WGL HOLDINGS INC - 10-Q Quarterly Report

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 March 31, 2003


[ ]		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	Exact name of registrant as		I.R.S.
Commission	specified in its charter and principal	State of	Employer
File Number	office address and telephone number	Incorporation	I.D. Number

1-16163	WGL Holdings, Inc. 1100 H Street, N.W. Washington, D.C. 20080 (703) 750-2000	Virginia	52-2210912

0-49807	Washington Gas Light Company 1100 H Street, N.W. Washington, D.C. 20080 (703) 750-4440	District of Columbia and Virginia	53-0162882

Indicate by check mark whether each 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 registrants were required to file such reports) and (2) has been subject to filing requirements for the past 90 days, Yes X No ______

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

WGL Holdings common stock, no par value, outstanding as of April 30, 2003: 48,582,528 shares.

All of the outstanding shares of common stock ($1 par value) of Washington Gas Light Company were held by WGL Holdings, Inc. as of April 30, 2003.

WGL Holdings, Inc.
Washington Gas Light Company
Part 1 – Financial Information *
Item 1– Financial Statements

TABLE OF CONTENTS


PART I.	Financial Information

Item 1.	Financial Statements:
	WGL Holdings, Inc.:
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Cash Flows	6

	Washington Gas Light Company:
	Balance Sheets	7
	Statements of Income	8
	Statements of Cash Flows	10

	Notes to Consolidated Financial Statement	11
	(WGL Holdings, Inc. and Washington Gas Light Company — Combined)

Item 2.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	23
	WGL Holdings, Inc.	26
	Washington Gas Light Company	35

Item 3.	Quantitative and Qualitative Disclosures About
	Market Risk	43

Item 4.	Controls and Procedures	43

PART II.	Other Information


Item 4.	Submission of Matters to a vote of Security Holders	43

Item 6.	Exhibits and Reports on Form 8-K	44

Signature		47

Certifications		48

* Filing Format-This Quarterly Report on Form 10-Q is a combined report being filed by two separate registrants: WGL Holdings, Inc. (WGL Holdings or the Company) and Washington Gas Light Company (Washington Gas or the regulated utility). Except where the content clearly indicates otherwise, any reference in the report to “WGL Holdings” or “the Company” is to the consolidated entity WGL Holdings and all of its subsidiaries, including Washington Gas, a distinct registrant that is a wholly owned subsidiary of WGL Holdings.

Part I — Financial Information of this Quarterly Report on Form 10-Q includes separate financial statements (i.e., balance sheets, statements of income and statements of cash flows) for consolidated WGL Holdings and Washington Gas.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 1– Financial Statements

WGL Holdings, Inc.
Consolidated Balance Sheets (Unaudited)

March 31,

September 30,

(Thousands)

2003

2002

ASSETS

Property, Plant and Equipment

At original cost

2,503,651

2,481,810

Accumulated depreciation and amortization

(884,250

)

(874,967

)

Net Property, Plant and Equipment

1,619,401

1,606,843

Current Assets

Cash and cash equivalents

18,432

2,529

Receivables

Accounts receivable

449,975

175,344

Gas costs due from customers

14,050

6,983

Accrued utility revenues

61,648

11,557

Allowance for doubtful accounts

(22,417

)

(13,740

)

Net Receivables

503,256

180,144

Materials and supplies—principally at average cost

11,857

13,088

Storage gas at cost (first-in, first-out)

25,386

99,087

Deferred income taxes

34,790

29,973

Other prepayments—principally taxes

11,482

13,422

Exchange gas imbalance—non-utility operations

203

329

Other

3,238

2,259

Total Current Assets

608,644

340,831

Deferred Charges and Other Assets

Regulatory assets

Gas Costs

11,131

5,272

Other

55,622

64,621

Prepaid qualified pension benefits

62,603

58,453

Other

21,839

37,644

Total Deferred Charges and Other Assets

151,195

165,990

Total Assets

2,379,240

2,113,664

CAPITALIZATION AND LIABILITIES

Capitalization

Common shareholders’ equity (Note 4)

868,225

766,403

Washington Gas Light Company Preferred stock

28,173

28,173

Long-term debt (Note 3)

623,257

667,951

Total Capitalization

1,519,655

1,462,527

Current Liabilities

Notes payable and current maturities of long-term debt (Note 3)

138,949

133,261

Accounts payable

250,964

152,820

Accrued interest

3,094

3,308

Dividends declared

15,864

15,743

Customer deposits and advance payments

10,358

15,482

Gas costs due to customers

38,719

6,190

Accrued taxes

79,035

9,957

Other

2,606

750

Total Current Liabilities

539,589

337,511

Deferred Credits

Unamortized investment tax credits

16,290

16,739

Deferred income taxes

219,058

212,631

Accrued pensions and benefits

36,335

37,970

Other

48,313

46,286

Total Deferred Credits

319,996

313,626

Commitments and Contingencies (Note 12)

Total Capitalization and Liabilities

2,379,240

2,113,664

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements

WGL Holdings, Inc.
Part 1 – Financial Information
Item 1– Financial Statements (continued)

WGL Holdings, Inc.
Consolidated Statements of Income (Unaudited)



				Three Months Ended
				March 31,

(Thousands, Except Per Share Data)				2003			2002

UTILITY OPERATIONS
	Operating Revenues			$	620,208		$	379,394
	Less: Cost of gas				366,763			189,200
		Revenue taxes			16,029			11,779

		Utility Net Revenues			237,416			178,415

	Other Operating Expenses
	Operation				46,115			43,743
	Maintenance				9,931			8,596
	Depreciation and amortization				21,189			18,048
	General taxes				11,849			10,769
	Income taxes				54,443			34,139

		Utility Other Operating Expenses			143,527			115,295

			Utility Operating Income		93,889			63,120

NON-UTILITY OPERATIONS
	Operating Revenues
	Retail energy-marketing				222,692			172,897
	Heating, ventilating and air conditioning				7,551			12,016
	Other non-utility				622			512

		Non-Utility Operating Revenues			230,865			185,425

	Equity Loss in 50%-Owned Residential HVAC Investment (Note 7)				—			(2,115	)
	Impairment of Residential HVAC Investment (Note 7)				—			(7,300	)

	Other Operating Expenses
	Operating expenses				232,584			182,318
	Income taxes (benefit)				(785	)		1,173

		Non-Utility Operating Expenses			231,799			183,491

			Non-Utility Operating Income (Loss)		(934	)		(7,481	)

TOTAL OPERATING INCOME					92,955			55,639
	Other Income (Expenses)—Net				(85	)		1,782

INCOME BEFORE INTEREST EXPENSE					92,870			57,421

INTEREST EXPENSE
	Interest on long-term debt				10,671			10,610
	Other				906			721

	Total Interest Expense				11,577			11,331
DIVIDENDS ON WASHINGTON GAS PREFERRED STOCK					330			330

NET INCOME (APPLICABLE TO COMMON STOCK)				$	80,963		$	45,760

AVERAGE COMMON SHARES OUTSTANDING					48,582			48,565

EARNINGS PER AVERAGE COMMON SHARE—BASIC (Note 6)				$	1.67		$	0.94

EARNINGS PER AVERAGE COMMON SHARE—DILUTED (Note 6)				$	1.66		$	0.94

DIVIDENDS DECLARED PER COMMON SHARE				$	0.32		$	0.3175

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 1– Financial Statements (continued)

WGL Holdings, Inc.
Consolidated Statements of Income (Unaudited)

Six Months Ended

March 31,

(Thousands, Except Per Share Data)

