content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                     FORM 10-Q
  
  
  
            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
             For the quarterly period ended...June 30, 1995............
  
                                         OR
  
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
            For the transition period from............to................
  
  
                  Commission file number..........1-1401..........
  
  
           .....................PECO Energy Company.....................
               (Exact name of registrant as specified in its charter)
  
  
           ............Pennsylvania.................... 23-0970240......
                  (State or other jurisdiction of (I.R.S. Employer
             incorporation or organization)         Identification No.)
  
           ...2301 Market Street, Philadelphia, PA..........19103.......
                (Address of principal executive offices) (Zip Code)
  
            ......................(215) 841-4000........................
                (Registrant's telephone number, including area code)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing
  requirements for the past 90 days.
  
                              Yes _X_   No ___
  
  
  Indicate the number of shares outstanding of each of the issuer's classes of
  common stock as of the latest practicable date. The Company had 221,903,072
  shares of common stock outstanding on July 31, 1995.
  
  
  
  <PAGE>
  
                           PART I. FINANCIAL INFORMATION
                            ITEM 1. FINANCIAL STATEMENTS
                    PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                    (Unaudited)
                               (Millions of Dollars)
  
  <TABLE>
  <CAPTION>
                                                   3 Months Ended                   6 Months Ended
                                                      June 30,                         June 30,
                                               -------------------------       --------------------------
                                                  1995            1994              1995              1994
                                                -------           -------        ---------          ---------
  <S>                                          <C>              <C>            <C>               <C>
  OPERATING REVENUES
  Electric                                      $887.5            $885.4         $1,768.9           $1,807.0
  Gas                                             71.1              66.2            248.3              273.0
                                                -------           -------        ---------          ---------
  TOTAL OPERATING REVENUES                       958.6             951.6          2,017.2            2,080.0
                                                -------           -------        ---------          ---------
  OPERATING EXPENSES
  Fuel and Energy Interchange                    166.6             161.5            366.9              421.3
  Other Operating                                213.2             250.9            444.8              473.6
  Maintenance                                     74.4              86.4            155.4              176.6
  Depreciation                                   112.5             109.3            224.1              218.0
  Income Taxes                                    85.6              68.7            183.6              172.4
  Other Taxes                                     73.7              72.0            153.1              155.0
                                                -------            ------        ---------          ---------
  TOTAL OPERATING EXPENSES                       726.0             748.8          1,527.9            1,616.9
                                                -------           -------        ---------          ---------
  OPERATING INCOME                               232.6             202.8            489.3              463.1
                                                -------           -------        ---------          ---------
  OTHER INCOME AND DEDUCTIONS
  Allowance for Other Funds Used
        During Construction                        3.2               2.9              7.5                5.0
  Gain on Sale of Subsidiary, Net                 27.1               --              27.1                --
  Income Taxes                                    (1.0)             (8.5)            (2.3)             (11.4)
  Other, Net                                       0.6              16.8              2.3               24.1
                                                -------           -------        ---------          ---------
  TOTAL OTHER INCOME AND DEDUCTIONS               29.9              11.2             34.6               17.7
                                                -------           -------        ---------          ---------
  INCOME BEFORE INTEREST CHARGES                 262.5             214.0            523.9              480.8
                                                -------           -------        ---------          ---------
  INTEREST CHARGES
  Long-Term Debt                                  97.0              92.0            196.1              192.0
  Company Obligated Minority Interests
        in Partnership                             5.0               --              10.0                --
  Short-Term Debt                                  9.8               9.1             19.3               18.8
                                                -------           -------        ---------          ---------
  TOTAL INTEREST CHARGES                         111.8             101.1            225.4              210.8
  Allowance for Borrowed Funds
        Used During Construction                  (2.9)             (3.1)            (7.1)              (5.4)
                                                -------           -------        ---------          ---------
  NET INTEREST CHARGES                           108.9              98.0            218.3              205.4
  
  Net Income                                     153.6             116.0            305.6              275.4
  Preferred Stock Dividends                        6.0              10.8             12.1               21.6
                                                -------           -------        ---------          ---------
  EARNINGS APPLICABLE TO COMMON STOCK           $147.6            $105.2           $293.5             $253.8
                                                =======           =======        =========          =========
  AVERAGE SHARES OF COMMON STOCK
        OUTSTANDING (Millions)                   221.8             221.5            221.7              221.5
  EARNINGS PER AVERAGE COMMON
        SHARE (Dollars)                          $0.67             $0.48            $1.32              $1.15
  DIVIDENDS PER COMMON SHARE (Dollars)          $0.405             $0.38            $0.81              $0.76
  </TABLE>
  
              See Notes to Condensed Consolidated Financial Statements
  
  
                                       - 2 -
  
  
  <PAGE>
  
  
  
                    PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Millions of Dollars)
  
  <TABLE>
  <CAPTION>
                                                        June 30,      December 31,
                                                           1995             1994
                                                       (UNAUDITED)
                                                        ---------       ---------
  <S>                                                  <C>          <C>
  ASSETS
  UTILITY PLANT
  Plant at Original Cost                                 $14,477.6     $14,414.6
  Less Accumulated Provision for Depreciation              4,393.1       4,242.6
                                                         ---------     ---------
                                                          10,084.5      10,172.0
  Nuclear Fuel, Net                                          159.9         184.2
  Construction Work in Progress                              449.0         472.5
  Leased Property, Net                                       163.2         174.6
                                                         ---------     ---------
                                                          10,856.6      11,003.3
                                                         ---------     ---------
  CURRENT ASSETS
  Cash and Temporary Cash Investments                        130.1          47.0
  Accounts Receivable, Net
    Customer                                                  72.1          97.0
    Other                                                     53.7          49.8
  Inventories, at Average Cost
    Fossil Fuel                                               74.3          72.8
    Materials and Supplies                                   121.2         118.2
  Deferred Income Taxes                                        9.2          12.0
  Other                                                      222.7          58.0
                                                         ---------     ---------
                                                             683.3         454.8
                                                         ---------     ---------
  DEFERRED DEBITS AND OTHER ASSETS
  Recoverable Deferred Income Taxes                        2,067.9       2,138.1
  Deferred Limerick Costs                                    403.1         413.9
  Deferred Non-Pension Postretirement Benefits Costs         254.1         261.9
  Investments                                                252.1         236.6
  Loss on Reacquired Debt                                    307.4         320.9
  Other                                                      254.9         263.3
                                                         ---------     ---------
                                                           3,539.5       3,634.7
                                                         ---------     ---------
  TOTAL                                                  $15,079.4     $15,092.8
                                                         =========     =========
  
  CAPITALIZATION AND LIABILITIES
  CAPITALIZATION
  Common Shareholders' Equity
    Common Stock (No Par)                                $ 3,498.5     $ 3,490.7
    Other Paid-In Capital                                      1.3           1.3
    Retained Earnings                                        923.4         810.5
  Preferred and Preference Stock
    Without Mandatory Redemption                             277.4         277.4
    With Mandatory Redemption                                 92.7          92.7
  Company Obligated Minority Interests in Partnership        221.3         221.3
  Long-Term Debt                                           4,515.5       4,785.6
                                                         ---------     ---------
                                                           9,530.1       9,679.5
                                                         ---------     ---------
  CURRENT LIABILITIES
  Notes Payable, Bank                                          --           11.5
  Long-Term Debt Due Within One Year                         375.9         201.2
  Capital Lease Obligations Due Within One Year               60.5          60.5
  Accounts Payable                                           205.2         308.8
  Taxes Accrued                                              147.7          87.2
  Deferred Energy Costs                                        8.6          15.5
  Interest Accrued                                            92.9          93.2
  Dividends Payable                                           27.8          15.1
  Other                                                      145.7          85.6
                                                         ---------     ---------
                                                           1,064.3         878.6
                                                         ---------     ---------
  DEFERRED CREDITS AND OTHER LIABILITIES
  Capital Lease Obligations                                  102.7         114.1
  Deferred Income Taxes                                    3,200.7       3,225.9
  Unamortized Investment Tax Credits                         355.9         374.1
  Pension Obligation for Early Retirement Plan               238.3         238.3
  Non-Pension Postretirement Benefits Obligation             370.4         354.5
  Other                                                      217.0         227.8
                                                         ---------     ---------
                                                           4,485.0       4,534.7
                                                         ---------     ---------
  COMMITMENTS AND CONTINGENCIES (Note 5)
                                                         ---------     ---------
  
  TOTAL                                                  $15,079.4     $15,092.8
                                                         =========     =========
  </TABLE>
  
              See Notes to Condensed Consolidated Financial Statements
  
                                       - 3 -
  
  
  <PAGE>
  
  
  
                    PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)
                               (Millions of Dollars)
  
  <TABLE>
  <CAPTION>
                                                                     6 Months Ended
                                                                          June 30,
                                                                -------------------------
                                                                   1995              1994
                                                                --------          --------
  <S>                                                           <C>            <C>
  CASH FLOWS FROM OPERATING ACTIVITIES
  
  NET INCOME                                                     $305.6            $275.4
  Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:
  Depreciation and Amortization                                   259.4             255.0
  Deferred Income Taxes                                            65.7              38.2
  Gain on Sale of Subsidiary                                      (58.7)             --
  Deferred Energy Costs                                            (6.6)            (19.0)
  Changes in Working Capital:
   Accounts Receivable                                             13.6              16.0
   Inventories                                                     (4.7)             20.4
   Accounts Payable                                               (99.5)            (42.8)
   Other Current Assets and Liabilities                           (44.5)           (101.5)
  Other Items Affecting Operations                                  9.1             (16.0)
                                                                --------          --------
  NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES                 439.4             425.7
                                                                --------          --------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
  
  Investment in Plant                                            (223.6)           (219.0)
  Proceeds from Sale of Subsidiary                                150.0              --
  Increase in Investments                                         (16.9)            (15.8)
                                                                --------          --------
  NET CASH FLOWS USED BY INVESTING ACTIVITIES                     (90.5)           (234.8)
                                                                --------          --------
  CASH FLOWS FROM FINANCING ACTIVITIES
  
  Change in Short-Term Debt                                       (11.5)             62.2
  Issuance of Common Stock                                          7.8               0.8
  Retirement of Preferred Stock                                    (0.1)             (4.3)
  Issuance of Long-Term Debt                                       --               145.9
  Retirement of Long-Term Debt                                    (97.3)           (224.1)
  Loss on Reacquired Debt                                          13.5               9.9
  Dividends on Preferred and Common Stock                        (191.7)           (189.9)
  Change in Dividends Payable                                      12.7              12.7
  Other Items Affecting Financing                                   0.8               1.1
                                                                --------          --------
  NET CASH FLOWS USED BY FINANCING ACTIVITIES                    (265.8)           (185.7)
                                                                --------          --------
  INCREASE IN CASH AND CASH EQUIVALENTS                            83.1               5.2
                                                                --------          --------
  CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                 47.0              46.9
                                                                --------          --------
  CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $130.1             $52.1
                                                                ========          ========
  </TABLE>
  
              See Notes to Condensed Consolidated Financial Statements
  
                                       - 4 -
  
  
  <PAGE>
  
                    PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
  1.   BASIS OF PRESENTATION
  
       The accompanying condensed consolidated financial statements are unaudited,
  but include all adjustments that PECO Energy Company (Company) considers
  necessary for a fair presentation of such financial statements. All adjustments
  are of a normal, recurring nature except for the recognition of a one-time gain
  of $58.7 million ($27.1 million net of taxes) in the second quarter of 1995 to
  recognize the Company's sale of its Maryland retail electric subsidiary,
  Conowingo Power Company, described in note 2. The year-end condensed
  consolidated balance sheet data were derived from audited financial statements
  but do not include all disclosures required by generally accepted accounting
  principles.
  
