

As soon as practicable after the date the Plan Administrator makes the above determination, the Plan Administrator will determine the Award payment for each Participant.

In the event a Participant ceases employment (or ceases board membership in the case of a director or ceases the performance of services in the case of a consultant) during a Performance Period (or at the Plan Administrator’s discretion, prior to Award payout), the Performance Unit Award generally is subject to forfeiture or payout as follows: (a) involuntary Termination by the Company without cause (as determined in the sole discretion of the Company), Retirement (for Awards granted before February 21, 2008), Disability or death – (i) if performance is at or above an applicable target at the time employment ceases, payout of the Performance Unit Award is based on 100% of target performance and prorated for service during the Performance Period and  (ii) if performance is below target at the time employment ceases no payout will be made; (b) Retirement (for Awards granted on or after February 21, 2008) – payout is prorated for service during the Performance Period and based on the achievement of performance objectives as determined by the Plan Administrator after the end of the Performance Period; or (c) other Termination - the Performance Unit Award is completely forfeited.  Notwithstanding the foregoing, the Plan Administrator may modify the above in its sole discretion in the actual Award.

C.Form and Timing of Payment. Each Performance Unit payout may be paid in cash or shares of Stock or in a combination of cash and Stock, as determined by the Plan Administrator in its sole discretion.  Such payouts will be made within a reasonable period of time, as determined in the sole discretion of the Plan Administrator, 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.  Each Stock Appreciation Right will have a grant price of not less than 100% of the Fair Market Value at the Date of Grant.  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.  A Stock Appreciation Right issued independent of an Option will be exercisable pursuant to such terms and conditions established in the Award.  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

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of the Company for a vote, the Plan Administrator, 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 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.  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 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.

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 the Plan Administrator must consent to or disapprove such election.  The value of the Stock to be received upon exercise of a Stock Appreciation Right shall be the Fair Market Value of the Stock on the trading day preceding the date on which the Stock Appreciation Right is exercised.  To the extent that a Stock Appreciation Right issued pursuant to an Option is exercised, such Option shall be deemed to have been exercised, and shall not be deemed to have lapsed.

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

F.Lapse of a Stock Appreciation Right.  A Stock Appreciation Right will lapse upon the earlier of:  (i) 10 years from the Date of Grant; or (ii) at the expiration of the Exercise Period as set by the grant.  If the Participant ceases employment (or ceases Board membership in the case of a director or ceases the performance of services in the case of a consultant) within the Exercise Period and prior to the lapse of the Stock Appreciation Right, the Stock Appreciation Right will lapse as follows: (a) 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

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lapse at the expiration of the Exercise Period set by the grant; or (b) other 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; provided, however, that the Plan Administrator may modify the above in its sole discretion.

11.Dividend Equivalents.

A.Grants of Dividend Equivalents.  Dividend Equivalents may also be granted under the Plan in conjunction with Restricted Stock, Restricted Stock Units or Performance Units, at any time during the Performance Period, without consideration by the Participant.  Dividend Equivalents will be structured in a manner that complies with Section 409A of the Code.

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 its 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 end of the Performance Period (or if earlier, the date the Participant ceases employment or ceases board membership in the case of a director or ceases the performance of services in the case of a consultant) of the related Performance Units, Restricted Stock or Restricted Stock Unit Award; or (ii) the lapse date established by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

12.Cash-Based Awards and Other Equity Awards.

A.Grant of Cash-Based Awards.  Cash-Based Awards may be granted to any Eligible Person, in such amounts, on such terms and conditions, and for such consideration, including no consideration as the Plan Administrator shall determine.  A Cash-Based Award may be paid in cash or shares of Stock or in a combination of cash and Stock, as determined in the sole discretion of the Plan Administrator.

B.Other Equity Awards. 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 as the Plan Administrator shall determine.  An Other 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, as determined in the sole discretion of the Plan Administrator.

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C.Forfeiture of Payout of Award.  The Plan Administrator shall determine the extent to which the Participant shall have the right to receive outstanding Cash-Based Awards or Other Equity Awards or to have such Awards vest or payout, as applicable, in the event a Participant ceases employment (or ceases board membership in the case of a director or ceases the performance of services in the case of a consultant).  Such provisions shall be determined in the sole discretion of the Plan Administrator, may be included in an agreement with the Participant reflecting the terms of such Award, but need not be uniform among all such Awards, and may reflect distinctions based on the reasons for the cessation.

