This is a Reoffering Agreement dated June 23, 2009 between Atlantic City Electric Company (the “ Company ”) and Morgan Stanley & Co. Incorporated (“ Morgan Stanley ”), in its capacity as Remarketing Agent under the Remarketing Agreement hereinafter referred to.

(a)   The Pollution Control Financing Authority of Salem County (the “ Authority ”) issued $18,200,000 of its Pollution Control Revenue Refunding Bonds, 1997 Series A (Atlantic City Electric Company) (the “ Bonds ”) on July 30, 1997.  The proceeds of the Bonds were used to refund $18,200,000 aggregate principal amount of the Authority’s Adjustable Rate Pollution Control Revenue Bonds of 1984, Series B (Atlantic City Electric Company Project), the proceeds of which were used to finance certain pollution control and solid waste disposal facilities at the Deepwater Generating Station and the Company’s 5% undivided ownership interest in certain pollution control and solid waste disposal facilities at the Hope Creek Generating Station, both of which are electric power plants located in Salem County, New Jersey.

(b)   The Bonds were issued pursuant to a Trust Indenture, dated as of July 1, 1997 (the “ Original Indenture ”), between the Authority and The Bank of New York Mellon, as successor trustee (the “ Trustee ”).  The Authority and the Trustee have entered into an Amended and Restated Trust Indenture, dated as of June 22, 2009, to amend and restate in its entirety the Original Indenture (the “ Indenture ”).  The Bonds are limited obligations of the Authority payable, except to the extent payable from Bond proceeds or investment earnings thereon, solely from and are secured solely by a pledge of, revenues received by the Authority under a Pollution Control Facilities Loan Agreement, dated as of July 1, 1997 (the “ Original Loan Agreement ”), between the Authority and the Company.  The Authority and the Company have entered into Amendment No. 1 to Pollution Control Facilities Loan Agreement, dated as of June 22, 2009, to amend the Original Loan Agreement (the Original Loan Agreement, as so amended, the “ Loan Agreement ”), such obligations being evidenced by a promissory note (the “ Note ”) of the Company previously delivered to the Trustee.

               (c)     The Bank of New York Mellon (“ BNY ”) proposes to issue and deliver to the Trustee an irrevocable, direct-pay Letter of Credit relating to the Bonds (the “ Letter of Credit ”), which will permit the Trustee to draw upon such Letter of Credit for the payment of the principal or redemption price of, and interest on, the Bonds pursuant to the terms and subject to the conditions set forth in the Indenture and in a Letter of Credit and Reimbursement Agreement, to be dated on or about June 24, 2009, by and between BNY and the Company (the “ Reimbursement Agreement ”).

(d)           The Company and Morgan Stanley have heretofore entered into the Remarketing Agreement, dated as of July 30, 1997 (the “ Original Remarketing Agreement ”), pursuant to which Morgan Stanley undertook the duties and responsibilities of remarketing agent under the Indenture and the Remarketing Agreement (Morgan Stanley, in its capacity of such remarketing agent, the “ Remarketing Agent ”).  The Original Remarketing Agreement has been amended by Amendment No. 1 to Remarketing Agreement, dated as of June 22, 2009 (the Original Remarketing Agreement, as so amended, the “ Remarketing Agreement ”).

(e)           The Company acknowledges that the Remarketing Agent will remarket the Bonds in an offering in reliance on the representations, warranties, covenants and indemnities herein set forth.  A reoffering circular, dated June 16, 2009, including the Appendices thereto and all documents incorporated therein by reference, will be distributed in connection with the remarketing of the Bonds.  The reoffering circular, as it may be amended or supplemented, including the Appendices thereto (collectively, the “ Appendix ”), and all documents incorporated therein by reference is collectively referred to as the “ Reoffering Circular .”

(f)           The Remarketing Agent shall not incur any liability to the Company for its actions as Remarketing Agent pursuant to the terms hereof or of the Indenture except for (i) its gross negligence or willful misconduct and (ii) the liabilities for which the Remarketing Agent has agreed to indemnify the Company and others pursuant to Section 5(a)(ii) hereof.