       These notes should be read in conjunction with the Notes to Consolidated
  Financial Statements in the Company's Annual Report on Form 10-K for the year
  ended December 31, 1994 (1994 Form 10-K).
  
  2.   SALE OF SUBSIDIARY COMPANY COMPLETED
  
       On June 19, 1995, the Company completed the sale of Conowingo Power Company
  to Delmarva Power & Light Company (Delmarva) for $150 million. The transaction,
  which was approved by state and federal regulators, also included a 10-year
  contract for the Company to sell power to Delmarva.
  
       The Company's gain on the sale of $58.7 million ($27.1 million net of
  taxes) is included in second quarter earnings.
  
                                       - 5 -
  
  
  <PAGE>
  
  
  The sale did not involve the Conowingo Hydroelectric Project, which is owned by
  two Company subsidiaries, PECO Energy Power Company and Susquehanna Power
  Company.
  
  3.   SALES OF ACCOUNTS RECEIVABLE
  
       The Company is party to an agreement with a financial institution under
  which it can sell on a daily basis and with limited recourse an undivided
  interest in up to $325 million of designated accounts receivable through January
  24, 1996. At June 30, 1995, the Company had sold a $325 million interest in
  accounts receivable under this agreement. The Company retains the servicing
  responsibility for these receivables. At June 30, 1995, the average annual
  service-charge rate, computed on a daily basis on the portion of the accounts
  receivable sold but not yet collected, was 6.2%.
  
       By terms of this agreement, under certain circumstances, a portion of
  Deferred Limerick Costs may be included in the pool of eligible receivables. At
  June 30, 1995, $34.1 million of Deferred Limerick Costs were included in the
  pool of eligible receivables.
  
  4.   ACCOUNTING UNDER STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
       (SFAS) NO. 121
  
       In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
  No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
  Assets to Be Disposed Of," which requires that long-lived assets and certain
  identifiable
  
                                       - 6 -
  
  
  <PAGE>
  
  
  
  intangibles held and used by an entity be reviewed for impairment whenever
  events or changes in circumstances indicate that the carrying amount of an asset
  may not be recoverable. The new standard is effective for fiscal years beginning
  after December 15, 1995. The Company is currently evaluating the impact of the
  standard, but does not expect it to have a material effect upon the Company's
  financial condition or results of operations.
  
  5.   COMMITMENTS AND CONTINGENCIES
  
       The Price-Anderson Act, as amended (Price-Anderson Act), sets the limit of
  liability of approximately $8.9 billion for claims that could arise from an
  incident involving any licensed nuclear facility in the nation. The limit is
  subject to increase to reflect the effects of inflation and changes in the
  number of licensed reactors. All utilities with nuclear generating units,
  including the Company, have obtained coverage for these potential claims through
  a combination of private insurances of $200 million and mandatory participation
  in a financial protection pool. Under the Price-Anderson Act, all nuclear
  reactor licensees can be assessed up to $76 million per reactor per incident,
  payable at no more than $10 million per reactor per incident per year. This
  assessment is subject to inflation, state premium taxes and an additional
  surcharge of 5% if the total amount of claims and legal costs exceeds the basic
  assessment. If the damages from an incident at a licensed nuclear facility
  exceed $8.9 billion, the President of the United States is to submit to Congress
  a plan for providing additional
  
                                       - 7 -
  
  
  <PAGE>
  
  
  
  compensation to the injured parties. Congress could impose further
  revenue-raising measures on the nuclear industry to pay claims. The
  Price-Anderson Act and the extensive regulation of nuclear safety by the Nuclear
  Regulatory Commission (NRC) do not preempt claims under state law for personal,
  property or punitive damages related to radiation hazards.
  
       Although the NRC requires the maintenance of property insurance on nuclear
  power plants in the amount of $1.06 billion or the amount available from private
  sources, whichever is less, the Company maintains coverage in the amount of its
  $2.75 billion proportionate share for each station. The Company's insurance
  policies provide coverage for decontamination liability expense, premature
  decommissioning and loss or damage to its nuclear facilities. These policies
  require insurance proceeds first be applied to assure that, following an
  accident, the facility is in a safe and stable condition and can be maintained
  in such condition. Within 30 days of stabilizing the reactor, the licensee must
  submit a report to the NRC which provides a clean-up plan, including the
  identification of all clean-up operations necessary to decontaminate the reactor
  to permit either the resumption of operations or decommissioning of the
  facility. Under the Company's insurance policies, proceeds not already expended
  to place the reactor in a stable condition must be used to decontaminate the
  facility. If the decision is made to decommission the facility, a portion of the
  insurance proceeds will be allocated to a fund which the Company is required by
  the NRC to maintain to provide funds for decommissioning the
  
                                       - 8 -
  
  
  <PAGE>
  
  
  
  facility. These proceeds would be paid to the fund to make up any difference
  between the amount of money in the fund at the time of the early decommissioning
  and the amount that would have been in the fund if contributions had been made
  over the normal life of the facility. The Company is unable to predict what
  effect these requirements may have on the timing of the availability of
  insurance proceeds to the Company for the Company's bondholders and the amount
  of such proceeds which would be available. Under the terms of the various
  insurance agreements, the Company could be assessed up to $48 million for losses
  incurred at any plant insured by the insurance companies. The Company is
  self-insured to the extent that any losses may exceed the amount of insurance
  maintained. Any such losses, if not recovered through the ratemaking process,
  could have a material adverse effect on the Company's financial condition or
  results of operations.
  
       The Company is a member of an industry mutual insurance company which
  provides replacement power cost insurance in the event of a major accidental
  outage at a nuclear station. The policy contains a 21-week waiting period before
  recovery of costs can commence. The premium for this coverage is subject to
  assessment for adverse loss experience. The Company's maximum share of any
  assessment is $14 million per year.
  
                                      * * * *
  
       On April 11, 1991, 33 former employees of the Company filed an amended
  class action suit against the Company in the United States District Court for
  the Eastern District of Pennsylvania
  
                                       - 9 -
  
  
  <PAGE>
  
  
  
  (Eastern District Court) on behalf of approximately 141 persons who retired from
  the Company between January and April 1990. The lawsuit, filed under the
  Employee Retirement Income Security Act (ERISA), alleges that the Company
  fraudulently and/or negligently misrepresented or concealed facts concerning the
  Company's 1990 Early Retirement Plan and thus induced the plaintiffs to retire
  or not to defer retirement immediately before the initiation of the 1990 Early
  Retirement Plan, thereby depriving the plaintiffs of substantial pension and
  salary benefits. In June 1991, the plaintiffs filed amended complaints adding
  additional plaintiffs. The lawsuit names the Company, the Company's Service
  Annuity Plan (SAP) and two Company officers as defendants. The plaintiffs seek
  approximately $20 million in damages representing, among other things, increased
  pension benefits and nine months salary pursuant to the terms of the 1990 Early
  Retirement Plan, as well as punitive damages. On March 24 and 25, 1994, the case
  was tried in Eastern District Court on the issue of liability. On May 13, 1994,
  the Eastern District Court issued a decision, finding the Company liable to all
  plaintiffs who made inquiries about any early retirement plan after March 12,
  1990 and retired prior to April 1990. The Eastern District Court will try the
  case on the issue of damages. The ultimate outcome of this matter is not
  expected to have a material adverse effect on the Company's financial condition
  or results of operations.
  
                                      * * * *
  
       On May 2, 1991, 37 former employees of the Company filed an amended class
  action suit against the Company, the SAP and three
  
                                       - 10 -
  
  
  <PAGE>
  
  
  
  former Company officers in the Eastern District Court on behalf of 147 former
  employees who retired from the Company between January and June 1987. The
  lawsuit was filed under ERISA and concerns the August 1, 1987 amendment to the
  SAP. The plaintiffs claim that the Company concealed or misrepresented the fact
  that an amendment to the SAP was planned to increase retirement benefits and, as
  a consequence, they retired prior to the amendment to the SAP and were deprived
  of significant retirement benefits. The complaint does not specify any dollar
  amount of damages. On March 24 and 25, 1994, the case was tried in Eastern
  District Court on the issue of liability. On May 13, 1994, the Eastern District
  Court issued a decision, finding the Company liable to all plaintiffs who made
  inquiries about any pension improvement after March 1, 1987 and retired prior to
  June 1987. The Eastern District Court will try the case on the issue of damages.
  The ultimate outcome of this matter is not expected to have a material adverse
  effect on the Company's financial condition or results of operations.
  
                                      * * * *
  
       As disclosed in note 3 of Notes to Consolidated Financial Statements for
  the year ended December 31, 1994, the Company's share of the current estimated
  cost for decommissioning nuclear generating stations, based on site-specific
  studies approved for ratemaking purposes by the Pennsylvania Public Utility
  Commission (PUC), is $643 million expressed in 1990 dollars. Under current
  rates, the Company collects approximately $20 million annually from customers
  for decommissioning the Company's nuclear units.
  
                                       - 11 -
  
  
  <PAGE>
  
  
  
  At June 30, 1995, the Company held $188 million in trust accounts, representing
  amounts recovered from customers and realized investment earnings thereon, to
  fund future decommissioning costs. The Company's most recent estimate of its
  share of the cost to decommission its nuclear units is $900 million in 1994
  dollars. Any increase in the 1990 decommissioning cost estimate being recovered
  in base rates is to be recoverable in the Company's next base rate case. As a
  result, the Company expects to receive recovery of a higher level of
  decommissioning expense in its next base rate proceeding. The staff of the
  Securities and Exchange Commission has questioned the electric utility industry
  accounting practices regarding the recognition, measurement and classification
  of decommissioning costs for nuclear generating stations in financial
  statements. The FASB has agreed to review the accounting for removal costs
  including decommissioning. The Company does not expect the outcome of this
  review to have a material effect on the Company's financial condition or results
  of operations.
  
       As disclosed in note 3 of Notes to Consolidated Financial Statements for
  the year ended December 31, 1994, the Company recorded an estimated liability
  and related regulatory asset of $59 million, reflecting the Company's share of
  the costs of decommissioning and decontamination of the United States Department
  of Energy's nuclear enrichment facilities which the Company is required to pay
  under the National Energy Policy Act of 1992 (Energy Act). The Company is paying
  its share of such costs on an installment basis through 2006 and is currently
  
                                       - 12 -
  
  
  <PAGE>
  
  
  
  recovering these costs in rates through the Energy Cost Adjustment clause.
  
       The Company believes that the ultimate costs of decommissioning and
  decontamination of its nuclear generating stations and any assessment under the
  Energy Act will continue to be recoverable through rates, although such recovery
  is not assured.
  