13.Performance Measures.

A.General.  Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Section, the performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to goals set by reference to the following Performance Measures: net earnings or net income (before or after taxes); earnings per share; share price (including growth measures and total shareholder return); net sales growth; net operating profit; capital targets (including return on capital); return on assets; return on equity; earnings before or after taxes, interest, depreciation and/or amortization; ongoing earnings; net earnings; net sales growth; return on sales; cash flow (including operating cash flow, free cash flow, discounted cash flow return on investment, cash flow return on capital and cash flow in excess of costs of capital); economic value added; value created; economic profit (net operating profit after tax, less a cost of capital charge); shareholder value added; revenues; operating income; pre-tax profit margin; gross margin; performance against business plan; customer service; corporate governance quotient or rating; market share; productivity ratios; operating efficiency; employee satisfaction; customer satisfaction; safety; employee engagement; succession planning; supplier diversity; workforce diversity; margins (including gross, future gross or operating margins); credit rating; dividend payments; expenses (including targets or ratios); fuel cost per million BTU; costs per kilowatt hour; retained earnings; completion of acquisitions, divestitures, corporate restructurings, projects or other specific events or transactions; and individual goals based on objective business criteria underlying the goals listed above and which pertain to individual effort as to achievement of those goals or to one or more business criteria in the areas of litigation, human resources, information services, production, inventory, support services, site development, plant development, building development, facility development, government relations, product market share or management.

In the event the Committee intends that any Award under this Plan should qualify as Performance-Based Compensation, such Awards shall be granted in accordance with the additional requirements of this Section, which, in case of any conflict, shall supersede any other provision of the Plan.  For Awards subject to Performance Measures set forth in this Section, the Committee will establish (a) Performance Target(s) relative to the applicable Performance Measures, (b) the applicable Performance Period and (c) the applicable amount of cash or

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number of shares 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 of less than the amount determined by the formula or standard established pursuant to this Section or may pay no Award at all.  Before any payments are made under this Section, the Committee shall be responsible for certifying in writing to the Company that the applicable Performance Targets have been met.

B.Selection of Performance Target(s).  The specific Performance Target(s) with respect to the Performance Measures 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 based on the performance of the Company or a Subsidiary as a whole or any business unit of the Company or a Subsidiary or any combination thereof, as the Committee may deem appropriate, or on a cumulative basis or in the alternative, or as compared to the performance of a group of comparator companies, or a published or special index that the Committee, in its sole discretion, deems appropriate.  The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 13.  The Committee also has the authority to use any other performance measures in connection with Awards under the Plan that are not intended to qualify as Performance-Based Compensation.  At the time the Performance Target(s) are selected, the Committee shall provide, in terms of an objective formula or standard for each Participant, the method of computing the specific amount that will represent the maximum amount of Award payable to the Participant if the Performance Target(s) are attained.  The objective formula or standard shall preclude the use of discretion to increase the amount of any Award earned pursuant to the terms of the Award.

C.Evaluation of Performance For Performance–Based Compensation.  The Committee may provide in any such Award that any evaluation of performance may include or exclude, in whole or in part, any one or more of the following with respect to the Performance Period: (i) the gain, loss, income or expense resulting from changes in tax laws or accounting principles or other laws or provisions affecting reported results,  that become effective during the Performance Period; (ii) the gain, loss, income or expense with respect to the Performance Period that are extraordinary or unusual in nature or infrequent in occurrence, including but not limited to gain or loss on certain transactions that do not meet the definition of cash flow hedges under U.S. generally accepted accounting principles and must be recognized for financial statement purposes prior to financial statement recognition of the gain or loss of the underlying transaction and also including but not limited to any major corporate transaction-related costs; (iii) the gains or losses resulting from, and the direct expenses incurred in connection with mergers, acquisitions or  the disposition of a business, in whole or in part, or the sale of investments or non-core assets;

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(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 including but not limited to changes in valuation allowances for deferred income tax assets; (vi) any impact of the phase-out of the tax credit for synthetic fuel or any synthetic fuel earnings; (vii) the impact of reorganization, restructuring or business recharacterization activities, including but not limited to reductions in force; (viii) foreign exchange gains and losses and (ix) 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 13C 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.  To the extent such adjustments affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility. The adjustments are to be determined in accordance with U.S. 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 Performance Measures, 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.