               (a)      The financial statements of the Company and its subsidiary contained or incorporated by reference in the Appendix to the Reoffering Circular present fairly the financial position of the Company as of the dates indicated and the results of its operations for the periods specified; such financial statements have been prepared in conformity with United States generally accepted accounting principles consistently applied (except as stated therein) with respect to the periods involved; the financial statement schedule incorporated by reference in Appendix A presents fairly the information required to be stated therein; and the other financial data incorporated by reference in Appendix A, if it includes any non-GAAP financial measure, comply as of the date hereof, and as of the Closing Time (as hereinafter defined) will comply, in all material respects with the requirements of paragraph (e) of Item 10 of Regulation S-K.

                 (b)         PricewaterhouseCoopers LLP, which audited certain of the financial statements incorporated by reference into the Appendix are independent public accountants as required by the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the regulations promulgated thereunder.

                 (c)         The Reoffering Circular does not, and, at the Closing Time, the Reoffering Circular will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided, however, that (i) none of the representations and warranties in this paragraph (c) shall apply to any statements in or omissions from the Reoffering Circular made in reliance upon and in conformity with information furnished in writing to the Company by the Remarketing Agent, the Authority or BNY expressly for use therein, to the information contained under the headings “THE AUTHORITY” and “TAX MATTERS,” or to the information in Appendices B and C.

                 (d)         The documents specified in Appendix A as being incorporated by reference therein, when they were filed with the Securities and Exchange Commission (the “ Commission ”), complied in all material respects with the applicable provisions of the Exchange Act and the regulations promulgated thereunder and any documents that are deemed incorporated by reference after the date hereof and prior to the termination of the remarketing of the Bonds, when they are filed with the Commission, will comply in all material respects with the applicable provisions of the Exchange Act and the regulations promulgated thereunder.

                 (e)     The Company hereby confirms the representations, warranties, covenants and agreements on the part of the Company in the Loan Agreement.  All information supplied in writing by the Company to Parker McCay P.A. and/or Ballard Spahr Andrews & Ingersoll, LLP and designated as being for use by either or both of such firms to render any of its opinions with respect to the Bonds (or any predecessor bonds of the Authority refunded directly or indirectly by the Bonds), was when supplied, and, considered collectively, is at the date hereof, true, accurate, correct and complete in all material respects.

                 (f)     There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any public board or body pending to which the Company is a party or, to the knowledge of the Company, threatened against or affecting the Company, wherein the decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated by this Reoffering Agreement or the Reoffering Circular or have a material adverse effect on the validity or enforceability of the Bonds or this Reoffering Agreement or (ii) except as set forth in the Reoffering Circular, have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Company and its subsidiary, considered as one enterprise, whether or not arising in the ordinary course of business (a “ Material Adverse Effect ”).

                 (g)         Since April 1, 2008, the Company has filed timely all reports and all definitive proxy and information statements required to be filed by the Company

with the Commission pursuant to the Exchange Act and the regulations thereunder; the Company is an indirect, wholly-owned subsidiary of Pepco Holdings, Inc., a Delaware corporation (“ PHI ”).

                 (h)         The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of New Jersey with all corporate power and other authority, including franchises, necessary to own or lease its properties and conduct its business and enter into this Reoffering Agreement and the transactions contemplated by the Reoffering Circular.  The Company is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or its ownership or leasing of properties requires such qualification, except to the extent where a failure to so qualify would not constitute a Material Adverse Effect.

                 (i)         The Company has no “significant subsidiaries” as defined in Rule 1-02 of Regulation S-X.

                 (j)         The authorized, issued and outstanding capital stock of the Company is as set forth in the Reoffering Circular.   The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable and are owned by Conectiv, a Delaware corporation wholly-owned by PHI; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company.

                 (k)         Since the respective dates as of which information contained in the Reoffering Circular is given, and except as set forth therein or contemplated thereby, there has not been any material adverse change in, the business, condition (financial or otherwise) or results of operations of the Company and its subsidiary, considered as one enterprise, whether or not arising in the ordinary course of business (such change, a “ Material Adverse Change ”).