                                      * * * *
  
       The Company's operations have in the past and may in the future require
  substantial capital expenditures in order to comply with environmental laws.
  Additionally, under federal and state environmental laws, the Company is
  generally liable for the costs of remediating environmental contamination of
  property now or formerly owned by the Company or of property contaminated by
  hazardous substances generated by the Company. The Company owns or leases a
  substantial number of real estate parcels, including parcels on which its
  operations or the operations of others may have resulted in contamination by
  substances which are considered hazardous under environmental laws. The Company
  is currently involved in a number of proceedings relating to sites where
  hazardous substances have been deposited and may be subject to additional
  proceedings in the future. An evaluation of all Company sites for potential
  environmental clean-up liability is in progress, including approximately 20
  sites where manufactured gas plant activities may have resulted in site
  contamination. Past activities at several sites have resulted in actual site
  contamination. The Company is presently engaged in performing
  
                                       - 13 -
  
  
  <PAGE>
  
  
  
  detailed evaluations of these sites to define the nature and extent of the
  contamination, to determine the necessity of remediation and to identify
  possible remediation alternatives. At June 30, 1995, the Company had accrued $20
  million for various investigation and remediation costs that currently can be
  reasonably estimated. The Company cannot currently predict whether it will incur
  other significant liabilities for additional investigation and remediation costs
  at these or additional sites identified by the Company, environmental agencies
  or others, or whether all such costs will be recoverable through rates or from
  third parties.
  
                                      * * * *
  
       The Company is involved in various other litigation matters, the ultimate
  outcomes of which, while uncertain, are not expected to have a material adverse
  effect on the Company's financial condition or results of operations. 
  
                                      * * * *
  
  
                                       - 14 -
  
  
  <PAGE>
  
  
  
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  FINANCIAL CONDITION
  
       The Company's construction program is currently estimated to require
  expenditures of approximately $495 million for 1995 and $1.8 billion from 1996
  to 1999, all of which are expected to be financed from internal sources. The
  Company's construction program is subject to periodic review and revision to
  reflect changes in economic conditions, revised load forecasts and other
  appropriate factors. Certain facilities under construction and to be constructed
  may require permits and licenses which the Company has no assurance will be
  granted.
  
                                      * * * *
  
       On June 19, 1995, the Company completed the sale of Conowingo Power Company
  (COPCO) to Delmarva Power & Light Company (Delmarva) for $150 million. Proceeds
  from the sale will be used to retire long-term debt and for general corporate
  purposes. The transaction also included a 10-year contract to sell power to
  Delmarva. Revenue received under this contract is expected to offset the revenue
  lost as a result of the sale of COPCO.
  
                                      * * * *
  
       See note 5 of Notes to Condensed Consolidated Financial Statements in this
  Quarterly Report on Form 10-Q under "PART I. FINANCIAL INFORMATION, ITEM 1.
  FINANCIAL STATEMENTS," for a discussion of commitments and contingencies
  relating to environmental matters. 
  
                                      * * * *
  
                                       - 15 -
  
  
  <PAGE>
  
  
  
       Salem Generating Station (Salem) Unit No. 1 and Unit No. 2 were removed
  from service on May 16, 1995 and June 7, 1995, respectively. The Company owns a
  42.59% share of each of the units. The operator, Public Service Electric and Gas
  Company (PSE&G), currently estimates that Unit No. 1 will be ready to return to
  service in the first quarter of 1996 and Unit No. 2 during the second quarter of
  1996, although no assurances can be given.
  
       The Company expects to purchase replacement power, to the extent necessary,
  and to incur additional operating and maintenance expenses until Salem is
  returned to service. While replacement power costs could vary significantly on a
  month-to-month basis depending on a number of factors, the Company's current
  estimate is that the replacement power costs for Salem will average
  approximately $5 million per month. The Company cannot predict the length of the
  shutdown, the total cost of replacement power or whether the Company will be
  permitted by the Pennsylvania Public Utility Commission (PUC) to recover the
  replacement power costs through the Energy Cost Adjustment clause. For
  additional information see "PART II. OTHER INFORMATION, ITEM 5. OTHER
  INFORMATION," in this Quarterly Report on Form 10-Q.
  
                                      * * * *
  
       The Company's future financial condition or results of operations may be
  affected by increased competition among utilities and non-utility generators in
  the power generation market and regulatory changes designed to encourage such
  
                                       - 16 -
  
  
  <PAGE>
  
  
  
  competition. To date, the Company's electric business, particularly sales to
  large industrial customers and off-system sales, has been affected by increased
  competition. The Company has responded to increased competition for
  larger-volume industrial customers through the use of interruptible rates and
  long-term contracts with cost-based rates. In the wholesale market, the Company
  has increased its off-system sales but increased competition has reduced the
  Company's margin for these sales.
  
       On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued a
  Notice of Proposed Rulemaking regarding open access to utility transmission
  facilities. See the Company's Quarterly Report on Form 10-Q for the period ended
  March 31, 1995 (March 31, 1995 Form 10-Q) under "PART II. OTHER INFORMATION,
  ITEM 5. OTHER INFORMATION," for a discussion of the FERC's proposed rules. In
  addition, see "PART II. OTHER INFORMATION, ITEM 5. OTHER INFORMATION," in this
  Quarterly Report on Form 10-Q for a discussion of the PUC's investigation into
  electric power competition issues.
  
                                      * * * *
  
       At June 30, 1995, the Company and its subsidiaries had no short-term
  borrowings outstanding. The Company has formal and informal lines of bank credit
  aggregating $351 million. At June 30, 1995, the Company and its subsidiaries had
  $80 million of short-term investments.
  
                                      * * * *
  
                                       - 17 -
  
  
  <PAGE>
  
  
  
       In June 1995, the Company entered into a $400 million revolving credit
  agreement with a group of banks and terminated a $150 million revolving credit
  and term loan agreement. The Company anticipates utilizing up to $300 million of
  the borrowing capacity under the new revolving credit facility to support the
  issuance, from time to time, of commercial paper. This will permit the Company
  to reduce its formal and informal lines of bank credit. The Company had no
  commercial paper outstanding at June 30, 1995.
  
                                      * * * *
  
       The Company's Ratio of Earnings to Fixed Charges (Mortgage Method) for the
  twelve months ended June 30, 1995 was 3.71 times compared to 4.43 times for the
  corresponding period ended June 30, 1994. The Company's Ratio of Earnings to
  Combined Fixed Charges and Preferred Stock Dividends (Articles of Incorporation
  Method) for the twelve months ended June 30, 1995, was 2.17 times compared to
  2.40 times for the corresponding period ended June 30, 1994. These ratios,
  although significantly above minimum requirements, will continue to be adversely
  affected through the third quarter of 1995 by the one-time charge in the third
  quarter of 1994 as a result of the voluntary retirement and separation programs
  approved by the Company's Board of Directors in April 1994. For the six months
  ended June 30, 1995, the Company's Ratio of Earnings to Fixed Charges (SEC
  Method) and Ratio of Earnings to Combined Fixed Charges and Preferred Stock
  Dividends (SEC Method) were 3.46 times and 3.15 times, respectively. See the
  Company's Annual Report on Form 10-K for the year ended
  
                                       - 18 -
  
  
  <PAGE>
  
  
  
  December 31, 1994 (1994 Form 10-K) under "PART I. ITEM 1. BUSINESS-Capital
  Requirements and Financing Activities," for a discussion of the ratio methods.
  
                                      * * * *
  
  RESULTS OF OPERATIONS
  
  EARNINGS
  
       Common stock earnings for the three and six months ended June 30, 1995 were
  $0.67 and $1.32 per share, respectively, compared to $0.48 and $1.15 per share
  for the corresponding periods ended June 30, 1994. The increase in earnings for
  the second quarter of 1995 was due primarily to the gain recognized on the sale
  of Conowingo Power Company (COPCO) in June 1995 which resulted in a $0.12 per
  share increase compared to the prior year, and to lower non-fuel operating and
  maintenance expenses of $0.12 per share. These increases in 1995 earnings were
  partially offset by a reduction in other income due to revenues recorded in 1994
  from the receipt of nuclear fuel from Shoreham Nuclear Power Station (Shoreham)
  of $0.06 per share.
  
       The earnings increase for the six months ended June 30, 1995 was due
  primarily to the gain recognized on the sale of COPCO in June 1995 which
  resulted in a $0.12 per share increase compared to the prior year, and $0.16 per
  share resulting from lower non- fuel operating and maintenance expenses.
  Earnings also increased by $0.04 per share due to fuel-related revenues
  associated with sales to other utilities and by $0.04 per share from the
  retention by the Company of a share of the energy savings resulting from the
  operation of Limerick Generating Station
  
                                       - 19 -
  
  
  <PAGE>
  
  
  
  (Limerick) as provided by the 1991 Limerick Settlement Agreement. These
  increases were partially offset by $0.13 per share for milder weather conditions
  for the six months ended June 30, 1995 as compared to the corresponding period
  ended June 30, 1994, and by $0.06 per share related to a reduction in other
  income due to revenues recorded in 1994 from the receipt of nuclear fuel from
  Shoreham.
  
                                      * * * *
  
  OPERATING REVENUES
  
       Electric revenues increased 0.2% and decreased 2.1% for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994. The increase for the three months ended June 30, 1995 was
  primarily due to increased sales to other utilities. This increase was partially
  offset by decreased retail sales due to cooler summer weather conditions in
  1995. The decrease for the six months ended June 30, 1995 was primarily due to
  decreased retail sales resulting from milder weather conditions in 1995 and
  lower fuel-clause revenues.
  
       Gas revenues increased 7.4% and decreased 9.1% for the three and six months
  ended June 30, 1995, respectively, compared to the corresponding periods ended
  June 30, 1994. The increase for the three months ended June 30, 1995 was
  primarily due to increased sales to retail customers and higher fuel-clause
  revenues. The decrease for the six months ended June 30, 1995 was primarily due
  to decreased retail and small commercial sales resulting from
  
                                       - 20 -
  
  
  <PAGE>
  
  
  
  milder weather conditions in 1995. This decrease was partially offset by higher
  fuel-clause revenues.
  
                                      * * * *
  
  FUEL AND ENERGY INTERCHANGE EXPENSES
  
       Fuel and energy interchange expenses increased 3.2% and decreased 12.9% for
  the three and six months ended June 30, 1995, respectively, compared to the
  corresponding periods ended June 30, 1994. The increase for the three months
  ended June 30, 1995 was primarily due to increased sales to other utilities. The
  decrease for the six months ended June 30, 1995 was primarily due to decreased
  electric output and gas sendout resulting from weather conditions, and net
  credits to expense from the retention by the Company of a share of the energy
  savings resulting from the operation of Limerick and from certain energy sales
  to other utilities.
  
                                      * * * *
  
  OPERATION AND MAINTENANCE EXPENSES
  
       Operation and maintenance expenses decreased 14.7% and 7.7% for the three
  and six months ended June 30, 1995, respectively, compared to the corresponding
  periods ended June 30, 1994 primarily due to the Company's continuing
  cost-control efforts, including the savings associated with the Company's 1994
  voluntary retirement and separation programs as well as lower nuclear generating
  station charges resulting from fewer and shorter refueling and maintenance
  outages. In addition, inventory and environmental charges were lower in 1995 as
  compared to the prior year. For the six months ended June 30,
  
                                       - 21 -
  
  
  <PAGE>
  
  
  
  1995, these decreases were partially offset by increased process reengineering
  costs.
  