D.            Committee Discretion to Determine Award.  The Committee has the sole discretion to determine the standard or formula pursuant to which each Participant’s Award shall be calculated, whether all or any portion of the amount so calculated will be paid, and the specific amount (if any) to be paid to each Participant, subject in all cases to the terms, conditions and limits of the Plan.  To this same extent, the Committee may at any time establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of Awards (including but not limited to the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the Plan.  The Committee may not, however, with respect to Performance-Based Compensation, increase the maximum amount permitted to be paid to any individual under the Plan or pay Awards under this Section 13 if the applicable Performance Target(s) have not been satisfied.

In the event that the requirements of Section 162(m) and the regulations thereunder change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.  In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation and/or to amend previously granted Awards in a way that would disqualify them as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and may base vesting on Performance Measures other than those set forth in Section 13A and/or make such amendments.

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14.Accelerated Award Payout/Exercise.

A.Adjustment Upon Changes in Stock.  In the event of any change in the number of shares of Stock outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of shares of Stock with respect to which the Committee may grant Awards and the maximum aggregate number of shares of Stock with respect to which the Committee may grant Awards to any individual Participant in any year shall be appropriately adjusted by the Committee.  In the event of any change in the number of shares of Stock outstanding by reason of any other similar event or transaction, the Committee may, but need not, make such adjustments in the number and class of shares of Stock with respect to which Awards may be granted as the Committee may deem appropriate.

B.Increase or Decrease in Issued Shares Without Consideration. Subject  to any required action by the shareholders of the Company, in the event of any increase or decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares of Stock or the payment of a stock dividend (but only on the shares of Stock), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee shall proportionally adjust the number of shares of Stock subject to each outstanding Award and the exercise price per share of Stock of each such Award.

C.Certain Mergers.  Subject to any required action by the shareholders of the Company, in the event that the Company shall be the surviving corporation in any merger, consolidation or similar transaction as a result of which the holders of shares of Stock receive consideration consisting exclusively of securities of such surviving corporation, the Committee shall adjust each Award outstanding on the date of such merger or consolidation so that it pertains to and applies to the securities which a holder of the number of shares of Stock subject to such Award would have received in such merger or consolidation.

D.Certain Other Transactions.

In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis), (iii) a merger, consolidation or similar transaction involving the Company in which the Company is not the surviving corporation or (iv) a merger, consolidation or similar transaction involving the Company in which the Company is the surviving corporation but the holders of shares of Stock receive securities of another corporation and/or other property, including cash, the Committee shall, in its discretion, have the power to:

(i)  cancel, effective immediately prior to the occurrence of such event, each Award (whether or not then exercisable), and, in full consideration of such cancellation, pay to the Participant to whom such Award was granted an amount in cash, for each share of Stock subject to such Award equal to the value, as determined by the  Committee in its discretion, of such Award, provided that with respect to any outstanding Option such value shall be equal to the excess of (A) the value, as

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determined by the Committee in its discretion, of the property (including cash) received by the holder of a share of Stock as a result of such event over (B) the exercise price of such Option; or

(ii)  provide for the exchange of each Award (whether or not then exercisable or vested) for an incentive award with respect to, as appropriate, some or all of the property which a holder of the number of shares of Stock subject to such Award would have received in such transaction and, incident thereto, make an equitable adjustment as determined by the Committee in its discretion in the exercise price of the incentive award, or the number of shares or amount of property subject to the incentive award or, if appropriate, provide for a cash payment to the Participant to whom such Award was granted in partial consideration for the exchange of the Award.

E.Other Changes.  In the event of any change in the capitalization of the Company or corporate change other than those specifically referred to in paragraphs B, C or D, the Committee may, in its discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in such other terms of such Awards as the Committee may consider appropriate.

F.No Other Rights.  Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of the Company or any other corporation.  Except as expressly provided in the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to any Award.