                 (l)         Prior to the original issuance of the Bonds, the Company filed with the State of New Jersey Board of Public Utilities (“ BPU ”) an application and any necessary amendment or amendments thereto, and obtained from the BPU an appropriate order authorizing the borrowing from the Authority of the proceeds from the sale of the Bonds pursuant to the Loan Agreement and the transactions related thereto and the Company has complied with all terms and conditions contained in such order.  The Company is not required to obtain any other consents, approvals or authorizations in connection with the transactions contemplated in the Reoffering Circular.

                 (m)         This Reoffering Agreement, the Loan Agreement, the Note and the Remarketing Agreement and the Reimbursement Agreement have been duly authorized, executed and delivered by the Company, and the Loan Agreement and the Note each constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent

transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. At the Closing Time, the Reimbursement Agreement will have been duly authorized, executed and delivered by the Company and will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

                 (n)         The sale of the Bonds will not be subject to any New Jersey issuance, transfer or other documentary stamp taxes.

                 (o)         The Company is in compliance with all previous undertakings made by it pursuant to Section (b)(5)(i) of Rule 15c2-12 of the Commission (“ Rule 15c2-12 ”) under the Exchange Act.

                 (p)         The descriptions of the Bonds (except for information relating to the status of interest on the Bonds for tax purposes), the Indenture, the Loan Agreement, the Letter of Credit and the Reimbursement Agreement in the Reoffering Circular are accurate in all material respects.

                 (q)         The Company is not in violation of its articles of incorporation or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company is subject (collectively, “ Agreements and Instruments ”) except for such defaults as have not resulted, and are not reasonably expected to result, in a Material Adverse Effect; and the execution, delivery and performance of this Reoffering Agreement and the consummation of the transactions contemplated herein (including the remarketing of the Bonds) and compliance by the Company with its obligations hereunder and under the Indenture, the Loan Agreement and the Remarketing Agreement do not and will not, and the execution, delivery and performance of the Reimbursement Agreement and compliance by the Company with its obligations thereunder will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event under, or result in the creation or imposition of any lien upon any property or assets of the Company pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or liens as would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the articles of incorporation or bylaws of the Company or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its assets, properties or operations.  As used herein, a “ Repayment Event ” means any event or condition that gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.

(r)         No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers, customers or contractors, which, in either case, could reasonably be expected to result in a Material Adverse Effect.

(s)         The Company possesses such permits, licenses, approvals, consents and other authorizations (collectively, “ Governmental Licenses ”) issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by it and is in compliance with the terms and conditions of all such Governmental Licenses, except (a) as disclosed in the Reoffering Circular or (b) where the failure so to possess any such Governmental License or to comply therewith would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and the Company has not received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses, the revocation or modification of which would, singly or in the aggregate, result in a Material Adverse Effect.

(t)         Any leases material to the business of the Company, and under which the Company holds properties described in the Reoffering Circular, are in full force and effect, and the Company has no notice of any claim of any sort asserted by anyone adverse to the rights of the Company under any such leases, or affecting or questioning the rights of the Company to the continued possession of the leased premises under any such lease, that, if the subject of an adverse decision, ruling or finding, would have a Material Adverse Effect.

(u)         The Company is not, and upon the sale of the Bonds as herein contemplated and the application of the net proceeds therefrom will not be, an “investment company” or an entity “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(v)         Except as described in the Reoffering Circular or except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) the Company is not in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “ Hazardous Materials ”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “ Environmental Laws ”), (B) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is

in compliance with their requirements, (C) there are no pending, or to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company and (D) to the knowledge of the Company, there are no events or circumstances that could reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company relating to Hazardous Materials or Environmental Laws.

(w)         (i) The Company has established and maintains the following:

(A)   a system of “internal accounting controls” as contemplated in Section 13(b)(2)(B) of the Exchange Act (the “ Accounting Controls ”);

(B)   “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Exchange Act (the “ Disclosure Controls ”); and

(C)   “internal control over financial reporting” as such term is defined in Rule 13a-15(f) under the Exchange Act (the “ Reporting Controls ” and, together with the Accounting Controls and the Disclosure Controls, the “ Internal Controls ”);

(ii)   The Internal Controls are evaluated by the Company periodically as appropriate and, in any event, as required by law;

(iii)   Based on the most recent evaluations of the Accounting Controls, the Accounting Controls perform the functions for which they were established in all material respects;