                                      * * * *
  
  DEPRECIATION
  
       Depreciation expense increased 2.9% and 2.8% for the three and six months
  ended June 30, 1995, respectively, compared to the corresponding period ended
  June 30, 1994 primarily due to additions to plant in service.
  
                                      * * * *
  
  INCOME TAXES
  
       Income taxes charged to operating expenses increased 24.6% and 6.5% for the
  three and six months ended June 30, 1995, respectively, compared to the
  corresponding periods ended June 30, 1994 primarily due to higher operating
  income which was partially offset by higher interest expense allocated to
  operations.
  
                                      * * * *
  
  OTHER TAXES
  
       Other taxes charged to operating expenses increased by 2.4% and decreased
  1.2% for the three and six months ended June 30, 1995, respectively, compared to
  the corresponding periods ended June 30, 1994. The increase for the three months
  ended June 30, 1995 was primarily due to increased Pennsylvania gross receipts
  tax resulting from higher operating revenues and increased capital stock taxes.
  The decrease for the six months ended June 30, 1995 was primarily due to
  decreased Pennsylvania gross
  
                                       - 22 -
  
  
  <PAGE>
  
  
  
  receipts taxes resulting from lower operating revenues and lower real estate
  taxes.
  
                                      * * * *
  
  OTHER INCOME AND DEDUCTIONS
  
       Other income and deductions increased significantly for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994 primarily due to the gain recognized on the sale of COPCO in
  June 1995 and decreased income taxes on other income. These increases were
  partially offset by revenues recorded in 1994 from the receipt of nuclear fuel
  from Shoreham.
  
                                      * * * *
  
  TOTAL INTEREST CHARGES
  
       Total interest charges increased 11.1% and 6.3% for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994 primarily due to the July 1994 issuance of Monthly Income
  Preferred Securities (reflected in the financial statements as Company Obligated
  Minority Interests in Partnership).
  
                                      * * * *
  
  PREFERRED DIVIDENDS
  
       Preferred stock dividends decreased 44.4% and 44.0% for the three and six
  months ended June 30, 1995 compared to the corresponding periods ended June 30,
  1994 due to redemptions of preferred stock in the third quarter of 1994 with the
  proceeds from the issuance of Monthly Income Preferred Securities.
  
                                      * * * *
  
                                       - 23 -
  
  
  <PAGE>
  
  
  
                            PART II - OTHER INFORMATION
  
  ITEM 1.  LEGAL PROCEEDINGS
  
       As previously reported in the 1994 Form 10-K, on April 12, 1994, the
  Company filed a motion for summary judgment seeking termination of the July 26,
  1993 shareholder derivative suit regarding the Company's prior credit and
  collections practices. On June 29, 1995, the Court of Common Pleas of
  Philadelphia County denied the Company's motion for summary judgment. On July
  28, 1995, the Company filed a motion requesting the court to, among other
  things, reconsider its decision.
  
                                      * * * *
  
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
  
       Information regarding the submission of matters to a vote of security
  holders was presented in the March 31, 1995 Form 10-Q.
  
                                      * * * *
  
  ITEM 5.  OTHER INFORMATION
  
       On August 2, 1995, the Company's single-hour peak load reached 7,262
  megawatts (MW), surpassing the previous peak of 7,227 MW set on July 8, 1994.
  Also, on August 2, 1995, the single-hour peak load for the Pennsylvania-New
  Jersey-Maryland Interconnection Association (PJM) reached 48,750 MW. The PJM's
  previous peak was 47,240 MW set on July 27, 1995.
  
                                      * * * *
  
       On May 24, 1995, the Nuclear Regulatory Commission (NRC) issued its
  periodic Systematic Assessment of Licensee Performance (SALP) Report for
  Limerick for the period September 26, 1993 to April 1, 1995. The SALP process
  rates nuclear power plant
  
                                       - 24 -
  
  
  <PAGE>
  
  
  
  licensees in four functional areas: plant operations, maintenance, engineering,
  and plant support. The plant support area includes radiological controls,
  security, emergency preparedness, fire protection, chemistry, and housekeeping
  controls.
  
       Limerick achieved ratings of "1," the highest of the three rating
  categories, in all four areas. The NRC stated that, overall, it observed an
  excellent level of performance at Limerick. The NRC noted continued strong
  performance in the operations and engineering areas during this SALP period and
  improved performance was noted in the maintenance and plant support areas. The
  NRC stated that factors contributing to this level of performance included
  excellent oversight management, along with excellent interdepartmental
  communication and coordination of activities. Particularly, the NRC noted the
  Company's excellent planning and execution of the two refueling outages during
  the SALP period and the aggressive use of probabilistic safety assessment in
  scheduling outage and non- outage maintenance activities.
  
       The NRC also stated that, in recognition of Limerick's superior
  performance, the next SALP period for Limerick has been extended to 24 months
  and both the number of resident NRC inspectors and planned total inspection
  hours have been reduced.
  
                                      * * * *
  
       On August 2, 1995, the NRC held an enforcement conference regarding three
  alleged violations identified by the NRC at Peach Bottom Atomic Power Station.
  The NRC's findings include alleged
  
                                       - 25 -
  
  
  <PAGE>
  
  
  
  violations in control and design activities and technical specification
  requirements regarding operability of the emergency diesel generators. The
  Company cannot predict what action, if any, the NRC may take as a result of the
  enforcement conference.
  
                                      * * * *
  
       As previously reported in the Company's Current Reports on Form 8-K dated
  June 13, 1995 and July 24, 1995, the Company has been informed by PSE&G that,
  Salem Unit No. 1 and Unit No. 2 were taken out of service May 16, 1995 and June
  7, 1995, respectively. On August 10, 1995, PSE&G met with the NRC concerning the
  Salem restart plan (Plan). PSE&G presented an overview of the Plan and discussed
  independent oversight and engineering performance issues.
  
                                      * * * *
  
       The Company has also been informed by PSE&G that, on July 28, 1995, the NRC
  held an enforcement conference, originally scheduled for June 1, 1995, regarding
  Salem. Apparent violations discussed included valves that were incorrectly
  positioned following a plant modification in May 1993, nonconservatisms in
  setpoints for a pressurizer overpressure protection system and several examples
  of inadequate root-cause determination of events, leading to insufficient
  corrective actions at Salem. PSE&G cannot predict what action, if any, the NRC
  may take as a result of this meeting.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, all of the appeals relating
  to the Point Pleasant Project have been
  
                                       - 26 -
  
  
  <PAGE>
  
  
  
  resolved, except for two appeals pending before the Commonwealth Court of
  Pennsylvania (Commonwealth Court). The appeals relate to two orders issued by
  the Pennsylvania Environmental Hearing Board (EHB) which had dismissed two
  appeals filed by certain groups concerning National Pollutant Discharge
  Elimination System permits issued by the Pennsylvania Department of
  Environmental Resources (now the Pennsylvania Department of Environmental
  Protection). On June 14, 1995, the Commonwealth Court affirmed the orders of the
  EHB dismissing the two appeals. The time for petitioning the Supreme Court of
  Pennsylvania for further appeal has expired.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on May 24, 1994, the Company
  entered into a stock purchase agreement to sell COPCO to Delmarva Power & Light
  Company. On June 19, 1995, the Company completed the sale. See note 2 of Notes
  to Condensed Consolidated Financial Statements in this Quarterly Report on Form
  10-Q under "PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS."
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on August 5, 1994, Duquesne
  Light Company (Duquesne) filed an application under Section 211 of the Federal
  Power Act requesting that the FERC order the Company and the other PJM member
  and associate utilities to provide it with 300 MW of firm transmission service
  for a 20-year term. On May 17, 1995, the FERC issued an order requiring the PJM
  companies to provide transmission service to
  
                                       - 27 -
  
  
  <PAGE>
  
  
  
  Duquesne. The order provides guidance as to the rates, terms and conditions for
  the service and directs that further procedures be held, including negotiations
  among the parties and the filing of additional briefs.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, in May 1994, the PUC
  instituted an investigation into electric power competition issues. On August 4,
  1995, the PUC released a report on electric power competition prepared by the
  PUC's Bureau of Conservation, Economics and Energy Planning and the PUC's Law
  Bureau. The report, which is not binding on the PUC, recommends against retail
  wheeling and supports alternative regulatory measures to reduce electric rates
  over time. The report also identifies significant legal issues, including the
  scope of the PUC's existing authority to order retail wheeling and the ability
  of utilities to recover stranded costs caused by the introduction of retail
  wheeling. Concurrent with release of the report, the PUC announced its intention
  to schedule hearings after which the PUC itself would issue a report to the
  Governor of Pennsylvania and the Pennsylvania Legislature.
  
                                      * * * *
  
       On May 31, 1995, the Company filed Purchased Gas Cost No. 12 rates for the
  period December 1, 1995 through November 30, 1996, which reflect a $0.80 per
  thousand cubic feet reduction in natural gas sales rates. The rate filing is
  under review by the PUC.
  
                                      * * * *
  
                                       - 28 -
  
  
  <PAGE>
  
  
  
       As previously reported in the 1994 Form 10-K, a settlement has been reached
  among the potentially responsible parties (PRPs), the federal and private PRPs,
  the Commonwealth of Kentucky and the United States Environmental Protection
  Agency (EPA) concerning remedial activities at the Maxey Flats disposal site
  near Moorehead, Kentucky. On June 5, 1995, a Consent Decree, which included the
  terms of the settlement, was filed with the United States District Court for the
  Eastern District of Kentucky. The Consent Decree was subject to public comment
  through August 8, 1995.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on October 14, 1994, the PRPs
  for the Metal Bank of America site, located in Philadelphia, Pennsylvania,
  submitted to the EPA a remedial investigation and feasibility study which
  identified a range of possible remedial alternatives for the site from taking no
  action to removal of essentially all contaminated material with an estimated
  cost range of $2 million to $90 million. On July 19, 1995, the EPA issued a
  proposed plan for remediation of the site which involves removal of contaminated
  soil, sediment and groundwater and which the EPA estimates would cost
  approximately $17 million to implement. The PRPs are reviewing the proposed plan
  and will provide comments on the plan to the EPA during the public comment
  period.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, in March 1994, the Company
  received a notice from the EPA that it may be a de
  
                                       - 29 -
  
  
  <PAGE>
  
  
  
  minimis PRP with respect to a site (Jack's Creek/Sitkin Smelting Facility)
  located in Mifflin County, Pennsylvania. The Company has signed an agreement to
  pay $6,000 to settle this matter with the EPA. The settlement has been approved
  by the United States Assistant Attorney General and the Company has received an
  assessment for $6,000.
  
                                      * * * *
  
  
  
                                       - 30 -
  
  
  <PAGE>
  
  
  
  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
  
  (a)      Exhibits:
  
            12-1 - Statement regarding computation of ratio of earnings to fixed
                   charges.
  
            12-2 - Statement regarding computation of ratio of earnings to
                   combined fixed charges and preferred stock dividends.
   
            27   - Financial Data Schedule.
  
  (b)      Reports on Form 8-K (filed during the reporting period):
  
            Report, dated May 24, 1995, reporting information under "ITEM 7.
            EXHIBITS" relating to the sale of Company securities. 
  
            Report, dated June 13, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to Salem Nuclear Generating Station.
  
