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

For the quarter ended June 30, 2003

Commission
File Number

Name of Registrant, State of Incorporation, Address of Principal Executive Offices,
    and Telephone Number    

I.R.S. Employer Identification Number

001-31403

PEPCO HOLDINGS, INC.
("Pepco Holdings," a Delaware
  corporation)
701 Ninth Street, N.W.
Washington, D.C. 20068
Telephone: (202)872-2000

52-2297449

001-01072

POTOMAC ELECTRIC POWER COMPANY
("Pepco," a District of
  Columbia and Virginia
  corporation)
701 Ninth Street, N.W.
Washington, D.C. 20068
Telephone: (202)872-2000

53-0127880

001-13895

CONECTIV
("Conectiv," a Delaware
  corporation)
800 King Street, P.O. Box 231
Wilmington, Delaware
Telephone: (202)872-2000

51-0377417

001-01405

DELMARVA POWER & LIGHT COMPANY
("DPL," a Delaware and
  Virginia corporation)
800 King Street, P.O. Box 231
Wilmington, Delaware
Telephone: (202)872-2000

51-0084283

001-03559

ATLANTIC CITY ELECTRIC COMPANY
("ACE," a New Jersey
  corporation)
800 King Street, P.O. Box 231
Wilmington, Delaware
Telephone: (202)872-2000

21-0398280

333-59558

ATLANTIC CITY ELECTRIC
  TRANSITION FUNDING LLC
("ACE Funding," a New Jersey
  limited liability company)
P.O. Box 15597
Wilmington, Delaware
Telephone: (202)872-2000

51-0408521

Continued

Securities registered pursuant to Section 12(b) of the Act:

Registrant

Title of Each Class

Name of Each Exchange on Which Registered  

Pepco Holdings

Common Stock, $.01 par value

   New York Stock
   Exchange

Pepco

Guarantee by Pepco of the 7-3/8% Trust Originated Preferred Securities issued by Potomac Electric Power Company Trust I

   New York Stock    Exchange

DPL

Guarantee by DPL of the 8.125% Cumulative Trust Preferred Capital Securities of Delaware Power Financing I

   New York Stock
   Exchange

ACE

Guarantee by ACE of the 7-3/8% Cumulative Quarterly Income Preferred Securities, issued by Atlantic Capital II

   New York Stock    Exchange

     None.

     Indicate by check mark whether each of the registrants (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 and (2) has been subject to such filing requirements for the past 90 days. Yes X . No    .

     Indicate by check mark whether Pepco Holdings is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes   X  .    No      .

     Pepco, Conectiv, DPL, ACE, and ACE Funding are not accelerated filers.

     Conectiv, DPL, ACE and ACE Funding meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

Registrant

Number of Shares of Common Stock of the Registrant Outstanding at June 30, 2003

Pepco Holdings

170,907,405 ($.01 par value)

Pepco

100 ($.01 par value) (a)

Conectiv

100 ($.01 par value) (a)

DPL

1,000 ($2.25 par value) (b)

ACE

18,320,937 ($3 par value)(b)

ACE Funding

None (c)

(a)

As of August 1, 2002, all voting and non-voting common equity is owned
  by Pepco Holdings.

(b)

All voting and non-voting common equity is owned by Conectiv.

(c)

All voting and non-voting common equity is owned by ACE.

DOCUMENTS INCORPORATED BY REFERENCE

     THIS COMBINED FORM 10-Q IS SEPARATELY FILED BY PEPCO HOLDINGS, PEPCO, CONECTIV, DPL, ACE, AND ACE FUNDING. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANTS.

TABLE OF CONTENTS

Page

PART I

FINANCIAL INFORMATION

  Item 1.

-

Financial Statements

1

  Item 2.

-

Management's Discussion and Analysis of
   Financial Condition and Results of
   Operations

89

  Item 3.

-

Quantitative and Qualitative Disclosures
   About Market Risk

153

  Item 4.

-

Controls and Procedures

153

PART II

OTHER INFORMATION

  Item 1.

-

Legal Proceedings

156

  Item 2.

-

Changes in Securities and Use of Proceeds

158

  Item 3.

-

Defaults Upon Senior Securities

159

  Item 4.

-

Submission of Matters to a Vote of Security Holders

159

  Item 5.

-

Other Information

159

  Item 6.