2003

2002

UTILITY OPERATIONS

Operating Revenues

995,200

646,050

Less: Cost of gas

559,299

315,733

Revenue taxes

25,816

19,644

Utility Net Revenues

410,085

310,673

Other Operating Expenses

Operation

91,901

81,084

Maintenance

19,278

18,234

Depreciation and amortization

40,804

35,699

General taxes

21,457

18,071

Income taxes

82,343

53,486

Utility Other Operating Expenses

255,783

206,574

Utility Operating Income

154,302

104,099

NON-UTILITY OPERATIONS

Operating Revenues

Retail energy-marketing

396,633

302,009

Heating, ventilating and air conditioning

18,140

32,772

Other non-utility

1,120

1,084

Non-Utility Operating Revenues

415,893

335,865

Equity Loss in 50%-Owned Residential HVAC Investment (Note 7)

—

(2,822

)

Impairment of Residential HVAC Investment (Note 7)

—

(7,300

)

Other Operating Expenses

Operating expenses

411,698

329,715

Income taxes

2,407

2,209

Non-Utility Operating Expenses

414,105

331,924

Non-Utility Operating Income (Loss)

1,788

(6,181

)

TOTAL OPERATING INCOME

156,090

97,918

Other Income (Expenses)—Net

631

1,980

INCOME BEFORE INTEREST EXPENSE

156,721

99,898

INTEREST EXPENSE

Interest on long-term debt

21,623

21,363

Other

1,853

1,878

Total Interest Expense

23,476

23,241

DIVIDENDS ON WASHINGTON GAS PREFERRED STOCK

660

660

NET INCOME (APPLICABLE TO COMMON STOCK)

132,585

75,997

AVERAGE COMMON SHARES OUTSTANDING

48,578

48,561

EARNINGS PER AVERAGE COMMON SHARE—BASIC (Note 6)

2.73

1.56

EARNINGS PER AVERAGE COMMON SHARE—DILUTED (Note 6)

2.72

1.56

DIVIDENDS DECLARED PER COMMON SHARE

0.6375

0.6325

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 1– Financial Statements (continued)

WGL Holdings, Inc.
Consolidated Statements of Cash Flows (Unaudited)



			Six Months Ended
			March 31,

(Thousands)			2003			2002

OPERATING ACTIVITIES
Net income (applicable to common stock)			$	132,585		$	75,997

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
	Depreciation and amortization ^(a)			44,625			38,657
	Deferred income taxes—net			2,276			(17,367	)
	Amortization of investment tax credits			(449	)		(452	)
	Accrued/deferred pension cost			(2,470	)		(7,041	)
	Allowance for funds used during construction			90			—
	Equity loss in 50%-owned residential HVAC investment (Note 7)			—			2,822
	Impairment of residential HVAC investment (Note 7)			—			7,300
	Other non-cash charges (credits)—net			(920	)		830

CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable and accrued utility revenues			(316,045	)		(162,505	)
	Gas costs due from/to customers—net			25,462			27,249
	Storage gas			73,701			108,944
	Other prepayments—principally taxes			1,940			6,390
	Accounts payable			97,241			(7,729	)
	Wages payable			903			(176	)
	Customer deposits and advance payments			(5,124	)		818
	Accrued taxes			69,078			38,763
	Accrued interest			(214	)		79
	Pipeline refunds due to customers			2,020			(150	)
	Deferred purchased gas costs—net			(5,860	)		11,553
	Exchange gas imbalance—non-utility operations			126			605
	Other—net			(4,911	)		6,824

		Net Cash Provided by Operating Activities		114,054			131,411

FINANCING ACTIVITIES
	Long-term debt issued			93			66,351
	Long-term debt retired			(59,060	)		(30,106	)
	Debt issuance costs			(217	)		(500	)
	Notes payable			19,868			(47,141	)
	Dividends on common stock			(30,849	)		(30,595	)
	Other financing activities			818			371

		Net Cash Used in Financing Activities		(69,347	)		(41,620	)

INVESTING ACTIVITIES
	Capital expenditures			(60,508	)		(68,552	)
	Net proceeds from the sale of assets (Note 11)			19,619			—
	50%-owned residential HVAC investment (Note 7)			—			(2,450	)
	Other investing activities			12,085			(16,487	)

		Net Cash Used in Investing Activities		(28,804	)		(87,489	)

INCREASE IN CASH AND CASH EQUIVALENTS ^(b)				15,903			2,302

Cash and Cash Equivalents at Beginning of Year ^(b)				2,529			12,104

Cash and Cash Equivalents at End of Period ^(b)			$	18,432		$	14,406

^(a) Includes amounts charged to other accounts
^(b) Cash equivalents are highly liquid investments with a maturity of three months or less when purchased

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Income taxes paid		$	20,027		$	30,569
	Interest paid		$	22,777		$	22,636

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

Washington Gas Light Company
Part 1 – Financial Information
Item 1– Financial Statements (continued)

Washington Gas Light Company
Balance Sheets (Unaudited)

March 31,

September 30,

2003

2002

(Thousands)

ASSETS

Property, Plant and Equipment

At original cost

2,479,223

2,457,673

Accumulated depreciation and amortization

(867,814

)

(859,505

)

Net Property, Plant and Equipment

1,611,409

1,598,168

Current Assets

Cash and cash equivalents

18,339

2,637

Receivables

Accounts receivable

289,964

63,055

Gas costs due from customers

14,050

6,983

Accrued utility revenues

61,648

11,557

Allowance for doubtful accounts

(16,991

)

(9,395

)

Net Receivables

348,671

72,200

Materials and supplies—principally at average cost

11,627

12,858

Storage gas—at cost (first-in, first-out)

18,462

69,207

Deferred income taxes

29,528

25,387

Other prepayments—principally taxes

6,845

8,316

Receivables from associated companies (Note 10)

—

4,341

Total Current Assets

433,472

194,946

Deferred Charges and Other Assets

Regulatory assets

Gas costs

11,131

5,272

Other

55,622

64,621

Prepaid qualified pension benefits

62,291

58,162

Other

18,889

30,968

Total Deferred Charges and Other Assets

147,933

159,023

Total Assets

2,192,814

1,952,137

CAPITALIZATION AND LIABILITIES

Capitalization

Common shareholders’ equity (Note 4)

828,914

730,320

Preferred stock

28,173

28,173

Long-term debt (Note 3)

623,193

667,852

Total Capitalization

1,480,280

1,426,345

Current Liabilities

Notes payable and current maturities of long-term debt (Note 3)

62,706

67,943

Accounts payable

181,860

96,150

Accrued interest

3,094

3,308

Dividends declared

15,889

15,764

Customer deposits and advance payments

10,358

15,482

Gas costs due to customers

38,719

6,190

Accrued taxes

74,609

7,220

Payable to associated companies (Note 10)

3,448

692

Other

2,048

Total Current Liabilities

392,731

212,778

Deferred Credits

Unamortized investment tax credits

16,265

16,711

Deferred income taxes

220,415

214,200

Accrued pensions and benefits

36,214

37,848

Other

46,909

44,255

Total Deferred Credits

319,803

313,014

Commitments and Contingencies (Note 12)

Total Capitalization and Liabilities

2,192,814

1,952,137

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Washington Gas Light Company
Part 1 – Financial Information
Item 1– Financial Statements (continued)

Washington Gas Light Company
Statements of Income (Unaudited)

Three Months Ended

March 31,

(Thousands)

2003

2002

UTILITY OPERATIONS

Operating Revenues (Note 10)

626,424

385,046

Less: Cost of gas (Note 10)

372,979

194,852

Revenue taxes

16,029

11,779

Utility Net Revenues

237,416

178,415

Other Operating Expenses

Operation (Note 10)

