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&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;I&gt;Environmental Matters
&lt;/I&gt;&lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;U&gt;Solid and Hazardous Waste&lt;/U&gt;
&lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;In 1999, the EPA proposed to add the
68th&amp;nbsp;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 at the site. In March 2004, we
and other potentially responsible parties formed the 68th&amp;nbsp;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. &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;U&gt;Air Quality&lt;/U&gt; &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;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 requires
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. &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT
size=2&gt;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;In January 2009, the EPA
issued a notice of violation (NOV) to a subsidiary of Constellation Energy, as
well as the other owners and the operator of the Keystone coal-fired power plant
in Shelocta, Pennsylvania. We hold an approximately 21% interest in the Keystone
plant. The NOV alleges that the plant performed various capital projects
beginning in 1984 without complying with the new source review permitting
requirements of the Clean Air Act. The EPA also contends that the alleged
failure to comply with those requirements are continuing violations under the
plant's air permits. The EPA could seek civil penalties under the Clean Air Act
for the alleged violations. &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT
size=2&gt;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;The owners and operator
of the Keystone plant are investigating the allegations and have entered into
discussions with the EPA. We believe there are meritorious defenses to the
allegations contained in the NOV. However, we cannot predict the outcome of this
proceeding and it is not possible to determine our actual liability, if any, at
this time. &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;!-- SEQ.=16,FOLIO='26',FILE='DISK108:[09ZBZ1.09ZBZ44501]EC44501A.;15',USER='CGONCE',CD=';7-AUG-2009;08:36' --&gt;&lt;A
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&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;U&gt;Water Quality&lt;/U&gt; &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;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&amp;nbsp;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
$7.9&amp;nbsp;million, which includes the $1&amp;nbsp;million penalty and our estimate
of probable costs to remediate contamination, replace drinking water supplies,
monitor groundwater conditions, and otherwise comply with the consent decree. We
have paid approximately $4.1&amp;nbsp;million of these costs as of June&amp;nbsp;30,
2009, resulting in a remaining liability at June&amp;nbsp;30, 2009 of
$3.8&amp;nbsp;million. We estimate that it is reasonably possible that we could
incur additional costs of up to approximately $10&amp;nbsp;million more than the
liability that we accrued. &lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;&lt;I&gt;Insurance &lt;/I&gt;&lt;/FONT&gt;&lt;/P&gt;
&lt;P style="FONT-FAMILY: times"&gt;&lt;FONT size=2&gt;We discuss our nuclear and
non-nuclear insurance programs in &lt;/FONT&gt;&lt;FONT
size=2&gt;&lt;I&gt;Note&amp;nbsp;12&lt;/I&gt;&lt;/FONT&gt;&lt;FONT size=2&gt; of our 2008 Annual Report on
Form&amp;nbsp;10-K. &lt;/FONT&gt;&lt;/P&gt;&lt;/BODY&gt;&lt;/HTML&gt;
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Solid and Hazardous Waste

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