-

Exhibits and Reports on Form 8-K

160

  Signatures

188

  Principal Executive Officer and Principal Financial Officer Certifications
     (Exhibit 31)

169

TABLE OF CONTENTS - EXHIBITS

Exh. No.

Registrant(s)

Description of Exhibit

Page

12.1

PHI

Statements Re: Computation of Ratios

163

12.2

Pepco

Statements Re: Computation of Ratios

164

12.3

Conectiv

Statements Re: Computation of Ratios

165

12.4

DPL

Statements Re: Computation of Ratios

166

12.5

ACE

Statements Re: Computation of Ratios

167

15

PHI

Independent Accountants' Awareness Letter

168

31.1

PHI

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

169

31.2

PHI

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

170

31.3

Pepco

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

171

31.4

Pepco

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

172

31.5

Conectiv

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

173

31.6

Conectiv

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

174

31.7

DPL

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

175

31.8

DPL

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

176

31.9

ACE

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

177

31.10

ACE

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

178

31.11

ACEF

Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer

179

31.12

ACEF

Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

180

32.1

PHI

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

181

32.2

Pepco

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

182

32.3

Conectiv

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

183

32.4

DPL

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

184

32.5

ACE

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

185

32.6

ACEF

Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

186

PART I    FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

     Listed below is a table that sets forth, for each registrant, the page number where the information is contained herein.

                      Registrants                  

Item

Pepco
Holdings

Pepco

Conectiv

DPL

ACE

ACE
Funding

Report of Independent
  Accountants

3

N/A

N/A

N/A

N/A

N/A

Consolidated Statements
  of Earnings

4

31

48

65

75

85

Consolidated Statements
  of Comprehensive Income

5

32

49

N/A

N/A

N/A

Consolidated Balance
  Sheets

6

33

50

66

76

86

Consolidated Statements
  of Cash Flows

8

35

52

68

78

N/A

Notes to Consolidated
  Financial Statements

9

36

53

69

79

87

THIS PAGE LEFT INTENTIONALLY BLANK.

Report of Independent Accountants

To the Shareholders and Board of Directors
   of Pepco Holdings, Inc.

We have reviewed the accompanying consolidated balance sheet of Pepco Holdings, Inc. and its subsidiaries (the Company) as of June 30, 2003, and the related consolidated statements of earnings and consolidated statements of comprehensive income for each of the three-month and six-month periods ended June 30, 2003 and 2002 and the consolidated statement of cash flows for the six-month periods ended June 30, 2003 and 2002. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2002, and the related consolidated statements of earnings, and the consolidated statements of comprehensive income, and consolidated statements of cash flows for the year then ended (not presented herein), and in our report dated February 10, 2003, except as to Note (a) to Note 11 for which the date is February 28, 2003 and as to the eleventh and twelfth paragraphs of Note 15 for which the date is March 4, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of June 30, 2003, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Washington, DC
August 13, 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PEPCO HOLDINGS, INC.

     For additional information, other than the information disclosed in the Notes to Consolidated Financial Statements section herein, refer to Item 8. Financial Statements and Supplementary Data of the Company's 2002 Form 10-K.

(1)  ORGANIZATION

     Pepco Holdings, Inc. (Pepco Holdings or the Company), a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA), was incorporated under the laws of Delaware on February 9, 2001 for the purpose of effecting Potomac Electric Power Company's (Pepco) acquisition of Conectiv. In accordance with the terms of the merger agreement, upon the consummation of the merger on August 1, 2002, Pepco and Conectiv became wholly owned subsidiaries of Pepco Holdings. Additionally, Pepco, through a series of transactions, transferred its ownership interests in its pre-merger subsidiaries Potomac Capital Investment Corporation (PCI) and Pepco Energy Services, Inc. (Pepco Energy Services) to Pepco Holdings and PCI transferred its ownership interest in its pre-merger subsidiary Pepco Communications, Inc. (Pepcom) to Pepco Holdings. These transactions resulted in PCI, Pepco Energy Services, and Pepcom becoming wholly owned subsidiar ies of Pepco Holdings. Additionally, PUHCA imposes certain restrictions on the operations of registered holding companies and their subsidiaries; therefore, Pepco Holdings has a subsidiary service company that provides a variety of support services to Pepco Holdings and its subsidiaries. The costs of the service company are directly assigned or allocated to Pepco Holdings and its subsidiaries based on prescribed allocation factors listed in the service agreement filed with, and approved by, the Securities and Exchange Commission (SEC). Pepco Holdings manages its operations as described below.