46,518

44,261

Maintenance

9,883

8,553

Depreciation and amortization

21,019

17,882

General taxes

11,840

10,678

Income taxes

54,374

34,009

Utility Other Operating Expenses

143,634

115,383

Utility Operating Income

93,782

63,032

NON-UTILITY OPERATIONS

Non- Utility Operating Revenues

Other non-utility

598

456

Non-Utility Operating Revenues

598

456

Other Expenses (Income)

Operating expenses

—

350

Income taxes

111

Non-Utility Operating Expenses

111

391

Non-Utility Operating Income

487

TOTAL OPERATING INCOME

94,269

63,097

Other Income (Expenses)—Net

(81

)

2,815

INCOME BEFORE INTEREST EXPENSE

94,188

65,912

INTEREST EXPENSE

Interest on long-term debt

10,671

10,610

Other

996

992

Total Interest Expense

11,667

11,602

NET INCOME (BEFORE PREFERRED STOCK DIVIDENDS)

82,521

54,310

DIVIDENDS ON PREFERRED STOCK

330

330

NET INCOME APPLICABLE TO COMMON STOCK

82,191

53,980

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Washington Gas Light Company
Part 1 – Financial Information
Item 1– Financial Statements (continued)

Washington Gas Light Company
Statements of Income (Unaudited)

Six Months Ended

March 31,

(Thousands)

2003

2002

UTILITY OPERATIONS

Operating Revenues (Note 10)

1,005,129

655,685

Less: Cost of gas (Note 10)

569,228

325,368

Revenue taxes

25,816

19,644

Utility Net Revenues

410,085

310,673

Other Operating Expenses

Operation (Note 10)

92,697

82,107

Maintenance

19,155

18,150

Depreciation and amortization

40,464

35,368

General taxes

21,384

17,905

Income taxes

82,241

53,262

Utility Other Operating Expenses

255,941

206,792

Utility Operating Income

154,144

103,881

NON-UTILITY OPERATIONS

Non- Utility Operating Revenues

Other non-utility

1,029

928

Non-Utility Operating Revenues

1,029

928

Other Operating Expenses (Income)

Operating expenses

738

Income taxes

402

Non-Utility Operating Expenses

411

759

Non-Utility Operating Income

618

169

TOTAL OPERATING INCOME

154,762

104,050

Other Income (Expenses)—Net

(938

)

3,614

INCOME BEFORE INTEREST EXPENSE

153,824

107,664

INTEREST EXPENSE

Interest on long-term debt

21,623

21,363

Other

2,049

2,408

Total Interest Expense

23,672

23,771

NET INCOME (BEFORE PREFERRED STOCK DIVIDENDS)

130,152

83,893

DIVIDENDS ON PREFERRED STOCK

660

660

NET INCOME APPLICABLE TO COMMON STOCK

129,492

83,233

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Washington Gas Light Company
Part 1 – Financial Information
Item 1– Financial Statements (continued)

Washington Gas Light Company
Statements of Cash Flows (Unaudited)



			Six Months Ended
			March 31,

(Thousands)			2003			2002

OPERATING ACTIVITIES
Net income (before Preferred Stock Dividends)			$	130,152		$	83,893

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
	Depreciation and amortization ^(a)			43,759			37,785
	Deferred income taxes—net			2,742			(15,442	)
	Amortization of investment tax credits			(446	)		(449	)
	Accrued/deferred pension cost			(2,449	)		(6,962	)
	Allowance for funds used during construction			90			—
	Other non-cash charges and (credits)—net			(1,013	)		807

CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable and accrued utility revenues and receivables from associated companies			(265,063	)		(115,469	)
	Gas costs due from/to customers—net			25,462			27,249
	Storage gas			50,745			87,242
	Other prepayments—principally taxes			1,472			6,153
	Accounts payable			87,746			(19,100	)
	Wages payable			717			(493	)
	Customer deposits and advance payments			(5,124	)		818
	Accrued taxes			67,389			40,547
	Accrued Interest			(214	)		79
	Pipeline refunds due to customers			2,020			(150	)
	Deferred purchased gas costs—net			(5,860	)		11,553
	Other—net			(3,318	)		5,794

		Net Cash Provided by Operating Activities		128,807			143,855

FINANCING ACTIVITIES
	Long-term debt issued			—			66,279
	Long-term debt retired			(58,896	)		(29,952	)
	Debt issuance costs			(124	)		(500	)
	Paid-in capital			—			20,186
	Notes payable			8,906			(79,251	)
	Dividends on common and preferred stock			(31,379	)		(31,246	)
	Other financing activities			557			223

		Net Cash Used in Financing Activities		(80,936	)		(54,261	)

INVESTING ACTIVITIES
	Capital expenditures			(60,002	)		(68,595	)
	Net proceeds from sale of assets (Note 11)			16,000			—
	Other investing activities			11,833			(16,487	)

		Net Cash Used in Investing Activities		(32,169	)		(85,082	)

INCREASE IN CASH AND CASH EQUIVALENTS ^(b)				15,702			4,512

Cash and Cash Equivalents at Beginning of Year ^(b)				2,637			7,537

Cash and Cash Equivalents at End of Period ^(b)			$	18,339		$	12,049

^(a) Includes amounts charged to other accounts
^(b) Cash equivalents are highly liquid investments with a maturity of three months or less when purchased

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Income taxes paid		$	18,912		$	30,298
	Interest paid		$	22,376		$	22,314

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1—ACCOUNTING POLICIES

General

WGL Holdings, Inc. (WGL Holdings or the Company) has four wholly owned subsidiaries that include Washington Gas Light Company (Washington Gas or the regulated utility), Crab Run Gas Company, Hampshire Gas Company and Washington Gas Resources Corporation (Washington Gas Resources). Washington Gas Resources owns most of the Company’s non-regulated subsidiaries that, among others, include American Combustion Industries, Inc. (ACI), Washington Gas Energy Services, Inc. (WGEServices), WG Maritime Plaza 1, Inc. and Washington Gas Energy Systems, Inc. (WGESystems). Until October 15, 2002, WGL Holdings had a 50-percent equity investment in Primary Investors, LLC (Primary Investors). Please refer to WGL Holdings fiscal year 2002 Annual Report on Form 10-K for additional information on the corporate structure.

This Quarterly Report on Form 10-Q is a combined report of WGL Holdings and Washington Gas.

These notes are an integral part of the accompanying consolidated financial statements of WGL Holdings and its subsidiaries, including Washington Gas. Except where otherwise noted, these Notes to Consolidated Financial Statements apply equally to WGL Holdings and Washington Gas. Due to the seasonal nature of Washington Gas’ business, the results of operations shown do not necessarily represent the expected results of either WGL Holdings or Washington Gas for the entire fiscal year ending September 30, 2003.

The following accounting policies are the significant policies used by the Company and its subsidiaries in the preparation of their financial statements. The policies shown herein do not reflect all of the Company’s accounting policies that would normally be disclosed in connection with the preparation of the Company’s annual financial statements. Reference is made to the Company’s most recent Annual Report on Form 10-K for a complete listing and description of all significant accounting policies.

Basis of Presentation of Financial Statements

The interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Therefore, certain information and footnote disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the United States are omitted in this interim report pursuant to the SEC rules and regulations. The interim consolidated financial statements and notes thereto should be read in conjunction with the combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2002.

The accompanying unaudited consolidated financial statements for WGL Holdings and Washington Gas reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with GAAP.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

Consolidation of Financial Statements

The consolidated financial statements include the accounts of the Company and its subsidiaries during the periods reported. Intercompany transactions have been eliminated. WGL Holdings accounted for its former 50-percent investment in a limited liability corporation using the equity method. Certain amounts in financial statements of prior years have been reclassified to conform to the presentation of the current fiscal year.