G.Change in Control.  Unless otherwise determined by the Committee in connection with the grant of an Award, or unless the Participant and the Company agree in writing that the provisions of this Section 14G shall not apply, the following provisions shall apply upon the occurrence of a Change in Control of the Company:

i.Restricted Stock, Restricted Stock Unit, Cash-Based, or Other Equity Awards Subject to Service-Based Restrictions on Vesting. A prorata portion of all outstanding Restricted Stock, Restricted Stock Unit, Cash-Based or Other Equity Awards subject to service-based restrictions on vesting will be immediately and fully vested and earned, with the prorata portion determined based on the number of months in the restriction period that have elapsed as of the date of the Change in Control as compared to the total number of months in the restriction period.  The amount of the Award not so vested shall remain outstanding (on a converted basis, if applicable) in accordance with the original terms of the Award.

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ii.Stock Option Awards and Stock Appreciation Rights.  Any previously granted Stock Option Awards or Stock Appreciation Rights will be immediately and fully vested and will become fully exercisable.

Restricted Stock, Restricted Stock Unit, Cash-Based, or Other Equity Awards with Restrictions Based on Achievement of Performance Goals/Performance Units.  The Participant will be entitled to an immediate accelerated vesting and payout of Performance Unit, Restricted Stock, Restricted Stock Unit, Cash-Based or Other Equity Awards with restrictions based on achievement of performance goals, and the amount of the accelerated vesting and payout will be based on the number of such 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 date of the Change in Control as compared to the total number of months in the Performance Period, and assuming maximum performance was achieved.   Applicable payouts shall be made in the form set forth in the original terms of the grant.  The amount of the Award not so vested shall remain outstanding (on a converted basis, if applicable) in accordance with the original terms of the grant.

H.Savings Clause.  No provision of this Section 14 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.

15.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 14A - - E), 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 materially adversely affects the rights of such Participant concerning such Award, except as such alteration, termination, suspension 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, or the requirements of any securities exchange on which shares of stock are traded, shall be effective without such consent.  Notwithstanding the foregoing, except as otherwise required by applicable law, rule or regulation, the Committee may amend the Plan at its discretion to (i) address any issues concerning Section 162(m) of the Code; (ii) comply with applicable laws, rules or regulations and changes thereto; or (iii) maintain an exemption under rule 16b-3 of the 1934 Act. No provision of this Section 14 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.

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16.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 Plan Administrator may permit or require a Participant to have any portion of any withholding or other taxes payable in respect to a distribution of Stock satisfied through the payment of cash by the Participant to the Company or a Subsidiary, the retention by the Company or a Subsidiary of shares of Stock, or delivery of previously owned shares of the Participant’s Stock, having a Fair Market Value equal to the withholding amount.

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

E.Government and Other Regulations.  The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by any government agencies as may be required. The Company shall be under no obligation to register under the Securities Act of 1933, as amended (“Act”), any of the shares of Stock issued, delivered or paid in settlement under the Plan.  If Stock awarded under the Plan may in certain circumstances be exempt from registration under the Act, the Company may restrict its transfer in such manner as it deems advisable to ensure such exempt status.  Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Stock are traded.

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The exercise of any Option or Stock Appreciation Right granted under the Plan shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of shares of Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Stock are traded.  The Company may, in its discretion, defer the effectiveness of an exercise of an Option or Stock Appreciation Right hereunder or the issuance or transfer of shares of Stock pursuant to any Award pending or to ensure compliance under federal or state securities laws or the rules or regulations of any exchange on which the shares are then listed for trading.  The Company shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or Stock Appreciation Right or the issuance or transfer of shares of Stock pursuant to any Award.  During the period that the effectiveness of the exercise of an Option or Stock Appreciation Right has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.

F.Compliance with Section 409A of the Code.  This Plan is intended to comply and shall be administered in a manner that is intended to comply with section 409A of the Code and shall be construed and interpreted in accordance with such intent.  To the extent that an Award, issuance and/or payment is subject to section 409A of the Code, it shall be awarded and/or issued or paid in a manner that will comply with section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto.  Any provision of this Plan that would cause an Award, issuance and/or payment to fail to satisfy section 409A of the Code shall have no force and effect until amended to comply with Code section 409A (which amendment may be retroactive to the extent permitted by applicable law).

G.Indemnification.  Each person who is or at any time serves as a member of the Committee (and each person or committee to whom the Committee or any member thereof has delegated any of its authority or power under this Plan) shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit, or proceeding relating to the Plan.  Each person covered by this indemnification shall 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.

H.Reliance on Reports.  Each member of the Committee (and each person or committee to whom the Committee or any member thereof has

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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 registered public accounting firm 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.