Power Delivery

     The largest component of Pepco Holdings' business is power delivery, which is conducted through its subsidiaries Pepco, Delmarva Power & Light Company (DPL), and Atlantic City Electric Company (ACE). Pepco, DPL and ACE are all regulated public utilities in the jurisdictions in which they serve customers. The operations of DPL and ACE are collectively referred to herein as "Conectiv Power Delivery."

Pepco

     Pepco is engaged in the transmission and distribution of electricity in Washington, D.C. and major portions of Prince George's and Montgomery Counties in suburban Maryland. Under settlements entered into with regulatory authorities in connection with the divestiture of its generation assets in 2000, Pepco is required to provide default electricity supply (referred to as "standard offer service" or "SOS") at specified rates to customers in Maryland until July 2004 and to customers in Washington, D.C. until February 2005, which supply it purchases from an affiliate of Mirant Corporation ("Mirant"). On July 14, 2003, Mirant and most of its subsidiaries filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. For a discussion of Pepco's relationship with Mirant, see Note (5) "Commitments and Contingencies" herein. For the twelve months ended June 30, 2003, Pepco delivered 5.7 million megawatt hours to SOS cus tomers in the District of Columbia and 10.3 million megawatt hours to SOS customers in Maryland. For this period total deliveries were 11.2 million megawatt hours in the District of Columbia and 15.4 million megawatt hours in Maryland.

     On April 29, 2003, the Maryland Public Service Commission approved a settlement in Phase 1 of Maryland Case No. 8908 under which Pepco will supply retail customers with standard offer service electricity at market prices, including a margin, after existing rate caps expire in July 2004. Under this settlement, Pepco will provide standard offer service to its Maryland residential customers from July 2004 through May 2008 and to its non-residential customers for periods of one to four years. Pepco will obtain power for this market rate standard offer service through a competitive wholesale bidding process. In the District of Columbia, under current law, Pepco will not provide standard offer service after the expiration of its current obligations in February 2005, unless the District of Columbia Public Service Commission determines that there are insufficient bids to provide standard offer service, in which case Pepco may be directed to provide suc h service.

Conectiv Power Delivery

     DPL is engaged in the transmission and distribution of electricity in Delaware and portions of Maryland and Virginia and provides gas distribution service in northern Delaware. Under regulatory settlements, DPL is required to provide standard offer electricity service at specified rates to residential customers in Maryland until July 2004 and to non-residential customers in Maryland until June 2004 and to provide default electricity service at specified rates to customers in Delaware until May 2006. It is currently expected that DPL will also provide default electric service at specified rates to customers in Virginia until July 2007. However, the Virginia State Corporation Commission could terminate the obligation for some or all classes of customers sooner if it finds that an effectively competitive market exists. Conectiv Energy (described in the "Competitive Energy" section) supplies all of DPL's standard offer and default service load requ irements under a supply agreement that ends May 31, 2006. The terms of the supply agreement are structured to coincide with DPL's load requirements under each of its regulatory settlements. Conectiv Energy's resources for supplying DPL's standard offer and default service load include electricity generated by Conectiv Energy's plants and electricity purchased under long-term agreements or in the spot market. DPL purchases gas supplies for its customers from marketers and producers in the spot market and under short-term and long-term agreements.

     As discussed above, on April 29, 2003, the Maryland Commission approved a settlement in Phase I of Maryland Case No. 8908 to extend the provision of standard offer service that requires local utilities to continue to supply customers with electricity after existing rate caps/freezes expire in July 2004 at market prices. DPL will provide SOS to its Maryland residential customers from July 1, 2004 through May 31, 2008 and to its non-residential customers for periods of one to four years. DPL will obtain power for the market rate standard offer service through a competitive wholesale bidding process.

     ACE is engaged in the generation, transmission, and distribution of electricity in southern New Jersey. ACE has default service obligations, known as Basic Generation Service (BGS), for approximately 20 percent of the electricity supply to its customers. ACE expects to fulfill these obligations through the generation output from its fossil fuel-fired generating plants and through existing purchase power agreements with non-utility generators (NUG). In January 2003, ACE terminated its competitive bidding process to sell these generation assets.

     ACE formed Atlantic City Electric Transition Funding LLC (ACE Funding) during 2001. ACE Transition Funding is a wholly owned subsidiary of ACE. ACE Funding was organized for the sole purpose of purchasing and owning Bondable Transition Property (BTP), issuing transition bonds (Bonds) to fund the purchasing of BTP, pledging its interest in BTP and other collateral to the Trustee to collateralize the Bonds, and to perform activities that are necessary, suitable or convenient to accomplish these purposes.