Use of Estimates in the Preparation of Financial Statements

In accordance with United States GAAP, the Company’s management makes certain estimates and assumptions regarding 1) reported amounts of assets and liabilities, 2) disclosure of contingent assets and liabilities at the date of the financial statements; and 3) reported amounts of revenues, revenues subject to refund, and expenses during the reporting period. Actual results could differ from those estimates.

Utility Revenue and Cost of Gas Recognition

The regulated utility’s jurisdictional tariffs contain mechanisms that provide for the recovery of the invoice cost of gas applicable to firm customers. Under these mechanisms, the regulated utility periodically adjusts its firm customers’ rates to reflect increases and decreases in the invoice cost of gas. Annually, the regulated utility reconciles the difference between the total gas costs collected from firm customers and the invoice cost of gas. The regulated utility defers any excess or deficiency and subsequently either recovers it from, or refunds it to, customers over the following twelve-month period.

Rate Refunds Due to Customers

If the regulated utility were to file a request with a state regulatory commission to modify customers’ rates, the regulated utility could at a point in time after the initial filing, depending on the jurisdiction, begin to charge customers the new rates, until the regulatory commission renders a final decision. During this interim period, the regulated utility would potentially record a provision for a rate refund based on the difference between the amount it collected in rates subject to refund and the amount it expected to recover pending the final regulatory decision. Similarly, Washington Gas periodically records provisions for rate refunds related to other transactions of the regulated utility. Actual results related the these regulatory contingencies are difficult to predict and could differ significantly from the estimates in the financial statements. When necessary, in Management’s judgement, Washington Gas establishes an estimated refund to customers.

Regulated Operations

The Company accounts for its regulated operations in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation, as amended and supplemented. SFAS No. 71 sets specific GAAP for companies where independent third-party regulators determine their rates. When setting rates, regulators often make decisions, the economics of which require companies to record costs as expenses, (or defer costs or revenues), in different periods than may be appropriate for unregulated enterprises. When this situation occurs, the regulated utility defers the associated costs as assets (regulatory assets) on the balance sheet and records them as expenses on the income statement as it collects

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

revenues through customers’ rates. Further, regulators can also impose liabilities upon a company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities).

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, the Company recognizes deferred income taxes for all temporary differences between the financial statement and tax basis of assets and liabilities at currently enacted income tax rates.

SFAS No. 109 also requires recognition of the additional deferred income tax assets and liabilities for temporary differences where regulators prohibit deferred income tax treatment for ratemaking purposes of the regulated utility. Regulatory assets or liabilities corresponding to such additional deferred tax assets or liabilities may be recorded to the extent the Company believes they will be recoverable from or payable to customers through the ratemaking process. Amounts applicable to income taxes due from and due to customers primarily represent differences between the book and tax basis of net utility plant in service.

Derivative Activities

The Company applies the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. SFAS No. 133, as amended, requires derivative instruments, including certain derivative instruments embedded in other contracts, to be recorded at fair value as either an asset or a liability. Changes in the derivative’s fair value are recorded in earnings, unless the derivative meets specific hedge accounting criteria. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recognized in earnings. If the derivative is designated as a cash-flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. SFAS No. 133 requires that the Company formally document, designate and assess the effectiveness of derivatives that are accounted for as hedging instruments. The Company has not designated any derivatives as hedging instruments.

Recent Accounting Standards

Effective October 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires goodwill no longer be amortized over an estimated useful life, but rather be tested annually for impairment and written down to the extent the test indicates the existence of an impairment. Upon implementation of this Statement, the transition impairment test for goodwill was performed as of October 1, 2002, and no impairment loss was recorded. The adoption of SFAS No. 142 did not have any effect on the Company’s financial statements during the quarter ended March 31, 2003. The amount of the amortization expense for the three and six months ended March 31, 2002 was not material. Elimination of goodwill amortization does not have a significant impact on the financial statements.

Effective October 1, 2002, the Company also adopted SFAS No. 143, Accounting for Asset Retirement Obligations (ARO). The standard requires that the Company identify legal obligations associated with the retirement of tangible long-lived assets. Liabilities must be recognized and measured at fair value when it is determined that there is a legal obligation associated with the retirement of tangible long-lived assets. The cost associated with the recognition of the liability for asset retirement obligations is capitalized as part of the related asset’s book cost and is depreciated over the expected life o f the asset. If a legal obligation does not exist, or if it can not

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

be measured due to uncertainty about the estimated amounts, then the accounting for the asset retirement cost is not affected. The adoption of SFAS No. 143 did not have a material effect on the Company’s financial statements during the quarter and six months ended March 31, 2003, since the Company did not have a legal obligation to retire its tangible long-lived assets or, for certain immaterial assets, the Company could not estimate the ARO. The regulated utility currently accrues costs of removal on many regulated, long-lived assets through depreciation expense, with a corresponding credit to accumulated depreciation, as allowed by the regulatory commissions that have jurisdiction over its retail rates. However, because these removal costs meet the requirements of SFAS 71, these accumulated costs are not classified as liabilities. The regulated utility is in the process of determining the amount of the accumulated removal costs included in the accumulated depreciation reserve and will disclose them in the future.

In November 2002, the FASB issued Financial Interpretation No. (FIN) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 expands disclosures made by a guarantor in its financial statements about its obligations under certain guarantees it has issued and requires certain disclosures for product warranties and other contracts that are excluded from initial recognition and measurement. The interpretation requires, upon issuance of a guarantee, a company to recognize a liability at fair value. FIN No. 45 supercedes and incorporates FIN No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others. The provisions of this Interpretation are effective for fiscal years ending after December 15, 2002. Management has reviewed the effects of adopting this standard and believes that it will not have a material effect, if any, on the Company’s financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation. The provisions of this Statement are effective for fiscal years ending after December 15, 2002. Management has reviewed the effects of adopting this standard and believes that it will not have a material effect on the Company’s financial statements. As reflected in Note 11 of the Notes to Consolidated Financial Statements of the Company’s fiscal year 2002 Annual Report on Form 10-K, for the year ended September 30, 2002, this issue would have no effect on reported diluted earnings per share and would reduce basic earnings by $0.01 per share.

In April 2003, FASB approved certain decisions on its stock-based compensation project. Some of the key decisions reached by the FASB were that stock-based compensation should be recognized in the income statement as an expense and that the expense should be measured as of the grant date at fair value. A significant issue yet to be addressed by the FASB is the determination of the appropriate fair value measure. The FASB has not scheduled when it will deliberate additional issues in this project, however, the FASB plans to issue an exposure draft in 2003 that could become effective in 2004.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The amendments set forth in SFAS No. 149 require that contracts with comparable characteristics be accounted for similarly. In particular, this statement clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative according to SFAS No. 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. In addition, the statement amends the definition of an underlying to conform it to language used in FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and amends certain other existing pronouncements. The requirement of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The provisions of the statement that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. Management is currently evaluating the impacts, if any, of SFAS No. 149 on the Company’s financial statements.

NOTE 2—SHORT-TERM DEBT

On May 2, 2003, WGL Holdings and Washington Gas executed new revolving credit agreements with a banking group in the amounts of $130 million and $175 million respectively. The new credit agreements replace previously existing credit agreements of $85 million for WGL Holdingsand $220 million for Washington Gas. WGL Holdings and Washington Gas pay facility fees of 13 basis points and 11 basis points, respectively, for the new revolving credit agreements, which will expire on May 1, 2004. Other permanent and seasonal bank lines of credit available to WGL Holdings and Washington Gas during the period October 1, 2002 through March 31, 2003 had expired or were terminated as of May 2, 2003.