I.Severability.  If any provision of this Plan would cause Awards intended  to qualify as Performance-Based Compensation to not so qualify, that provision shall be severed from, and shall be deemed not to be a part of, the Plan, but the other provisions hereof shall remain in full force and effect.  Any specific action by the Committee that would be violative of Section 162(m) with respect to Awards intended to qualify as Performance-Based Compensation shall be void.

J.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.

K.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.

L.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.

M.Expenses.  The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

N.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.

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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

17th Floor

Baltimore, Maryland 21202

(410) 470-3011

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Executive Long-Term Incentive Plan

Appendix

Additional Information

The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974, and the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

Participants may obtain additional information about the Plan by contacting:

Manager – Executive Compensation

Constellation Energy Group, Inc.

750 East Pratt Street

5^th Floor

Baltimore, MD 21202

(410) 470-3244

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 Stock Option Agreement (“Agreement”)

You (“Participant”) have been granted stock options (“Options”) under the Constellation Energy Group, Inc. (“Constellation Energy”) Long-Term Incentive Plan (the “Plan”) shown in the attached Grant Header Information Table (“Table”). The number of Options granted is shown as “Granted Amount” in the Table. In addition to other provisions of the Plan, this award is subject to the following conditions. All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.

1. Grant of Options.

The Options are 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 vested Options are exercisable (i.e., prior to the “Expiration Date” in the Table).

2. Installment Exercise.

Subject to the terms of the Plan and this Agreement, the Options will vest and be exercisable in installments according to the “Vesting Schedule” in the Table.

3. Termination of Options.

(a)Except as provided in paragraph 3(b) below, the Options will terminate upon the earlier to occur of: (1) when all Options have been exercised; or (2) the Expiration Date.

(b)Upon Termination of employment, all unvested Options are forfeited.  Notwithstanding the foregoing, with respect to options granted after 2007, upon Retirement unvested options shall continue to vest as set forth in the Vesting Schedule.

(c)In the event of Retirement, Disability or death, vested Options will remain exercisable as specified in the Plan document under which the options were granted.  In the event of Participant’s death during the Option Period, vested Options 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 Options or dies intestate, such vested Options may be exercised by persons(s) entitled to receive the Options under the applicable laws of descent and distribution.

(d)In the event of Termination of employment for any other reason, vested Options will be exercisable for 90 days following the Termination effective date.

(e)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. Benefits Eligibility.

Options and proceeds from Option exercises are not eligible compensation for benefits purposes.

5. Exercise of Options.

(a)Subject to this Agreement and the Plan, Options may be exercised in whole or in part, by the method specified by the Plan Administrator from time to time, by Participant contacting [Name} at [Phone #] or [Phone #].

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(b)On or before the exercise date specified pursuant to paragraph 5(a), Participant must fully pay the “Exercise Price Per Share” as shown in the Table (“Exercise Price”) and the tax withholding obligation for the Options 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 5(c) below, by delivery of shares of Constellation Energy common stock (“Stock”) owned by Participant and acceptable to the Plan Administrator having an aggregate Fair Market Value (as defined in paragraph 7 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 Options (or a sufficient portion of the Options), 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 Options that would otherwise be deliverable to Participant by reason of the Option exercise. The Options will cease to be exercisable, as to the portion exercised, when Participant purchases the stock to which the exercised portion of the Options 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 Options. Except as permitted by the Insider Trading Policy, the Options may not be exercised by Participant during any blackout or prohibited trading period established by Constellation Energy or applicable to Participant, nor shall the Options 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 Options.

6. 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 Options or its exercises in such form and manner as provided in the Plan.

7. 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.

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8. 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 Options, in whole or in part, before the date of exercise of the Options and purchase of the shares.

9. Non-Transferability of Options.

The Options are 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 Options be subject to attachment, execution or other similar process. During Participant’s lifetime, the Options are 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 Options have 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 Options, except as provided in this 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 Options by notice to Participant and the Options will become null and void.

10. Employment Not Affected.

Neither this Agreement nor the grant of the Options 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.

11. Incorporation of Plan by Reference.

The Options are granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Options will in all respects be interpreted in accordance with 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.

12. 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. 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 #]	[Phone #]	[Phone #]

Please accept this Agreement by clicking on the “I ACCEPT this grant” button below.