           Reports  on Form 8-K (filed subsequent to the reporting period):
  
            Report, dated July 25, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to Salem Nuclear Generating Station. 
  
            Report, dated August 14, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to the Company's proposal to merge with PP&L
            Resources.
  
  
                                       - 31 -
  
  
  <PAGE>
  
  
                                     Signatures
  
  Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
  has duly caused this report to be signed on its behalf by the undersigned
  thereunto duly authorized.
  
                                PECO ENERGY COMPANY
  
                                /s/ Kenneth G. Lawrence
                                --------------------------
                                Kenneth G. Lawrence
                                Senior Vice President and
                                Chief Financial Officer
                                (Principal Financial and
                                Accounting Officer)
  
  
  Date     August 14, 1995
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                                       - 32 -
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 59932}]
text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                     FORM 10-Q
  
            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
             For the quarterly period ended...June 30, 1995............
  
                                         OR
  
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
            For the transition period from............to................
  
                  Commission file number..........1-1401..........
  
           .....................PECO Energy Company.....................
               (Exact name of registrant as specified in its charter)
  
           ............Pennsylvania.................... 23-0970240......
                  (State or other jurisdiction of (I.R.S. Employer
             incorporation or organization)         Identification No.)
  
           ...2301 Market Street, Philadelphia, PA..........19103.......
                (Address of principal executive offices) (Zip Code)
  
            ......................(215) 841-4000........................
                (Registrant's telephone number, including area code)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing
  requirements for the past 90 days.
  
                              Yes _X_   No ___
  
  Indicate the number of shares outstanding of each of the issuer's classes of
  common stock as of the latest practicable date. The Company had 221,903,072
  shares of common stock outstanding on July 31, 1995.
  PART I. FINANCIAL INFORMATION
                            ITEM 1. FINANCIAL STATEMENTS
                    PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                    (Unaudited)
                               (Millions of Dollars)
  3 Months Ended                   6 Months Ended
                                                      June 30,                         June 30,
                                               -------------------------       --------------------------
                                                  1995            1994              1995              1994
                                                -------           -------        ---------          ---------
  OPERATING REVENUES
  Electric                                      $887.5            $885.4         $1,768.9           $1,807.0
  Gas                                             71.1              66.2            248.3              273.0
                                                -------           -------        ---------          ---------
  TOTAL OPERATING REVENUES                       958.6             951.6          2,017.2            2,080.0
                                                -------           -------        ---------          ---------
  OPERATING EXPENSES
  Fuel and Energy Interchange                    166.6             161.5            366.9              421.3
  Other Operating                                213.2             250.9            444.8              473.6
  Maintenance                                     74.4              86.4            155.4              176.6
  Depreciation                                   112.5             109.3            224.1              218.0
  Income Taxes                                    85.6              68.7            183.6              172.4
  Other Taxes                                     73.7              72.0            153.1              155.0
                                                -------            ------        ---------          ---------
  TOTAL OPERATING EXPENSES                       726.0             748.8          1,527.9            1,616.9
                                                -------           -------        ---------          ---------
  OPERATING INCOME                               232.6             202.8            489.3              463.1
                                                -------           -------        ---------          ---------
  OTHER INCOME AND DEDUCTIONS
  Allowance for Other Funds Used
        During Construction                        3.2               2.9              7.5                5.0
  Gain on Sale of Subsidiary, Net                 27.1               --              27.1                --
  Income Taxes                                    (1.0)             (8.5)            (2.3)             (11.4)
  Other, Net                                       0.6              16.8              2.3               24.1
                                                -------           -------        ---------          ---------
  TOTAL OTHER INCOME AND DEDUCTIONS               29.9              11.2             34.6               17.7
                                                -------           -------        ---------          ---------
  INCOME BEFORE INTEREST CHARGES                 262.5             214.0            523.9              480.8
                                                -------           -------        ---------          ---------
  INTEREST CHARGES
  Long-Term Debt                                  97.0              92.0            196.1              192.0
  Company Obligated Minority Interests
        in Partnership                             5.0               --              10.0                --
  Short-Term Debt                                  9.8               9.1             19.3               18.8
                                                -------           -------        ---------          ---------
  TOTAL INTEREST CHARGES                         111.8             101.1            225.4              210.8
  Allowance for Borrowed Funds
        Used During Construction                  (2.9)             (3.1)            (7.1)              (5.4)
                                                -------           -------        ---------          ---------
  NET INTEREST CHARGES                           108.9              98.0            218.3              205.4
  
  Net Income                                     153.6             116.0            305.6              275.4
  Preferred Stock Dividends                        6.0              10.8             12.1               21.6
                                                -------           -------        ---------          ---------
  EARNINGS APPLICABLE TO COMMON STOCK           $147.6            $105.2           $293.5             $253.8
                                                =======           =======        =========          =========
  AVERAGE SHARES OF COMMON STOCK
        OUTSTANDING (Millions)                   221.8             221.5            221.7              221.5
  EARNINGS PER AVERAGE COMMON
        SHARE (Dollars)                          $0.67             $0.48            $1.32              $1.15
  DIVIDENDS PER COMMON SHARE (Dollars)          $0.405             $0.38            $0.81              $0.76
  See Notes to Condensed Consolidated Financial Statements
  
                                       - 2 -
  PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Millions of Dollars)
  June 30,      December 31,
                                                           1995             1994
                                                       (UNAUDITED)
                                                        ---------       ---------
  ASSETS
  UTILITY PLANT
  Plant at Original Cost                                 $14,477.6     $14,414.6
  Less Accumulated Provision for Depreciation              4,393.1       4,242.6
                                                         ---------     ---------
                                                          10,084.5      10,172.0
  Nuclear Fuel, Net                                          159.9         184.2
  Construction Work in Progress                              449.0         472.5
  Leased Property, Net                                       163.2         174.6
                                                         ---------     ---------
                                                          10,856.6      11,003.3
                                                         ---------     ---------
  CURRENT ASSETS
  Cash and Temporary Cash Investments                        130.1          47.0
  Accounts Receivable, Net
    Customer                                                  72.1          97.0
    Other                                                     53.7          49.8
  Inventories, at Average Cost
    Fossil Fuel                                               74.3          72.8
    Materials and Supplies                                   121.2         118.2
  Deferred Income Taxes                                        9.2          12.0
  Other                                                      222.7          58.0
                                                         ---------     ---------
                                                             683.3         454.8
                                                         ---------     ---------
  DEFERRED DEBITS AND OTHER ASSETS
  Recoverable Deferred Income Taxes                        2,067.9       2,138.1
  Deferred Limerick Costs                                    403.1         413.9
  Deferred Non-Pension Postretirement Benefits Costs         254.1         261.9
  Investments                                                252.1         236.6
  Loss on Reacquired Debt                                    307.4         320.9
  Other                                                      254.9         263.3
                                                         ---------     ---------
                                                           3,539.5       3,634.7
                                                         ---------     ---------
  TOTAL                                                  $15,079.4     $15,092.8
                                                         =========     =========
  
  CAPITALIZATION AND LIABILITIES
  CAPITALIZATION
  Common Shareholders' Equity
    Common Stock (No Par)                                $ 3,498.5     $ 3,490.7
    Other Paid-In Capital                                      1.3           1.3
    Retained Earnings                                        923.4         810.5
  Preferred and Preference Stock
    Without Mandatory Redemption                             277.4         277.4
    With Mandatory Redemption                                 92.7          92.7
  Company Obligated Minority Interests in Partnership        221.3         221.3
  Long-Term Debt                                           4,515.5       4,785.6
                                                         ---------     ---------
                                                           9,530.1       9,679.5
                                                         ---------     ---------
  CURRENT LIABILITIES
  Notes Payable, Bank                                          --           11.5
  Long-Term Debt Due Within One Year                         375.9         201.2
  Capital Lease Obligations Due Within One Year               60.5          60.5
  Accounts Payable                                           205.2         308.8
  Taxes Accrued                                              147.7          87.2
  Deferred Energy Costs                                        8.6          15.5
  Interest Accrued                                            92.9          93.2
  Dividends Payable                                           27.8          15.1
  Other                                                      145.7          85.6
                                                         ---------     ---------
                                                           1,064.3         878.6
                                                         ---------     ---------
  DEFERRED CREDITS AND OTHER LIABILITIES
  Capital Lease Obligations                                  102.7         114.1
  Deferred Income Taxes                                    3,200.7       3,225.9
  Unamortized Investment Tax Credits                         355.9         374.1
  Pension Obligation for Early Retirement Plan               238.3         238.3
  Non-Pension Postretirement Benefits Obligation             370.4         354.5
  Other                                                      217.0         227.8
                                                         ---------     ---------
                                                           4,485.0       4,534.7
                                                         ---------     ---------
  COMMITMENTS AND CONTINGENCIES (Note 5)
                                                         ---------     ---------
  
  TOTAL                                                  $15,079.4     $15,092.8
                                                         =========     =========
  See Notes to Condensed Consolidated Financial Statements
  
                                       - 3 -
  PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)
                               (Millions of Dollars)
  6 Months Ended
                                                                          June 30,
                                                                -------------------------
                                                                   1995              1994
                                                                --------          --------
  CASH FLOWS FROM OPERATING ACTIVITIES
  
  NET INCOME                                                     $305.6            $275.4
  Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:
  Depreciation and Amortization                                   259.4             255.0
  Deferred Income Taxes                                            65.7              38.2
  Gain on Sale of Subsidiary                                      (58.7)             --
  Deferred Energy Costs                                            (6.6)            (19.0)
  Changes in Working Capital:
   Accounts Receivable                                             13.6              16.0
   Inventories                                                     (4.7)             20.4
   Accounts Payable                                               (99.5)            (42.8)
   Other Current Assets and Liabilities                           (44.5)           (101.5)
  Other Items Affecting Operations                                  9.1             (16.0)
                                                                --------          --------
  NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES                 439.4             425.7
                                                                --------          --------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
  
  Investment in Plant                                            (223.6)           (219.0)
  Proceeds from Sale of Subsidiary                                150.0              --
  Increase in Investments                                         (16.9)            (15.8)
                                                                --------          --------
  NET CASH FLOWS USED BY INVESTING ACTIVITIES                     (90.5)           (234.8)
                                                                --------          --------
  CASH FLOWS FROM FINANCING ACTIVITIES
  
  Change in Short-Term Debt                                       (11.5)             62.2
  Issuance of Common Stock                                          7.8               0.8
  Retirement of Preferred Stock                                    (0.1)             (4.3)
  Issuance of Long-Term Debt                                       --               145.9
  Retirement of Long-Term Debt                                    (97.3)           (224.1)
  Loss on Reacquired Debt                                          13.5               9.9
  Dividends on Preferred and Common Stock                        (191.7)           (189.9)
  Change in Dividends Payable                                      12.7              12.7
  Other Items Affecting Financing                                   0.8               1.1
                                                                --------          --------
  NET CASH FLOWS USED BY FINANCING ACTIVITIES                    (265.8)           (185.7)
                                                                --------          --------
  INCREASE IN CASH AND CASH EQUIVALENTS                            83.1               5.2
                                                                --------          --------
  CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                 47.0              46.9
                                                                --------          --------
  CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $130.1             $52.1
                                                                ========          ========
  See Notes to Condensed Consolidated Financial Statements
  
                                       - 4 -
  PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
  1.   BASIS OF PRESENTATION
  
       The accompanying condensed consolidated financial statements are unaudited,
  but include all adjustments that PECO Energy Company (Company) considers
  necessary for a fair presentation of such financial statements. All adjustments
  are of a normal, recurring nature except for the recognition of a one-time gain
  of $58.7 million ($27.1 million net of taxes) in the second quarter of 1995 to
  recognize the Company's sale of its Maryland retail electric subsidiary,
  Conowingo Power Company, described in note 2. The year-end condensed
  consolidated balance sheet data were derived from audited financial statements
  but do not include all disclosures required by generally accepted accounting
  principles.
  