NOTE 3—LONG-TERM DEBT

Unsecured Medium-Term Notes

The regulated utility issues unsecured Medium-Term Notes (MTNs) with individual terms regarding interest rates, maturities and call or put options that are an integral part of the basic debt instrument. These notes can have maturity dates of one or more years from date of issuance. During the three months ended March 31, 2003 the regulated utility did not issue any unsecured MTNs. Washington Gas filed a new $250.0 million shelf registration that was declared effective by the SEC on April 24, 2003. The table below reflects notes payable and current maturities of long-term debt as of March 31, 2003 and September 30, 2002.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

WGL Holdings, Inc.



	As of		As of
(In thousands)	March 31, 2003		September 30, 2002

Current Maturities of Long-Term Debt	$	28,217	$	42,396
Notes Payable		110,732		90,865

Total	$	138,949	$	133,261

Washington Gas Light Company



	As of		As of
(In thousands)	March 31, 2003		September 30, 2002

Current Maturities of Long-Term Debt	$	28,095	$	42,238
Notes Payable		34,611		25,705

Total	$	62,706	$	67,943

NOTE 4–COMMON SHAREHOLDERS’ EQUITY

The tables below reflects the elements of common shareholders’ equity as of March 31, 2003 and September 30, 2002.


WGL Holdings, Inc.

	As of			As of
(In thousands)	March 31, 2003			September 30, 2002

Common Stock ,no par value, 120,000,000 shares authorized, 48,650,635 shares issued	$	471,497		$	471,497
Paid-in capital		1,967			1,645
Retained earnings		397,291			295,676
Deferred compensation		(55	)		(120	)
Other comprehensive income		(676	)		—
Treasury stock—at cost, 68,024 and 85,968 shares, respectively		(1,799	)		(2,295	)

Total	$	868,225		$	766,403


Washington Gas Light Company

	As of				As of
(In thousands)	March 31, 2003			September 30, 2002

Common Stock ,no par value, 80,000,000 Shares authorized, 46,479,536 shares issued	$	46,479			$	46,479
Paid-in capital		450,201				449,518
Retained earnings		332,965				234,443
Deferred compensation		(55	)			(120	)
Other comprehensive income		(676	)			—

Total	$	828,914			$	730,320

NOTE 5—COMPREHENSIVE INCOME

The table below reflects the elements of comprehensive income. Items that are excluded from net income and charged directly to common shareholder’s equity are accumulated in Other comprehensive income. The amount of accumulated other comprehensive income is included in Common Shareholders’ Equity.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)



			Three Months Ended				Six Months Ended
			March 31, 2003				March 31, 2003

			WGL		Washington		WGL			Washington
(In thousands)			Holdings		Gas		Holdings			Gas

Net Income			$	80,963	$	82,191	$	132,585			$	129,492
Other comprehensive income, net of tax:
	Minimum pension liability adjustment			112		112		(676	)			(676	)

		Comprehensive Income	$	81,075	$	82,303	$	131,909			$	128,816

NOTE 6—EARNINGS PER SHARE

Basic earnings per average common share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding during the reported period. Diluted EPS assumes the issuance of common shares pursuant to stock-based compensation plans at the beginning of the applicable period. The following tables show the computation of basic and diluted EPS of WGL Holdings for the three and six months ended March 31, 2003 and 2002.

Basic and Diluted Earnings Per Average Common Share



			Net				Per Share
*(Thousands, Except Per Share Data)*			Income		Shares		Amount

For the Three Months Ended Mar. 31, 2003
	Basic EPS:
		Net Income	$	80,963		48,582	$	1.67
		Stock-Based Compensation Plans				156

	Diluted EPS:
		Net Income	$	80,963		48,738	$	1.66

For the Three Months Ended Mar. 31, 2002
	Basic EPS:
		Net Income	$	45,760		48,565	$	0.94
		Stock-Based Compensation Plans				86

	Diluted EPS:
		Net Income	$	45,760		48,651	$	0.94

For the Six Months Ended Mar. 31, 2003
	Basic EPS:
		Net Income	$	132,585		48,578	$	2.73
		Stock-Based Compensation Plans				147

	Diluted EPS:
		Net Income	$	132,585		48,725	$	2.72

For the Six Months Ended Mar. 31, 2002
	Basic EPS:
		Net Income	$	75,997		48,561	$	1.56
		Stock-Based Compensation Plans				84

	Diluted EPS:
		Net Income	$	75,997		48,645	$	1.56

NOTE 7——LIMITED LIABILITY COMPANY INVESTMENT

On September 20, 2002, WGL Holdings and Thayer Capital Partners (Thayer) entered into an agreement to restructure Primary Investors such that WGL Holdings has no liability or financial commitment to Thayer, Primary Investors or any subsidiary of Primary Investors. On October 15, 2002, WGL Holdings and Primary Investors executed a final closing and transferred all of its

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

interest in Primary Investors to Thayer. Since September 30, 2002, the Company had no net investment in this equity venture. This investment had no effect on net income in the quarter or six months ended March 31, 2003.

NOTE 8—DERIVATIVE ACTIVITY

Washington Gas enters into forward contracts for the purchase of natural gas that qualify as derivatives under SFAS No. 133. Washington Gas has elected to exempt such contracts as normal purchases and sales, as defined by SFAS No. 133. Certain contracts meet the definition of a derivative and are recorded on the balance sheet at fair value, as a liability. Because such contracts relate to the acquisition of natural gas under a hedging program providing for recovery of the actual cost, which has been approved by the regulatory bodies in the District of Columbia, Maryland and Virginia, offsetting mark-to-market amounts are recorded as a regulatory asset. The fair value of these contracts at September 30, 2002 was $1.3 million and at March 31, 2003 was $112,000.

The Company’s non-regulated retail energy-marketing subsidiary, WGEServices held a heating degree day option contract as of March 31, 2003. WGEServices uses this instrument to manage the risk of increased usage caused by colder-than-normal weather for a limited number of its customers, where such customers have chosen a fixed price and volume service. This contract pays WGEServices a fixed dollar amount for every heating degree day over a specified level (strike) during the calculation period. The contract is accounted for under guidelines issued by the Emerging Issues Task Force (EITF) of the FASB in issue 99-2 and is excluded from the definition of a hedge contract under SFAS No. 133.

NOTE 9—OPERATING SEGMENT REPORTING

WGL Holdings reports three operating segments: 1) regulated utility; 2) retail energy-marketing; and 3) heating ventilating and air conditioning (HVAC) activities.

With approximately 92 percent of WGL Holdings’ assets, the regulated utility segment is its core business. Represented almost entirely by Washington Gas, the regulated utility segment provides regulated gas distribution services (including the purchase and delivery of natural gas, meter reading, responding to customer inquiries and bill preparation) to customers in metropolitan Washington, D.C. and parts of Maryland and Virginia. In addition, the regulated utility segment also includes an underground natural gas storage facility that is regulated by the Federal Energy Regulatory Commission and operated on behalf of Washington Gas.

Through WGEServices, the retail energy-marketing segment sells natural gas and electricity directly to customers, both inside and outside Washington Gas’ traditional service territory, in competition with unregulated gas and electricity marketers. Through two wholly owned subsidiaries, WGESystems and ACI, the HVAC segment designs, renovates and services mechanical heating, ventilating and air conditioning systems for commercial and governmental customers. In the three and six months periods ended March 31, 2002, the HVAC segment also included the results of the Company’s 50-percent equity investment in Primary Investors, an entity that provided HVAC services to residential customers. The Company terminated its interest in Primary Investors in October 2002. (Please see Note 7 of the Notes to Consolidated Financial Statements).

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

The following table presents operating segment information.