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Form of Service-Based Restricted Stock Award Agreement (“Agreement”)

You have been granted service-based restricted shares of Constellation Energy Group, Inc. (“Constellation Energy”) Common Stock (the “Award”) under the Constellation Energy Group, Inc. Long-Term Incentive Plan (the “Plan”) shown in the attached Grant Header Information Table (“Table”). The number of shares granted is shown as “Granted Amount” in the Table. In addition to other provisions of the Plan, your Award is subject to the following conditions.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.

1.The shares vest in accordance with the “Vesting Schedule” in the Table.

2.Prior to the applicable Vesting Date as shown in the Vesting Schedule, on any date that Constellation Energy pays dividends with respect to the Common Stock, Constellation Energy shall credit you with a number of service-based restricted shares equal to:

(i)the number of your service-based Restricted Stock shares on the dividend record date times

(ii)the dividend rate per share, divided by

(iii)the per share reinvestment price. Shares are either bought in the open market or bought directly from Constellation Energy.  The per share reinvestment price for shares bought on the open market will be the weighted average price per share (plus brokerage commission and fees) of the total number of shares purchased with reinvested dividends.  The purchase price for shares bought directly from Constellation Energy is the average of the high and low sale prices of shares on the investment date, or, if the stock is not traded on that date, the prices from the previous trading day.

These dividend-based additional shares of service based Restricted Stock are subject to the same rules and restrictions as the shares of service-based Restricted Stock originally granted to you.

3.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 acceptance of this Agreement 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 shares vest (see Attachment A). This waiver allows Constellation Energy to treat dividends on unvested shares as compensation, thereby giving Constellation Energy a tax deduction for such amounts.

4.As provided in the Plan, until the Award shares vest, you may not sell, transfer, pledge or hypothecate the shares. Constellation Energy will hold the shares for safekeeping until the shares vest.

5.You are required to comply with Constellation Energy’s Insider Trading Policy at all times, including in connection with the sale or transfer of vested shares.  If you contemplate the sale or transfer (for example to a family member) of any shares after they vest, please first review the Constellation Energy Insider Trading Policy. If you need a copy of the policy, you should contact the SEC-related person specified below.

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6.In the event of involuntary Termination without cause (as determined by Constellation Energy), Retirement, Disability or death before the Award shares vest, a prorated portion of the shares will vest based on service after the Grant Date (see Table). In the event of Termination for any other reason, any unvested Award shares will be forfeited.

7.Awards are not eligible compensation for benefit purposes.

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

9.The Award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The Award will in all respects be interpreted in accordance with 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.

10.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.

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 #]	[Phone #]	[Phone #]

Please accept this Agreement by clicking on the “I ACCEPT this grant” button below.

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ATTACHMENT A

Constellation Energy Group, Inc.

Long-Term Incentive Plan

Income Tax Consequences To Participants

For Service-Based Restricted Stock Awards

Set forth below 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 vesting 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 shares vest. The amount subject to income tax is the fair market value of the stock on the day that the shares vest. This amount is treated as compensation subject to withholding of applicable federal, state or local taxes. You are not taxed on the value of any stock forfeited.

(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 shares vest. This allows Constellation Energy to treat dividends on unvested shares as compensation, thereby giving Constellation Energy a tax deduction for such amounts.

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 shares vested. 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 shares vest.

Dividends

The dividends on unvested shares of Restricted Stock will be automatically reinvested in additional shares of Constellation Energy 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 shares vest, 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 shares vest 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.

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Form of Stock Unit with Sale Restriction Agreement (“Agreement”)

You have been granted Constellation Energy Group, Inc. (“Constellation Energy”) common stock units with sale restrictions (“Stock Units”) under the Constellation Energy Group, Inc. Long-Term Incentive Plan (the “Plan”). The number of Stock Units granted is shown as “Granted Amount” in the attached Grant Header Information Table (“Table”). In addition to other provisions of the Plan, your award is subject to the following conditions.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.

1.Each Stock Unit entitles you to receive on the “Restriction Lapse Date” (see “Vesting Schedule” in the Table) one share of Constellation Energy common stock (“Common Stock”). Under current tax law, you are not subject to tax on your Stock Units until the Restriction Lapse Date (see paragraph 4 below).