       These notes should be read in conjunction with the Notes to Consolidated
  Financial Statements in the Company's Annual Report on Form 10-K for the year
  ended December 31, 1994 (1994 Form 10-K).
  
  2.   SALE OF SUBSIDIARY COMPANY COMPLETED
  
       On June 19, 1995, the Company completed the sale of Conowingo Power Company
  to Delmarva Power & Light Company (Delmarva) for $150 million. The transaction,
  which was approved by state and federal regulators, also included a 10-year
  contract for the Company to sell power to Delmarva.
  
       The Company's gain on the sale of $58.7 million ($27.1 million net of
  taxes) is included in second quarter earnings.
  
                                       - 5 -
  The sale did not involve the Conowingo Hydroelectric Project, which is owned by
  two Company subsidiaries, PECO Energy Power Company and Susquehanna Power
  Company.
  
  3.   SALES OF ACCOUNTS RECEIVABLE
  
       The Company is party to an agreement with a financial institution under
  which it can sell on a daily basis and with limited recourse an undivided
  interest in up to $325 million of designated accounts receivable through January
  24, 1996. At June 30, 1995, the Company had sold a $325 million interest in
  accounts receivable under this agreement. The Company retains the servicing
  responsibility for these receivables. At June 30, 1995, the average annual
  service-charge rate, computed on a daily basis on the portion of the accounts
  receivable sold but not yet collected, was 6.2%.
  
       By terms of this agreement, under certain circumstances, a portion of
  Deferred Limerick Costs may be included in the pool of eligible receivables. At
  June 30, 1995, $34.1 million of Deferred Limerick Costs were included in the
  pool of eligible receivables.
  
  4.   ACCOUNTING UNDER STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
       (SFAS) NO. 121
  
       In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
  No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
  Assets to Be Disposed Of," which requires that long-lived assets and certain
  identifiable
  
                                       - 6 -
  intangibles held and used by an entity be reviewed for impairment whenever
  events or changes in circumstances indicate that the carrying amount of an asset
  may not be recoverable. The new standard is effective for fiscal years beginning
  after December 15, 1995. The Company is currently evaluating the impact of the
  standard, but does not expect it to have a material effect upon the Company's
  financial condition or results of operations.
  
  5.   COMMITMENTS AND CONTINGENCIES
  
       The Price-Anderson Act, as amended (Price-Anderson Act), sets the limit of
  liability of approximately $8.9 billion for claims that could arise from an
  incident involving any licensed nuclear facility in the nation. The limit is
  subject to increase to reflect the effects of inflation and changes in the
  number of licensed reactors. All utilities with nuclear generating units,
  including the Company, have obtained coverage for these potential claims through
  a combination of private insurances of $200 million and mandatory participation
  in a financial protection pool. Under the Price-Anderson Act, all nuclear
  reactor licensees can be assessed up to $76 million per reactor per incident,
  payable at no more than $10 million per reactor per incident per year. This
  assessment is subject to inflation, state premium taxes and an additional
  surcharge of 5% if the total amount of claims and legal costs exceeds the basic
  assessment. If the damages from an incident at a licensed nuclear facility
  exceed $8.9 billion, the President of the United States is to submit to Congress
  a plan for providing additional
  
                                       - 7 -
  compensation to the injured parties. Congress could impose further
  revenue-raising measures on the nuclear industry to pay claims. The
  Price-Anderson Act and the extensive regulation of nuclear safety by the Nuclear
  Regulatory Commission (NRC) do not preempt claims under state law for personal,
  property or punitive damages related to radiation hazards.
  
       Although the NRC requires the maintenance of property insurance on nuclear
  power plants in the amount of $1.06 billion or the amount available from private
  sources, whichever is less, the Company maintains coverage in the amount of its
  $2.75 billion proportionate share for each station. The Company's insurance
  policies provide coverage for decontamination liability expense, premature
  decommissioning and loss or damage to its nuclear facilities. These policies
  require insurance proceeds first be applied to assure that, following an
  accident, the facility is in a safe and stable condition and can be maintained
  in such condition. Within 30 days of stabilizing the reactor, the licensee must
  submit a report to the NRC which provides a clean-up plan, including the
  identification of all clean-up operations necessary to decontaminate the reactor
  to permit either the resumption of operations or decommissioning of the
  facility. Under the Company's insurance policies, proceeds not already expended
  to place the reactor in a stable condition must be used to decontaminate the
  facility. If the decision is made to decommission the facility, a portion of the
  insurance proceeds will be allocated to a fund which the Company is required by
  the NRC to maintain to provide funds for decommissioning the
  
                                       - 8 -
  facility. These proceeds would be paid to the fund to make up any difference
  between the amount of money in the fund at the time of the early decommissioning
  and the amount that would have been in the fund if contributions had been made
  over the normal life of the facility. The Company is unable to predict what
  effect these requirements may have on the timing of the availability of
  insurance proceeds to the Company for the Company's bondholders and the amount
  of such proceeds which would be available. Under the terms of the various
  insurance agreements, the Company could be assessed up to $48 million for losses
  incurred at any plant insured by the insurance companies. The Company is
  self-insured to the extent that any losses may exceed the amount of insurance
  maintained. Any such losses, if not recovered through the ratemaking process,
  could have a material adverse effect on the Company's financial condition or
  results of operations.
  
       The Company is a member of an industry mutual insurance company which
  provides replacement power cost insurance in the event of a major accidental
  outage at a nuclear station. The policy contains a 21-week waiting period before
  recovery of costs can commence. The premium for this coverage is subject to
  assessment for adverse loss experience. The Company's maximum share of any
  assessment is $14 million per year.
  
                                      * * * *
  
       On April 11, 1991, 33 former employees of the Company filed an amended
  class action suit against the Company in the United States District Court for
  the Eastern District of Pennsylvania
  
                                       - 9 -
  (Eastern District Court) on behalf of approximately 141 persons who retired from
  the Company between January and April 1990. The lawsuit, filed under the
  Employee Retirement Income Security Act (ERISA), alleges that the Company
  fraudulently and/or negligently misrepresented or concealed facts concerning the
  Company's 1990 Early Retirement Plan and thus induced the plaintiffs to retire
  or not to defer retirement immediately before the initiation of the 1990 Early
  Retirement Plan, thereby depriving the plaintiffs of substantial pension and
  salary benefits. In June 1991, the plaintiffs filed amended complaints adding
  additional plaintiffs. The lawsuit names the Company, the Company's Service
  Annuity Plan (SAP) and two Company officers as defendants. The plaintiffs seek
  approximately $20 million in damages representing, among other things, increased
  pension benefits and nine months salary pursuant to the terms of the 1990 Early
  Retirement Plan, as well as punitive damages. On March 24 and 25, 1994, the case
  was tried in Eastern District Court on the issue of liability. On May 13, 1994,
  the Eastern District Court issued a decision, finding the Company liable to all
  plaintiffs who made inquiries about any early retirement plan after March 12,
  1990 and retired prior to April 1990. The Eastern District Court will try the
  case on the issue of damages. The ultimate outcome of this matter is not
  expected to have a material adverse effect on the Company's financial condition
  or results of operations.
  
                                      * * * *
  
       On May 2, 1991, 37 former employees of the Company filed an amended class
  action suit against the Company, the SAP and three
  
                                       - 10 -
  former Company officers in the Eastern District Court on behalf of 147 former
  employees who retired from the Company between January and June 1987. The
  lawsuit was filed under ERISA and concerns the August 1, 1987 amendment to the
  SAP. The plaintiffs claim that the Company concealed or misrepresented the fact
  that an amendment to the SAP was planned to increase retirement benefits and, as
  a consequence, they retired prior to the amendment to the SAP and were deprived
  of significant retirement benefits. The complaint does not specify any dollar
  amount of damages. On March 24 and 25, 1994, the case was tried in Eastern
  District Court on the issue of liability. On May 13, 1994, the Eastern District
  Court issued a decision, finding the Company liable to all plaintiffs who made
  inquiries about any pension improvement after March 1, 1987 and retired prior to
  June 1987. The Eastern District Court will try the case on the issue of damages.
  The ultimate outcome of this matter is not expected to have a material adverse
  effect on the Company's financial condition or results of operations.
  
                                      * * * *
  
       As disclosed in note 3 of Notes to Consolidated Financial Statements for
  the year ended December 31, 1994, the Company's share of the current estimated
  cost for decommissioning nuclear generating stations, based on site-specific
  studies approved for ratemaking purposes by the Pennsylvania Public Utility
  Commission (PUC), is $643 million expressed in 1990 dollars. Under current
  rates, the Company collects approximately $20 million annually from customers
  for decommissioning the Company's nuclear units.
  
                                       - 11 -
  At June 30, 1995, the Company held $188 million in trust accounts, representing
  amounts recovered from customers and realized investment earnings thereon, to
  fund future decommissioning costs. The Company's most recent estimate of its
  share of the cost to decommission its nuclear units is $900 million in 1994
  dollars. Any increase in the 1990 decommissioning cost estimate being recovered
  in base rates is to be recoverable in the Company's next base rate case. As a
  result, the Company expects to receive recovery of a higher level of
  decommissioning expense in its next base rate proceeding. The staff of the
  Securities and Exchange Commission has questioned the electric utility industry
  accounting practices regarding the recognition, measurement and classification
  of decommissioning costs for nuclear generating stations in financial
  statements. The FASB has agreed to review the accounting for removal costs
  including decommissioning. The Company does not expect the outcome of this
  review to have a material effect on the Company's financial condition or results
  of operations.
  
       As disclosed in note 3 of Notes to Consolidated Financial Statements for
  the year ended December 31, 1994, the Company recorded an estimated liability
  and related regulatory asset of $59 million, reflecting the Company's share of
  the costs of decommissioning and decontamination of the United States Department
  of Energy's nuclear enrichment facilities which the Company is required to pay
  under the National Energy Policy Act of 1992 (Energy Act). The Company is paying
  its share of such costs on an installment basis through 2006 and is currently
  
                                       - 12 -
  recovering these costs in rates through the Energy Cost Adjustment clause.
  
       The Company believes that the ultimate costs of decommissioning and
  decontamination of its nuclear generating stations and any assessment under the
  Energy Act will continue to be recoverable through rates, although such recovery
  is not assured.
  