OPERATING SEGMENT FINANCIAL INFORMATION



							Non-Utility Operations

				Regulated			Retail Energy												Eliminations/
(Thousands)				Utility			Marketing			HVAC			Other Activities			Total			Other			Consolidated

Three Months Ended March 31, 2003

Total Revenues				$	626,425		$	222,692		$	7,551		$	622		$	230,865		$	(6,217	)	$	851,073
Operating Expenses
Depreciation and Amortization					21,189			74			33			156			263			—			21,452
Other Operating Expenses ^(a)					456,904			223,500			7,941			880			232,321			(6,217	)		683,008
Income Tax Expense (Benefit)					54,443			(428	)		(205	)		(152	)		(785	)		—			53,658

		Total Operating Expenses			532,536			223,146			7,769			884			231,799			(6,217	)		758,118

Operating Income (Loss)					93,889			(454	)		(218	)		(262	)		(934	)		—			92,955
Interest Expense – Net					11,361			144			5			454			603			(387	)		11,577
Other Non-Operating Inc. (Exp.) ^(b)					(68	)		—			(8	)		378			370			(387	)		(85	)
Dividends on Washington Gas Preferred Stock					330			—			—			—			—			—			330

Net Income (Loss)				$	82,130		$	(598	)	$	(231	)	$	(338	)	$	(1,167	)	$	—		$	80,963

Total Assets				$	2,182,986		$	156,700		$	24,857		$	14,697		$	196,254		$	—		$	2,379,240

Capital Expenditures				$	32,204		$	6		$	16		$	12		$	34		$	—		$	32,238

Three Months Ended March 31, 2002 ^(c)
Total Revenues				$	385,708		$	172,897		$	12,016		$	512		$	185,425		$	(6,314	)	$	564,819
Operating Expenses
Depreciation and Amortization					18,048			97			151			152			400			—			18,448
Other Operating Expenses ^(a)					270,401			170,503			10,999			416			181,918			(6,314	)		446,005
Income Tax Expense (Benefit)					34,139			724			480			(31	)		1,173			—			35,312

			Total Operating Expenses		322,588			171,324			11,630			537			183,491			(6,314	)		499,765
Equity in Net Loss of Affiliate					—			—			(2,115	)		—			(2,115	)		—			(2,115	)

Operating Income (Loss)					63,120			1,573			(1,729	)		(25	)		(181	)		—			62,939
Interest Expense – Net					10,953			246			122			10			378			—			11,331
Other Non-Operating Inc. (Exp.) ^(b)					1,719			—			63			—			63			—			1,782
Residential HVAC impairment					—			—			(7,300	)					(7,300	)		—			(7,300	)

Dividends on Washington Gas Preferred Stock					330			—			—			—			—			—			330

	Net Income (Loss)			$	53,556		$	1,327		$	(9,088	)	$	(35	)	$	(7,796	)	$	—		$	45,760

	Total Assets			$	2,011,690		$	119,183		$	27,962		$	12,058		$	159,203		$	(18,799	)	$	2,152,094

	Capital Expenditures/Investments			$	39,896		$	—		$	2,019		$	—		$	2,019		$	(8	)	$	41,907

(a)		Includes cost of gas and revenue taxes during all reported periods.
(b)		The amounts reported for Other Non-Operating Inc. (Exp.) are net of applicable income taxes.
(c)		Certain amounts in the fiscal year 2002 period have been reclassified to conform to the presentation of the current fiscal year period.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

OPERATING SEGMENT FINANCIAL INFORMATION



						Non-Utility Operations

			Regulated			Retail Energy											Eliminations/
(Thousands)			Utility			Marketing		HVAC			Other Activities			Total			Other			Consolidated

Six Months Ended March 31, 2003

Total Revenues			$	1,005,128		$	396,633	$	18,140		$	1,120		$	415,893		$	(9,928	)	$	1,411,093
Operating Expenses
	Depreciation and Amortization			40,804			148		66			312			526			—			41,330
	Other Operating Expenses ^(a)			727,679			390,090		19,143			1,939			411,172			(9,928	)		1,128,923
	Income Tax Expense (Benefit)			82,343			2,423		(448	)		432			2,407			—			84,750

	Total Operating Expenses			850,826			392,661		18,761			2,683			414,105			(9,928	)		1,255,003

Operating Income (Loss)				154,302			3,972		(621	)		(1,563	)		1,788			—			156,090
Interest Expense – Net				23,073			280		9			399			688			(285	)		23,476
Other Non-Operating Inc. (Exp.) ^(b)				(1,528	)		10		14			2,420			2,444			(285	)		631
Dividends on Washington Gas Preferred Stock				660			—		—			—			—			—			660

Net Income (Loss)			$	129,041		$	3,702	$	(616	)	$	458		$	3,544		$	—		$	132,585

Total Assets			$	2,182,986		$	156,700	$	24,857		$	14,697		$	196,254		$	—		$	2,379,240

Capital Expenditures			$	60,313		$	8	$	175		$	12		$	195		$	—		$	60,508

Six Months Ended March 31, 2002 ^(c)
Total Revenues			$	657,012		$	302,009	$	32,772		$	1,084		$	335,865		$	(10,962	)	$	981,915
Operating Expenses
	Depreciation and Amortization			35,699			224		302			310			836			—			36,535
	Other Operating Expenses ^(a)			463,728			297,834		30,136			909			328,879			(10,962	)		781,645
	Income Tax Expense (Benefit)			53,486			1,215		1,045			(51	)		2,209			—			55,695

		Total Operating Expenses		552,913			299,273		31,483			1,168			331,924			(10,962	)		873,875
Equity in Net Loss of Affiliate				—			—		(2,822	)		—			(2,822	)		—			(2,822	)

Operating Income (Loss)				104,099			2,736		(1,533	)		(84	)		1,119			—			105,218
Interest Expense – Net				22,480			479		269			13			761			—			23,241
Other Non-Operating Inc. (Exp.) ^(b)				1,889			—		91			—			91			—			1,980
Residential HVAC impairment				—			—		(7,300	)		—			(7,300	)		—			(7,300	)

Dividends on Washington Gas Preferred Stock				660			—		—			—			—			—			660

Net Income (Loss)			$	82,848		$	2,257	$	(9,011	)	$	(97	)	$	(6,851	)	$	—		$	75,997

Total Assets			$	2,011,690		$	119,183	$	27,962		$	12,058		$	159,203		$	(18,799	)	$	2,152,094

Capital Expenditures/Investments			$	68,711		$	—	$	2,442		$	—		$	2,442		$	(151	)	$	71,002

(a) Includes cost of gas and revenue taxes during all reported periods.

(b) The amounts reported for Other Non-Operating Inc. (Exp.) are net of applicable income taxes.

(c) Certain amounts in the fiscal year 2002 period have been reclassified to conform to the presentation of the current fiscal year period.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

NOTE 10—TRANSACTIONS BETWEEN WASHINGTON GAS AND AFFILIATES

Washington Gas and other subsidiaries of WGL Holdings may engage in transactions during the ordinary course of business. All significant intercompany transactions and balances have been eliminated from the consolidated financial statements of WGL Holdings.

Washington Gas provides administrative and general support to affiliates and prepares consolidated tax returns, which include affiliated company tax obligations. All such costs that are billed to affiliates are settled with a cash transfer or reflected in “Receivables from associated companies” or “Payables to associated companies” on Washington Gas’ Balance Sheet. Washington Gas may also, on occasion, borrow funds from, or lend funds to, affiliated companies through the operation of a money pool. The Washington Gas balance sheets reflect a net payable of $3.4 million at March 31, 2003, and a net receivable of $3.6 million at September 30, 2002, for money pool balances. All affiliated company transactions, including these balances, were eliminated from the WGL Holdings Consolidated Balance Sheet in accordance with GAAP. Additionally, Washington Gas provides system balancing services to all energy marketers participating in the customer choice programs on its facilities under approved tariffs, including $6.2 million and $9.9 million of charges to WGEServices, an affiliated energy marketer, for balancing services in the three and six month periods ended March 31, 2003, respectively. In the three and six month periods ended March 31, 2002, the charges for balancing services were $5.7 million and $9.6 million, respectively.