2.Prior to the Restriction Lapse Date, on any date that Constellation Energy pays dividends with respect to the Common Stock, Constellation Energy shall credit you with a number of Stock Units equal to:

(i)the number of your Stock Units on the dividend record date times

(ii)the dividend rate per share, divided by

(iii)the per share reinvestment price. Shares are either bought in the open market or bought directly from Constellation Energy.  The per share reinvestment price for shares bought on the open market will be the weighted average price per share (plus brokerage commission and fees) of the total number of shares purchased with reinvested dividends.  The purchase price for shares bought directly from Constellation Energy is the average of the high and low sale prices of shares on the investment date, or, if the stock is not traded on that date, the prices from the previous trading day.

These dividend-based additional Stock Units are subject to the same rules and restrictions as Stock Units originally granted to you.

3.Your Stock Units are fully and immediately vested; however, prior to the Restriction Lapse Date, you may not sell, transfer, pledge or hypothecate the Stock Units, irrespective of your employment status. Prior to the Restriction Lapse Date, you will have no voting rights with respect to the Stock Units.

4.You are required to comply with Constellation Energy’s Insider Trading Policy at all times, including in connection with the sale or transfer of unrestricted shares.  If you contemplate the sale or transfer (for example to a family member) of any shares, please first review the Constellation Energy Insider Trading Policy. If you need a copy of the policy, you should contact the SEC-related person specified below.

5.Following the Restriction Lapse Date, Constellation Energy shall cause to be issued to you a certificate for shares of Common Stock equal to the number of your Stock Units (including dividend-based additional Stock Units). 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). Constellation Energy will be required to withhold applicable minimum taxes at such time.

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You should consult your tax advisor regarding any tax issues. The total shares you receive will be rounded to the nearest whole share.

6.Amounts granted are not eligible compensation for benefit purposes.

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

8.The award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference. The award will in all respects be interpreted in accordance with 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 the Agreement.

9.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.

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 #]	[Phone #]	[Phone #]

Please accept this Agreement by clicking on the “I ACCEPT this grant” button below.

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Form of Performance Unit Agreement (“Agreement”)

You have been granted a target number of Performance Units (the “Units”) under the Constellation Energy Group, Inc. (“Constellation Energy”) Long-Term Incentive Plan (the “Plan”) shown in the attached Grant Header Information Table (“Table”).  The target number of Units granted is shown as “Granted Amount” in the Table.  In addition to other provisions of the Plan, your award is subject to the following conditions.  All capitalized terms, which are not otherwise defined in this Agreement, will have the meaning specified in the Plan.

1.Each Unit is worth $1. Under current tax law, you are not subject to tax on your Units until the “Vesting Date” as shown in the “Vesting Schedule” in the Table. The final award payout on the Vesting Date will be based on achievement of the performance objectives over the Performance Period, all as set forth in the performance unit program guidelines previously supplied (“Program Guidelines”).

2.The Plan Administrator will determine the award payout after the conclusion of the Performance Period.  The Plan Administrator’s determination regarding the satisfaction of the established performance objectives will be final and conclusive.

3.The Units will be paid out in cash.

4.With respect to Units granted after 2007, in the event of Retirement before the end of the Performance Period, a pro rata portion of the Units will vest based on service during the Performance Period, and any payout will be made after the end of the Performance Period based on actual performance.

In the event of involuntary Termination without cause (as determined by Constellation Energy), Disability, Retirement (with respect to Units granted before 2008) or death before the end of the Performance Period, a pro rata portion of the Units will vest based on service during the Performance Period.  The payout will be at target if Constellation Energy’s performance is at or above target.  If performance is below target then the Units are forfeited.

In the event of employment Termination for any other reason prior to the Vesting Date, the Units are forfeited.

5.Under current tax law, you will be subject to tax on the applicable Vesting Date on the award payout amount.  Constellation Energy will be required to withhold applicable taxes at such time.

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

7.Awards are not eligible compensation for benefit purposes.

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

9.The award is granted pursuant to the terms of the Plan, the terms of which are incorporated in this Agreement by reference.  The award will in all respects be interpreted in accordance with the Plan.  The Plan Administrator will interpret and construe the Plan and this Agreement, and

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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 the Agreement.

10.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.

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 #]	[Phone #]	[Phone #]

Please accept this Agreement by clicking on the “I ACCEPT this grant” button below.