                                      * * * *
  
       The Company's operations have in the past and may in the future require
  substantial capital expenditures in order to comply with environmental laws.
  Additionally, under federal and state environmental laws, the Company is
  generally liable for the costs of remediating environmental contamination of
  property now or formerly owned by the Company or of property contaminated by
  hazardous substances generated by the Company. The Company owns or leases a
  substantial number of real estate parcels, including parcels on which its
  operations or the operations of others may have resulted in contamination by
  substances which are considered hazardous under environmental laws. The Company
  is currently involved in a number of proceedings relating to sites where
  hazardous substances have been deposited and may be subject to additional
  proceedings in the future. An evaluation of all Company sites for potential
  environmental clean-up liability is in progress, including approximately 20
  sites where manufactured gas plant activities may have resulted in site
  contamination. Past activities at several sites have resulted in actual site
  contamination. The Company is presently engaged in performing
  
                                       - 13 -
  detailed evaluations of these sites to define the nature and extent of the
  contamination, to determine the necessity of remediation and to identify
  possible remediation alternatives. At June 30, 1995, the Company had accrued $20
  million for various investigation and remediation costs that currently can be
  reasonably estimated. The Company cannot currently predict whether it will incur
  other significant liabilities for additional investigation and remediation costs
  at these or additional sites identified by the Company, environmental agencies
  or others, or whether all such costs will be recoverable through rates or from
  third parties.
  
                                      * * * *
  
       The Company is involved in various other litigation matters, the ultimate
  outcomes of which, while uncertain, are not expected to have a material adverse
  effect on the Company's financial condition or results of operations. 
  
                                      * * * *
  
                                       - 14 -
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  FINANCIAL CONDITION
  
       The Company's construction program is currently estimated to require
  expenditures of approximately $495 million for 1995 and $1.8 billion from 1996
  to 1999, all of which are expected to be financed from internal sources. The
  Company's construction program is subject to periodic review and revision to
  reflect changes in economic conditions, revised load forecasts and other
  appropriate factors. Certain facilities under construction and to be constructed
  may require permits and licenses which the Company has no assurance will be
  granted.
  
                                      * * * *
  
       On June 19, 1995, the Company completed the sale of Conowingo Power Company
  (COPCO) to Delmarva Power & Light Company (Delmarva) for $150 million. Proceeds
  from the sale will be used to retire long-term debt and for general corporate
  purposes. The transaction also included a 10-year contract to sell power to
  Delmarva. Revenue received under this contract is expected to offset the revenue
  lost as a result of the sale of COPCO.
  
                                      * * * *
  
       See note 5 of Notes to Condensed Consolidated Financial Statements in this
  Quarterly Report on Form 10-Q under "PART I. FINANCIAL INFORMATION, ITEM 1.
  FINANCIAL STATEMENTS," for a discussion of commitments and contingencies
  relating to environmental matters. 
  
                                      * * * *
  
                                       - 15 -
  Salem Generating Station (Salem) Unit No. 1 and Unit No. 2 were removed
  from service on May 16, 1995 and June 7, 1995, respectively. The Company owns a
  42.59% share of each of the units. The operator, Public Service Electric and Gas
  Company (PSE&G), currently estimates that Unit No. 1 will be ready to return to
  service in the first quarter of 1996 and Unit No. 2 during the second quarter of
  1996, although no assurances can be given.
  
       The Company expects to purchase replacement power, to the extent necessary,
  and to incur additional operating and maintenance expenses until Salem is
  returned to service. While replacement power costs could vary significantly on a
  month-to-month basis depending on a number of factors, the Company's current
  estimate is that the replacement power costs for Salem will average
  approximately $5 million per month. The Company cannot predict the length of the
  shutdown, the total cost of replacement power or whether the Company will be
  permitted by the Pennsylvania Public Utility Commission (PUC) to recover the
  replacement power costs through the Energy Cost Adjustment clause. For
  additional information see "PART II. OTHER INFORMATION, ITEM 5. OTHER
  INFORMATION," in this Quarterly Report on Form 10-Q.
  
                                      * * * *
  
       The Company's future financial condition or results of operations may be
  affected by increased competition among utilities and non-utility generators in
  the power generation market and regulatory changes designed to encourage such
  
                                       - 16 -
  competition. To date, the Company's electric business, particularly sales to
  large industrial customers and off-system sales, has been affected by increased
  competition. The Company has responded to increased competition for
  larger-volume industrial customers through the use of interruptible rates and
  long-term contracts with cost-based rates. In the wholesale market, the Company
  has increased its off-system sales but increased competition has reduced the
  Company's margin for these sales.
  
       On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued a
  Notice of Proposed Rulemaking regarding open access to utility transmission
  facilities. See the Company's Quarterly Report on Form 10-Q for the period ended
  March 31, 1995 (March 31, 1995 Form 10-Q) under "PART II. OTHER INFORMATION,
  ITEM 5. OTHER INFORMATION," for a discussion of the FERC's proposed rules. In
  addition, see "PART II. OTHER INFORMATION, ITEM 5. OTHER INFORMATION," in this
  Quarterly Report on Form 10-Q for a discussion of the PUC's investigation into
  electric power competition issues.
  
                                      * * * *
  
       At June 30, 1995, the Company and its subsidiaries had no short-term
  borrowings outstanding. The Company has formal and informal lines of bank credit
  aggregating $351 million. At June 30, 1995, the Company and its subsidiaries had
  $80 million of short-term investments.
  
                                      * * * *
  
                                       - 17 -
  In June 1995, the Company entered into a $400 million revolving credit
  agreement with a group of banks and terminated a $150 million revolving credit
  and term loan agreement. The Company anticipates utilizing up to $300 million of
  the borrowing capacity under the new revolving credit facility to support the
  issuance, from time to time, of commercial paper. This will permit the Company
  to reduce its formal and informal lines of bank credit. The Company had no
  commercial paper outstanding at June 30, 1995.
  
                                      * * * *
  
       The Company's Ratio of Earnings to Fixed Charges (Mortgage Method) for the
  twelve months ended June 30, 1995 was 3.71 times compared to 4.43 times for the
  corresponding period ended June 30, 1994. The Company's Ratio of Earnings to
  Combined Fixed Charges and Preferred Stock Dividends (Articles of Incorporation
  Method) for the twelve months ended June 30, 1995, was 2.17 times compared to
  2.40 times for the corresponding period ended June 30, 1994. These ratios,
  although significantly above minimum requirements, will continue to be adversely
  affected through the third quarter of 1995 by the one-time charge in the third
  quarter of 1994 as a result of the voluntary retirement and separation programs
  approved by the Company's Board of Directors in April 1994. For the six months
  ended June 30, 1995, the Company's Ratio of Earnings to Fixed Charges (SEC
  Method) and Ratio of Earnings to Combined Fixed Charges and Preferred Stock
  Dividends (SEC Method) were 3.46 times and 3.15 times, respectively. See the
  Company's Annual Report on Form 10-K for the year ended
  
                                       - 18 -
  December 31, 1994 (1994 Form 10-K) under "PART I. ITEM 1. BUSINESS-Capital
  Requirements and Financing Activities," for a discussion of the ratio methods.
  
                                      * * * *
  
  RESULTS OF OPERATIONS
  
  EARNINGS
  
       Common stock earnings for the three and six months ended June 30, 1995 were
  $0.67 and $1.32 per share, respectively, compared to $0.48 and $1.15 per share
  for the corresponding periods ended June 30, 1994. The increase in earnings for
  the second quarter of 1995 was due primarily to the gain recognized on the sale
  of Conowingo Power Company (COPCO) in June 1995 which resulted in a $0.12 per
  share increase compared to the prior year, and to lower non-fuel operating and
  maintenance expenses of $0.12 per share. These increases in 1995 earnings were
  partially offset by a reduction in other income due to revenues recorded in 1994
  from the receipt of nuclear fuel from Shoreham Nuclear Power Station (Shoreham)
  of $0.06 per share.
  
       The earnings increase for the six months ended June 30, 1995 was due
  primarily to the gain recognized on the sale of COPCO in June 1995 which
  resulted in a $0.12 per share increase compared to the prior year, and $0.16 per
  share resulting from lower non- fuel operating and maintenance expenses.
  Earnings also increased by $0.04 per share due to fuel-related revenues
  associated with sales to other utilities and by $0.04 per share from the
  retention by the Company of a share of the energy savings resulting from the
  operation of Limerick Generating Station
  
                                       - 19 -
  (Limerick) as provided by the 1991 Limerick Settlement Agreement. These
  increases were partially offset by $0.13 per share for milder weather conditions
  for the six months ended June 30, 1995 as compared to the corresponding period
  ended June 30, 1994, and by $0.06 per share related to a reduction in other
  income due to revenues recorded in 1994 from the receipt of nuclear fuel from
  Shoreham.
  
                                      * * * *
  
  OPERATING REVENUES
  
       Electric revenues increased 0.2% and decreased 2.1% for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994. The increase for the three months ended June 30, 1995 was
  primarily due to increased sales to other utilities. This increase was partially
  offset by decreased retail sales due to cooler summer weather conditions in
  1995. The decrease for the six months ended June 30, 1995 was primarily due to
  decreased retail sales resulting from milder weather conditions in 1995 and
  lower fuel-clause revenues.
  
       Gas revenues increased 7.4% and decreased 9.1% for the three and six months
  ended June 30, 1995, respectively, compared to the corresponding periods ended
  June 30, 1994. The increase for the three months ended June 30, 1995 was
  primarily due to increased sales to retail customers and higher fuel-clause
  revenues. The decrease for the six months ended June 30, 1995 was primarily due
  to decreased retail and small commercial sales resulting from
  
                                       - 20 -
  milder weather conditions in 1995. This decrease was partially offset by higher
  fuel-clause revenues.
  
                                      * * * *
  
  FUEL AND ENERGY INTERCHANGE EXPENSES
  
       Fuel and energy interchange expenses increased 3.2% and decreased 12.9% for
  the three and six months ended June 30, 1995, respectively, compared to the
  corresponding periods ended June 30, 1994. The increase for the three months
  ended June 30, 1995 was primarily due to increased sales to other utilities. The
  decrease for the six months ended June 30, 1995 was primarily due to decreased
  electric output and gas sendout resulting from weather conditions, and net
  credits to expense from the retention by the Company of a share of the energy
  savings resulting from the operation of Limerick and from certain energy sales
  to other utilities.
  
                                      * * * *
  
  OPERATION AND MAINTENANCE EXPENSES
  
       Operation and maintenance expenses decreased 14.7% and 7.7% for the three
  and six months ended June 30, 1995, respectively, compared to the corresponding
  periods ended June 30, 1994 primarily due to the Company's continuing
  cost-control efforts, including the savings associated with the Company's 1994
  voluntary retirement and separation programs as well as lower nuclear generating
  station charges resulting from fewer and shorter refueling and maintenance
  outages. In addition, inventory and environmental charges were lower in 1995 as
  compared to the prior year. For the six months ended June 30,
  
                                       - 21 -
  1995, these decreases were partially offset by increased process reengineering
  costs.
  
                                      * * * *
  
  DEPRECIATION
  
       Depreciation expense increased 2.9% and 2.8% for the three and six months
  ended June 30, 1995, respectively, compared to the corresponding period ended
  June 30, 1994 primarily due to additions to plant in service.
  
                                      * * * *
  
  INCOME TAXES
  
       Income taxes charged to operating expenses increased 24.6% and 6.5% for the
  three and six months ended June 30, 1995, respectively, compared to the
  corresponding periods ended June 30, 1994 primarily due to higher operating
  income which was partially offset by higher interest expense allocated to
  operations.
  