(iv)   As of the most recent date as of which the effectiveness of the design and operation of the Disclosure Controls were evaluated by the Company, the Disclosure Controls were effective to provide reasonable assurance that material information relating to the Company and its subsidiary that is required to be disclosed in reports filed with, or submitted to, the Commission under the Exchange Act (I) is recorded, processed, summarized and reported within the time periods specified by the Commission rules and forms and (II) is accumulated and communicated to management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure;

(v)   As of December 31, 2008 (the most recent date as of which the Reporting Controls were evaluated by the Company), the Reporting Controls were effective based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission; and

(vi)   Since the respective dates as of which the Internal Controls were last evaluated, nothing has come to the attention of the Company that has caused the Company to conclude that (I) the Accounting Controls do not perform the functions for which they were established in all material respects or (II) the Disclosure Controls or the Reporting Controls are not effective (within the meaning of the evaluation standards identified above).

(x)         The Company is in compliance in all material respects with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission that have been adopted thereunder, all to the extent that such Act and such rules and regulations are applicable to the Company.

(y)         All representations, warranties and agreements of the Company shall survive delivery of the Bonds to the Remarketing Agent regardless of any investigations made by the Remarketing Agent or on its behalf.

(a)         On the basis of the representations, warranties, covenants and indemnities contained herein and in the other agreements referred to herein and subject to the terms and conditions set forth herein, the Remarketing Agent will use its best efforts to remarket the Bonds in accordance with the Indenture for an amount equal to 100% of the principal amount of the Bonds.

(b)         The Closing of the transactions contemplated herein shall be held in Washington, D.C. at the offices of Covington & Burling LLP at 1201 Pennsylvania Avenue, NW, Washington, DC 20004, or at such other place as the Company and the Remarketing Agent shall mutually agree upon in writing, at 10:00 A.M., New York City time, on the first business day after the date hereof (the “ Closing Date ,” and the hour and date of closing is herein called the “ Closing Time .”)

(c)         In connection with the remarketing of the Bonds, the Company shall pay the Remarketing Agent at the Closing Time a fee in the amount of $91,000, plus reasonable out-of-pocket expenses.  Such fee shall be paid by wire transfer in immediately available funds to Morgan Stanley & Co. Incorporated.  The Company and the Remarketing Agent acknowledge and agree that no additional fee shall be owing to the Remarketing Agent in connection with the remarketing of the Bonds under Section 7 of the Remarketing Agreement.

(a)         The Remarketing Agent’s obligations hereunder are subject to the accuracy, as of the date of this Reoffering Agreement and as of the Closing Time, of the representations and warranties of the Company contained in Section 2 hereof and in all certificates of officers of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder to be performed at or prior to the Closing Time, and to the following further conditions:

(i)   The Indenture, the Loan Agreement, the Remarketing Agreement and the Reimbursement Agreement shall have been duly executed and delivered in the forms heretofore approved by the Remarketing Agent and the Remarketing Agent shall have received executed originals or copies thereof.

(ii)   At the Closing Time, the Remarketing Agent shall have received:

(A)   The opinion or opinions, dated the Closing Date, of (i) Parker McCay P.A., Bond Counsel, covering the matters set forth in Exhibit A-1 and Exhibit A-2 hereto, (ii) Ballard Spahr Andrews & Ingersoll, LLP, Special Tax Counsel covering the matters set forth in Exhibit B hereto, (iii) Kirk J. Emge, Esq., General Counsel of the Company, and Philip J. Passanante, counsel for the Company, covering the matters set forth in Exhibit C and Exhibit D hereto, respectively, (iv) Covington & Burling LLP, special counsel to the Company, covering the matters set forth in Exhibit E hereto, (v) Pillsbury Winthrop Shaw Pittman LLP, counsel to BNY, covering the matters set forth in Exhibit F hereto, and (vi) Dewey & LeBoeuf LLP, counsel to the Remarketing Agent; and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;

(B)   A certificate, reasonably satisfactory in form and substance to the Remarketing Agent, of the Chairman, the President, any Senior Vice President, any Vice President, the Treasurer or any Assistant Treasurer of the Company, dated as of the Closing Date, to the effect that, to the best of his or her knowledge: (i) since the respective dates as of which information contained in the Reoffering Circular is given, and excep