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EX-12.(A)

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Exhibit 12(a)

CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

		3 Months Ended		12 Months Ended
		March 2008		December 2007		December 2006		December 2005		December 2004		December 2003
		(In millions)
Income from Continuing Operations (Before Extraordinary Loss and Cumulative Effects of Changes in Accounting Principles)		$	145.7	$	822.4	$	748.6	$	535.9	$	498.4	$	409.4
Taxes on Income, Including Tax Effect for BGE Preference Stock Dividends			74.3		419.2		343.1		155.4		110.2		213.7
Adjusted Income		$	220.0	$	1,241.6	$	1,091.7	$	691.3	$	608.6	$	623.1
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness, net of amounts capitalized	$	71.8	$	292.8	$	315.9	$	297.6	$	315.9	$	325.6
	Earnings Required for BGE Preference Stock Dividends		4.8		22.3		21.1		21.6		21.4		21.7
	Capitalized Interest and Allowance for Funds Used During Construction		7.1		19.4		13.7		9.9		9.7		11.7
	Interest Factor in Rentals		20.3		96.7		4.5		6.1		4.1		3.5
	Total Fixed Charges	$	104.0	$	431.2	$	355.2	$	335.2	$	351.1	$	362.5
Amortization of Capitalized Interest		$	1.1	$	3.5	$	4.3	$	3.7	$	2.8	$	2.4
Earnings (1)		$	318.0	$	1,656.9	$	1,437.5	$	1,020.3	$	952.8	$	976.3
Ratio of Earnings to Fixed Charges			3.06		3.84		4.05		3.04		2.71		2.69

(1)

Earnings are deemed to consist of income from continuing operations (before extraordinary items, cumulative effects of changes in accounting principles, and income (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

		3 Months Ended		12 Months Ended
		March 2008		December 2007		December 2006		December 2005		December 2004		December 2003
		(In Millions of Dollars)
Income from Continuing Operations (Before Extraordinary Loss)		$	76.3	$	139.8	$	170.3	$	189.0	$	166.3	$	163.2
Taxes on Income			35.4		96.0		102.2		119.9		102.5		105.2
Adjusted Income		$	111.7	$	235.8	$	272.5	$	308.9	$	268.8	$	268.4
Fixed Charges:
	Interest and Amortization of Debt Discount and Expense and Premium on all Indebtedness, net of amounts capitalized	$	35.0	$	127.9	$	104.6	$	95.6	$	97.3	$	112.8
	Interest Factor in Rentals		0.1		0.3		0.3		0.3		0.5		0.7
	Total Fixed Charges	$	35.1	$	128.2	$	104.9	$	95.9	$	97.8	$	113.5
Preferred and Preference
	Dividend Requirements: (1)
	Preferred and Preference Dividends	$	3.3	$	13.2	$	13.2	$	13.2	$	13.2	$	13.2
	Income Tax Required		1.5		9.1		8.0		8.4		8.1		8.6
	Total Preferred and Preference Dividend Requirements	$	4.8	$	22.3	$	21.2	$	21.6	$	21.3	$	21.8
Total Fixed Charges and Preferred and Preference Dividend Requirements		$	39.9	$	150.5	$	126.1	$	117.5	$	119.1	$	135.3
Earnings (2)		$	146.8	$	364.0	$	377.4	$	404.8	$	366.6	$	381.9
Ratio of Earnings to Fixed Charges			4.18		2.84		3.60		4.22		3.75		3.36
Ratio of Earnings to Combined Fixed Charges and Preferred and Preference Dividend Requirements			3.68		2.42		2.99		3.45		3.08		2.82

(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 items) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

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



(d)

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 control 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: May 9, 2008

/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, John R. Collins, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

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



(d)

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 control 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: May 9, 2008

/s/  JOHN R. COLLINS 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

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



(d)

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 control 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: May 9, 2008

/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, John R. Collins, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

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



(d)

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 control 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: May 9, 2008

/s/  JOHN R. COLLINS 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 March 31, 2008 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: May 9, 2008

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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, John R. Collins, 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 March 31, 2008 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/  JOHN R. COLLINS John R. Collins
Executive Vice President and Chief Financial Officer

Date: May 9, 2008

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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 March 31, 2008 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: May 9, 2008

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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, John R. Collins, 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 March 31, 2008 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/  JOHN R. COLLINS John R. Collins
Senior Vice President and Chief Financial Officer

Date: May 9, 2008

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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