                                      * * * *
  
  OTHER TAXES
  
       Other taxes charged to operating expenses increased by 2.4% and decreased
  1.2% for the three and six months ended June 30, 1995, respectively, compared to
  the corresponding periods ended June 30, 1994. The increase for the three months
  ended June 30, 1995 was primarily due to increased Pennsylvania gross receipts
  tax resulting from higher operating revenues and increased capital stock taxes.
  The decrease for the six months ended June 30, 1995 was primarily due to
  decreased Pennsylvania gross
  
                                       - 22 -
  receipts taxes resulting from lower operating revenues and lower real estate
  taxes.
  
                                      * * * *
  
  OTHER INCOME AND DEDUCTIONS
  
       Other income and deductions increased significantly for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994 primarily due to the gain recognized on the sale of COPCO in
  June 1995 and decreased income taxes on other income. These increases were
  partially offset by revenues recorded in 1994 from the receipt of nuclear fuel
  from Shoreham.
  
                                      * * * *
  
  TOTAL INTEREST CHARGES
  
       Total interest charges increased 11.1% and 6.3% for the three and six
  months ended June 30, 1995, respectively, compared to the corresponding periods
  ended June 30, 1994 primarily due to the July 1994 issuance of Monthly Income
  Preferred Securities (reflected in the financial statements as Company Obligated
  Minority Interests in Partnership).
  
                                      * * * *
  
  PREFERRED DIVIDENDS
  
       Preferred stock dividends decreased 44.4% and 44.0% for the three and six
  months ended June 30, 1995 compared to the corresponding periods ended June 30,
  1994 due to redemptions of preferred stock in the third quarter of 1994 with the
  proceeds from the issuance of Monthly Income Preferred Securities.
  
                                      * * * *
  
                                       - 23 -
  PART II - OTHER INFORMATION
  
  ITEM 1.  LEGAL PROCEEDINGS
  
       As previously reported in the 1994 Form 10-K, on April 12, 1994, the
  Company filed a motion for summary judgment seeking termination of the July 26,
  1993 shareholder derivative suit regarding the Company's prior credit and
  collections practices. On June 29, 1995, the Court of Common Pleas of
  Philadelphia County denied the Company's motion for summary judgment. On July
  28, 1995, the Company filed a motion requesting the court to, among other
  things, reconsider its decision.
  
                                      * * * *
  
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
  
       Information regarding the submission of matters to a vote of security
  holders was presented in the March 31, 1995 Form 10-Q.
  
                                      * * * *
  
  ITEM 5.  OTHER INFORMATION
  
       On August 2, 1995, the Company's single-hour peak load reached 7,262
  megawatts (MW), surpassing the previous peak of 7,227 MW set on July 8, 1994.
  Also, on August 2, 1995, the single-hour peak load for the Pennsylvania-New
  Jersey-Maryland Interconnection Association (PJM) reached 48,750 MW. The PJM's
  previous peak was 47,240 MW set on July 27, 1995.
  
                                      * * * *
  
       On May 24, 1995, the Nuclear Regulatory Commission (NRC) issued its
  periodic Systematic Assessment of Licensee Performance (SALP) Report for
  Limerick for the period September 26, 1993 to April 1, 1995. The SALP process
  rates nuclear power plant
  
                                       - 24 -
  licensees in four functional areas: plant operations, maintenance, engineering,
  and plant support. The plant support area includes radiological controls,
  security, emergency preparedness, fire protection, chemistry, and housekeeping
  controls.
  
       Limerick achieved ratings of "1," the highest of the three rating
  categories, in all four areas. The NRC stated that, overall, it observed an
  excellent level of performance at Limerick. The NRC noted continued strong
  performance in the operations and engineering areas during this SALP period and
  improved performance was noted in the maintenance and plant support areas. The
  NRC stated that factors contributing to this level of performance included
  excellent oversight management, along with excellent interdepartmental
  communication and coordination of activities. Particularly, the NRC noted the
  Company's excellent planning and execution of the two refueling outages during
  the SALP period and the aggressive use of probabilistic safety assessment in
  scheduling outage and non- outage maintenance activities.
  
       The NRC also stated that, in recognition of Limerick's superior
  performance, the next SALP period for Limerick has been extended to 24 months
  and both the number of resident NRC inspectors and planned total inspection
  hours have been reduced.
  
                                      * * * *
  
       On August 2, 1995, the NRC held an enforcement conference regarding three
  alleged violations identified by the NRC at Peach Bottom Atomic Power Station.
  The NRC's findings include alleged
  
                                       - 25 -
  violations in control and design activities and technical specification
  requirements regarding operability of the emergency diesel generators. The
  Company cannot predict what action, if any, the NRC may take as a result of the
  enforcement conference.
  
                                      * * * *
  
       As previously reported in the Company's Current Reports on Form 8-K dated
  June 13, 1995 and July 24, 1995, the Company has been informed by PSE&G that,
  Salem Unit No. 1 and Unit No. 2 were taken out of service May 16, 1995 and June
  7, 1995, respectively. On August 10, 1995, PSE&G met with the NRC concerning the
  Salem restart plan (Plan). PSE&G presented an overview of the Plan and discussed
  independent oversight and engineering performance issues.
  
                                      * * * *
  
       The Company has also been informed by PSE&G that, on July 28, 1995, the NRC
  held an enforcement conference, originally scheduled for June 1, 1995, regarding
  Salem. Apparent violations discussed included valves that were incorrectly
  positioned following a plant modification in May 1993, nonconservatisms in
  setpoints for a pressurizer overpressure protection system and several examples
  of inadequate root-cause determination of events, leading to insufficient
  corrective actions at Salem. PSE&G cannot predict what action, if any, the NRC
  may take as a result of this meeting.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, all of the appeals relating
  to the Point Pleasant Project have been
  
                                       - 26 -
  resolved, except for two appeals pending before the Commonwealth Court of
  Pennsylvania (Commonwealth Court). The appeals relate to two orders issued by
  the Pennsylvania Environmental Hearing Board (EHB) which had dismissed two
  appeals filed by certain groups concerning National Pollutant Discharge
  Elimination System permits issued by the Pennsylvania Department of
  Environmental Resources (now the Pennsylvania Department of Environmental
  Protection). On June 14, 1995, the Commonwealth Court affirmed the orders of the
  EHB dismissing the two appeals. The time for petitioning the Supreme Court of
  Pennsylvania for further appeal has expired.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on May 24, 1994, the Company
  entered into a stock purchase agreement to sell COPCO to Delmarva Power & Light
  Company. On June 19, 1995, the Company completed the sale. See note 2 of Notes
  to Condensed Consolidated Financial Statements in this Quarterly Report on Form
  10-Q under "PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS."
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on August 5, 1994, Duquesne
  Light Company (Duquesne) filed an application under Section 211 of the Federal
  Power Act requesting that the FERC order the Company and the other PJM member
  and associate utilities to provide it with 300 MW of firm transmission service
  for a 20-year term. On May 17, 1995, the FERC issued an order requiring the PJM
  companies to provide transmission service to
  
                                       - 27 -
  Duquesne. The order provides guidance as to the rates, terms and conditions for
  the service and directs that further procedures be held, including negotiations
  among the parties and the filing of additional briefs.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, in May 1994, the PUC
  instituted an investigation into electric power competition issues. On August 4,
  1995, the PUC released a report on electric power competition prepared by the
  PUC's Bureau of Conservation, Economics and Energy Planning and the PUC's Law
  Bureau. The report, which is not binding on the PUC, recommends against retail
  wheeling and supports alternative regulatory measures to reduce electric rates
  over time. The report also identifies significant legal issues, including the
  scope of the PUC's existing authority to order retail wheeling and the ability
  of utilities to recover stranded costs caused by the introduction of retail
  wheeling. Concurrent with release of the report, the PUC announced its intention
  to schedule hearings after which the PUC itself would issue a report to the
  Governor of Pennsylvania and the Pennsylvania Legislature.
  
                                      * * * *
  
       On May 31, 1995, the Company filed Purchased Gas Cost No. 12 rates for the
  period December 1, 1995 through November 30, 1996, which reflect a $0.80 per
  thousand cubic feet reduction in natural gas sales rates. The rate filing is
  under review by the PUC.
  
                                      * * * *
  
                                       - 28 -
  As previously reported in the 1994 Form 10-K, a settlement has been reached
  among the potentially responsible parties (PRPs), the federal and private PRPs,
  the Commonwealth of Kentucky and the United States Environmental Protection
  Agency (EPA) concerning remedial activities at the Maxey Flats disposal site
  near Moorehead, Kentucky. On June 5, 1995, a Consent Decree, which included the
  terms of the settlement, was filed with the United States District Court for the
  Eastern District of Kentucky. The Consent Decree was subject to public comment
  through August 8, 1995.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, on October 14, 1994, the PRPs
  for the Metal Bank of America site, located in Philadelphia, Pennsylvania,
  submitted to the EPA a remedial investigation and feasibility study which
  identified a range of possible remedial alternatives for the site from taking no
  action to removal of essentially all contaminated material with an estimated
  cost range of $2 million to $90 million. On July 19, 1995, the EPA issued a
  proposed plan for remediation of the site which involves removal of contaminated
  soil, sediment and groundwater and which the EPA estimates would cost
  approximately $17 million to implement. The PRPs are reviewing the proposed plan
  and will provide comments on the plan to the EPA during the public comment
  period.
  
                                      * * * *
  
       As previously reported in the 1994 Form 10-K, in March 1994, the Company
  received a notice from the EPA that it may be a de
  
                                       - 29 -
  minimis PRP with respect to a site (Jack's Creek/Sitkin Smelting Facility)
  located in Mifflin County, Pennsylvania. The Company has signed an agreement to
  pay $6,000 to settle this matter with the EPA. The settlement has been approved
  by the United States Assistant Attorney General and the Company has received an
  assessment for $6,000.
  
                                      * * * *
  
                                       - 30 -
  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
  
  (a)      Exhibits:
  
            12-1 - Statement regarding computation of ratio of earnings to fixed
                   charges.
  
            12-2 - Statement regarding computation of ratio of earnings to
                   combined fixed charges and preferred stock dividends.
   
            27   - Financial Data Schedule.
  
  (b)      Reports on Form 8-K (filed during the reporting period):
  
            Report, dated May 24, 1995, reporting information under "ITEM 7.
            EXHIBITS" relating to the sale of Company securities. 
  
            Report, dated June 13, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to Salem Nuclear Generating Station.
  
           Reports  on Form 8-K (filed subsequent to the reporting period):
  
            Report, dated July 25, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to Salem Nuclear Generating Station. 
  
            Report, dated August 14, 1995, reporting information under "ITEM 5.
            OTHER EVENTS" relating to the Company's proposal to merge with PP&L
            Resources.
  
                                       - 31 -
  Signatures
  
  Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
  has duly caused this report to be signed on its behalf by the undersigned
  thereunto duly authorized.
  
                                PECO ENERGY COMPANY
  
                                /s/ Kenneth G. Lawrence
                                --------------------------
                                Kenneth G. Lawrence
                                Senior Vice President and
                                Chief Financial Officer
                                (Principal Financial and
                                Accounting Officer)
  
  Date     August 14, 1995
  
                                       - 32 -