NOTE 11—SALE OF HEADQUARTERS PROPERTY

Results for the quarter ended March 31, 2003 reflect a gain of $2.5 million after income taxes related to the sale of the Company’s headquarters building and land located in downtown Washington, D.C. This gain was reported in Other Income (Expenses) in accordance with regulatory accounting. Results for the quarter ended March 31, 2003 also reflect Company estimates for potential refunds to customers based on the outcome of regulatory decisions related to this gain.

NOTE 12—COMMITMENTS AND CONTINGENCIES

Certain legal and administrative proceedings, incidental to the Company’s business including rate case contingencies involve WGL Holdings and/or its subsidiaries. In the opinion of management, the Company has recorded adequate provisions for probable losses or refunds to customers for rate case contingencies, in accordance with SFAS No. 5, Accounting for Contingencies. Washington Gas believes the amount of the refunds that are reasonably possible, in excess of the liability recorded at March 31, 2003, is approximately $8.0 million. Below is a description of some of the current regulatory proceedings.

Virginia Jurisdiction

On June 14, 2002, Washington Gas filed an application with the State Corporation Commission of Virginia (SCC of VA) to increase annual revenues in Virginia. The Shenandoah Gas Division of Washington Gas is included in the filing. The application requested to increase overall annual revenues by approximately $23.8 million. Washington Gas requested an overall rate of return of 9.42 percent and a return on common equity of 12.25 percent versus its current return on common equity of 11.50 percent for Washington Gas and 10.7 percent for Shenandoah Gas. Washington Gas also requested approval of an Incentive Rate Plan (IRP), which includes a 50/50 sharing between customers and Washington Gas of weather-normalized Virginia regulated earnings 100 basis points above or below the SCC of VA’s authorized return on equity. The incentive rate plan proposed no change in the method of recovering the cost of natural gas incurred by Washington Gas.

On November 15, 2002, the Staff of the SCC of VA (Staff) filed testimony in response to Washington Gas’ presentation. The Staff took the position that Washington Gas’ revenues are sufficient and do not need to be revised, but recommended that operating revenues for the Shenandoah Gas Division be decreased by $1.4 million. The Staff’s estimate of the cost of equity for Washington Gas, including the Shenandoah Division, was a range between 9.50 percent and 10.50 percent. The Staff recommended the SCC of VA adopt a 10.0 percent return on equity for Washington Gas including the Shenandoah Division. Washington Gas filed rebuttal testimony in this proceeding on December 4, 2002. Hearings were held the week of December 16, 2002. At the hearing, Washington Gas withdrew the IRP from consideration in that proceeding but reserved the right to propose a performance-based rate plan in a future rate case. The other parties agreed to leave the record open to permit Washington gas to submit by January 10, 2003, the actuarial studies that support the reasonableness of the updated pension and Other Post Employment Benefits (OPEB) expenses proposed by Washington Gas.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

On January 30, 2003, the Staff filed a motion that requested acceptance of the Staff’s comments and accompanying schedules that reflected revisions to the Staff’s original position. Based on its review of additional financial data and actuarial studies, the Staff supports the pension OPEB costs requested by Washington Gas. After appropriate revisions to reflect the Washington Gas’ proposed pension and OPEB costs, the Staff now supports an operating revenue increase of $5.0 million for Washington Gas and an operating revenue reduction of $1.2 million for the Shenandoah Division.

Washington Gas cannot predict the ultimate outcome of this pending regulatory proceeding. Under the regulations of the SCC of VA, Washington Gas placed the requested general revenue increase into effect on November 12, 2002, subject to refund pending the SCC of VA’s final decision in the proceeding. Washington Gas has recorded a provision for rate refunds as of March 31, 2003, representing management’s judgment of the rate case outcome.

Depreciation Issues

The Staff issued a letter dated October 2, 2002, approving new depreciation rates for Washington Gas and the Shenandoah Gas Division that would increase annual depreciation expense by approximately $4.0 million. Staff stated its position that the approved rates should be implemented as of January 1, 2002, but recognized that the implementation date should be decided by the SCC of VA in the pending rate case discussed above. Washington Gas believes the new depreciation rates should be implemented coincident with the effective date of new base rates on November 12, 2002. Washington Gas filed testimony supporting this position with the SCC of VA in the base rate proceeding discussed previously. Washington Gas believes that it is reasonably possible that the position it has taken on this matter will be adopted by the SCC of VA in the pending rate case.

The financial statements as reported in this Quarterly Report on Form 10-Q do not reflect any modification of depreciation rates for periods prior to November 12, 2002. However, Washington Gas did utilize the higher depreciation rates from November 12, 2002 forward. To the extent the position of the Staff of the SCC of VA is adopted by the SCC of VA in the current rate filing, Washington Gas would have to record a charge to income for additional depreciation expense, net of income tax benefits, calculated from January 1, 2002 to November 12, 2002, without a corresponding amount of revenue. The issue is still pending in the previously discussed rate case.

Maryland Jurisdiction

On March 31, 2003, Washington Gas filed with the Public Service Commission of Maryland (PSC of MD) an application to increase rates in Maryland. The request seeks to increase overall annual revenues by approximately $35.1 million with a return on common equity of 12.25 percent and an overall rate of return of 9.39 percent.

The proposed rate request included an IRP that would establish incentives to increase efficiencies and would set customer service quality standards that seek to increase the efficiency, safety, and reliability of service. The IRP benefits customers by providing for more stable rates, which would result in less frequent requests for rate increases.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 1 – Financial Statements (continued)

The March 31, 2003, rate request also included a proposal that would provide benefits to low-income customers who qualify for participation in a new Washington Gas program that would provide bill credits to participants during the winter heating season.

Under Maryland law, the PSC of MD may suspend the implementation of the proposed increase for up to 210 days from the filing date. The PSC of MD typically uses the 210-day period to review the reasonableness of the proposed change in rates. If action has not been taken after 210 days, rates may be placed into effect subject to refund. Due to Maryland’s suspension statute, Washington Gas anticipates a final Order prior to November 2003.

District of Columbia Jurisdiction

On June 19, 2001, Washington Gas filed an application with the Public Service Commission of the District of Columbia (PSC of DC) to increase rates in the District of Columbia. The request sought to increase overall annual revenues in the District of Columbia by approximately $16.3 million, or 6.8 percent, based on a proposed return on equity of 12.25 percent.

On October 29, 2002, the PSC of DC issued an Order for Washington Gas to decrease rates. The Order directed a decrease in overall annual revenues in the District of Columbia of approximately $7.5 million and approved a return on common equity of 10.6 percent and an overall rate of return of 8.83 percent.

On November 6, 2002, Washington Gas filed with the PSC of DC an Application for Reconsideration of the Order issued by the PSC of DC on October 29, 2002. The District of Columbia’s Office of the People’s Counsel and another intervenor also filed Applications for Reconsideration of the October 29, 2002 Order.

After reviewing the Applications for Reconsideration of Washington Gas and other parties in the case, the PSC of DC issued its order on reconsideration on March 28, 2003. New rates resulting in a $5.4 million annual revenue reduction were put into place in the District of Columbia for service rendered on and after April 9, 2003.

On February 7, 2003, Washington Gas filed with the PSC of DC an additional application to increase rates. The request sought to increase overall annual revenues in the District of Columbia by approximately $14.1 million, or 7.0 percent, to $214.2 million. The application seeks a return on common equity of 12.25 percent and an overall rate of return of 9.25 percent. The rate request application filed on February 7, 2003 did not reflect the effect of the revenue reduction indicated in the PSC of DC’s October 29, 2002 Order.