Competitive Energy

     The competitive energy component of the Company's business is conducted through subsidiaries of Conectiv Energy Holding Company (collectively referred to herein as "Conectiv Energy") and Pepco Energy Services.

Conectiv Energy

     Conectiv Energy provides wholesale power and ancillary services to the Pennsylvania/New Jersey/Maryland (PJM) power pool and supplies power under contract, to customers including DPL and ACE. Conectiv Energy's generation asset strategy focuses on mid-merit plants with operating flexibility and multi-fuel capability that can quickly change their output level on an economic basis. Mid-merit plants generally are operated during times when demand for electricity rises and prices are higher.

     As of June 30, 2003, Conectiv Energy owned and operated electric generating plants with 3,302 MW of capacity. In January 2002, Conectiv Energy began construction of a 1,100 MW combined cycle plant with six combustion turbines at a site in Bethlehem, Pennsylvania. The plant has become operational in stages that added 306 MW in 2002(resulting from the installation of three CTs), 279 MW in the first quarter of 2003 (resulting from the installation of an additional two CTs and an upgrade of the CTs installed during 2002), 296 MW in the second quarter (resulting from the installation of one additional CT and one waste heat recovery boiler and steam generating unit), and is expected to add an additional 209 MW of capacity by the end of 2003 (resulting from the installation of a second waste heat recovery boiler and steam generating unit and upgrades of the existing CTs).

     On June 25, 2003, Conectiv Energy entered into an agreement consisting of a series of energy contracts with an international investment banking firm with a senior unsecured debt rating of A+ / Stable from Standard & Poors (the "Counterparty"). The agreement is designed to more effectively hedge approximately fifty percent of Conectiv Energy's generation output and approximately fifty percent of its supply obligations, with the intention of providing Conectiv Energy with a more predictable earnings stream during the term of the agreement. For additional information about this agreement and Conectiv Energy, refer to Note 6. Conectiv Energy Events, herein.

Pepco Energy Services

     Pepco Energy Services provides retail electricity and natural gas to residential, commercial, industrial and governmental customers in the mid-Atlantic region. Pepco Energy Services also provides integrated energy management solutions to commercial, industrial and governmental customers, including energy-efficiency contracting, development and construction of "green power" facilities, equipment operation and maintenance, fuel management, and home service agreements. In addition, Pepco Energy Services owns electricity generation plants with approximately 800 MW of peaking capacity, the output of which is sold in the wholesale market. Pepco Energy Services also purchases and sells electricity and natural gas in the wholesale markets to support its commitments to its retail customers.

Other Non-Regulated

     This component of Pepco Holdings' business is conducted through its subsidiaries PCI and Pepcom.

PCI

     PCI manages a portfolio of financial investments. During the second quarter of 2003, Pepco Holdings announced the discontinuation of further new investment activity by PCI. In the future, PCI's existing portfolio of financial investments will be managed at Pepco Holdings. The majority of PCI's investments are focused on investments related to the energy industry, such as energy leveraged leases. These transactions involve PCI's purchase and leaseback of utility assets, located outside of the United States, that provide a long term, stable stream of cash flow and earnings. PCI also owns a ten-story, 360,000 square foot office building in downtown Washington, D.C., known as Edison Place, which is leased to Pepco and serves as Pepco Holdings' and Pepco's corporate headquarters. PCI will continue to pursue opportunities to divest its remaining aircraft assets and plans to sell its final real estate property - Edison Place. The sale of the Edison Pl ace building, which was announced on July 21, 2003, will occur by competitive bid and is expected to close during 2003. PCI's book basis in the building at June 30, 2003, is approximately $79 million.

     At June 30, 2003, PCI's utility industry products and services were provided through various operating companies, including W.A. Chester and Severn Cable, which effective August 1, 2003 were transferred to Pepco Energy Services. W.A. Chester, an underground electric services company, provides high voltage construction and maintenance services to utilities and to other customers throughout the United States. Severn Cable provides low voltage electric and telecommunication construction and maintenance services in the Washington, D.C. area.

Pepcom

     Pepcom owns a 50% interest in Starpower Communications, LLC (Starpower), a joint venture with RCN Corporation, which provides cable and telecommunication services to households in the Washington, D.C. area.