After considering the effect of the base rate reductions that became effective on April 9, 2003, Washington Gas filed a revision to its February 7, 2003, application on April 23, 2003. This revision increased the amount of the requested increase to $19.9 million. On May 2, 2003, in response to a commission request for supplemental testimony, the requested increase was modified to $18.8 million, supporting a total level of annual revenues of $213.2 million. There are no statutory time requirements for a ruling on the rate request in the District of Columbia. However, Washington Gas requested the PSC of DC to take action on the request within a nine-month period from the February filing date. The PSC of DC held a Pre-hearing Conference in this case on April 10, 2003 to consider interventions and appearances of interested parties, the procedural schedule in the case and proposals for issues to be resolved in this case. The commission has adopted a procedural schedule that requires final briefs to be filed during the first week of October 2003.

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Certain matters discussed in this report, excluding historical information, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the outlook for earnings, revenues and other future financial business performance or strategies and expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates”, “expects”, “anticipates”, “intends”, “believes”, “plans” and similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could”. Although the Company believes such forward-looking statements are based on reasonable assumptions, it cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and the Company assumes no duty to update them. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: 1) economic, competitive, political and regulatory conditions and developments; 2) capital and energy commodity market conditions; 3) changes in credit market conditions and creditworthiness of customers and suppliers; 4) changes in relevant laws and regulations, including tax, environmental and employment laws and regulations; 5) weather conditions; 6) legislative, regulatory, and judicial mandates and decisions; 7) timing and success of business and product development efforts; 8) technological improvements; 9) the pace of deregulation efforts and the availability of other competitive alternatives; 10) terrorist activities; and 11) other uncertainties.

Such uncertainties are difficult to predict accurately and are generally beyond WGL Holdings, Inc.’s (WGL Holdings) direct control. Accordingly, while it believes that the assumptions are reasonable, WGL Holdings cannot ensure that all expectations and objectives will be realized. Readers are urged to use care and consider the risks, uncertainties and other factors that could affect the Company’s business as described in this Quarterly Report on Form 10-Q. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is divided into the following two major sections:

WGL Holdings — This section describes the financial condition and results of operations of WGL Holdings and its subsidiaries on a consolidated basis. This section includes brief discussions of WGL Holdings’ regulated utility operations and non-utility operations. The majority of WGL Holdings’ operations are derived from the results of the regulated utility, Washington Gas Light Company (Washington Gas). In addition, WGL Holdings is also impacted by the results of its non-utility operations. To obtain a complete understanding and review of all the details of the regulated utility operations, please refer to the Management’s Discussion and Analysis of Financial Condition and Results of Operations for Washington Gas.

Washington Gas — This section comprises the vast majority of WGL Holdings’ regulated utility segment. As such, the financial condition and results of operations of Washington Gas’ utility operations and WGL Holdings regulated utility segment are essentially the same.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations for both WGL Holdings and Washington Gas should be read in conjunction with the respective company’s Consolidated Financial Statements and the combined Notes thereto.

Washington Gas provides accounting, legal and other services to its affiliates at cost, the total amounts of which are not material. Additionally, Washington Gas provides system balancing

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

services to all energy-marketers participating in the customer choice programs on its system under approved tariffs which includes $6.2 million and $5.7 million of charges to Washington Gas Energy Services, Inc. (WGEServices) for balancing in the quarters ended March 31, 2003 and 2002, respectively. For the six months ended March 31, 2003 and 2002, the charges for balancing services were $9.9 million and $9.3 million, respectively. All of these related-party amounts have been eliminated in the consolidated financial statements of WGL Holdings.

CRITICAL ACCOUNTING POLICIES

Preparation of financial statements and related disclosures in compliance with generally accepted accounting principles requires the selection and the application of appropriate technical accounting rules to the relevant facts and circumstances of the Company’s operations, as well as the use of estimates by management to compile the consolidated financial statements. The application of these accounting policies necessarily involves judgments regarding estimates and projected outcomes of future events, including the likelihood of success of particular regulatory initiatives, the likelihood of actualizing environmental estimates and the probability of recovering costs and investments in both the regulated utility and non-utility operations. These judgments, in and of themselves, materially impact the financial statements and the related disclosures.

The Company has identified four critical accounting policies discussed below that require judgment and estimation, where such estimates have a material impact on the consolidated financial statements.

Accounting for Utility Revenue and Cost of Gas Recognition

For regulated deliveries of natural gas, Washington Gas reads meters and bills customers on a cycle basis. It accrues revenues for gas that has been delivered but not yet billed at the end of an accounting period. Such revenues are recognized as unbilled revenue and those revenues are adjusted in the subsequent period when actual meter readings are taken.

Accounting for Regulated Operations – Regulatory Assets and Liabilities

A significant portion of the Company’s business is subject to regulation. As the regulated utility industry continues to address competitive market issues, the cost-of-service regulation used to compensate the Company’s regulated utility for the cost of its regulated operations will continue to evolve. Non-traditional ratemaking initiatives and market-based pricing of products and services could have additional long-term financial implications for the Company. Management has relied on its projection of continued regulatory oversight of its operations in order to validate the carrying cost of the regulated utility investment in fixed assets.

The Company’s regulated utility records the results of its regulated activities in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation, which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS No. 71 requires the recognition of regulatory assets and liabilities for certain transactions that would have been

WGL Holdings, Inc.
Washington Gas Light Company

Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

treated as revenue and expense in non-regulated businesses. In certain circumstances, SFAS No. 71 allows entities whose rates are determined by third-party regulators to defer costs as “regulatory” assets in the balance sheet to the extent that the entity expects to recover these costs in future rates. Future regulatory changes or changes in the competitive environment could result in the Company discontinuing the application of SFAS No. 71 for some of its businesses and require the write-off of the portion of any regulatory asset or liability that was no longer probable of recovery or refund. In effect, the Company’s regulated utility could be required to write off certain regulatory assets that had been deferred in prior period Consolidated Balance Sheets and charge these costs to expenses at the time it determines that the provisions of SFAS No. 71 no longer apply. If WGL Holdings was required to discontinue the application of SFAS No. 71 for its operations, it would have an extraordinary non-cash charge to income for the net book value of its regulatory assets and liabilities. Other adjustments might also be required.

Management believes that currently available facts support the continued application of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory environment.

Accounting for Income Taxes

SFAS No. 109 also requires recognition of the additional deferred income tax assets and liabilities for temporary differences when regulators have flowed through income tax benefits or costs to ratepayers. Regulatory assets or liabilities corresponding to such additional deferred tax assets or liabilities may be recorded to the extent the Company believes they will be recoverable from or payable to customers through the ratemaking process. Amounts applicable to income taxes due from and due to customers primarily represent differences between the book and tax basis of net utility plant in service.

Accounting for Contingencies

The Company recognizes contingent liabilities utilizing SFAS No. 5, Accounting for Contingencies. By their nature, the amount of the contingency and the timing of a contingent event are subject to management’s judgment of such events and management’s estimates of the amounts. Some of these contingent events and amounts are discussed in Note 12 of the Notes to Consolidated Financial Statements.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

WGL HOLDINGS

RESULTS OF OPERATIONS — THREE MONTHS ENDED MARCH 31, 2003 vs. MARCH 31, 2002

Earnings

WGL Holdings, Inc. (the Company) reported net income for the three months ended March 31, 2003, of $81.0 million, or $1.66 per share, an increase of $35.2 million, or $0.72 per share, over the same period last year, primarily due to significantly colder weather. Unless otherwise noted, earnings per share amounts are reflected as diluted earnings per share and are based on average common shares outstanding. Basic earnings per share for the consolidated results are one cent higher than diluted earnings per share for the quarter ending March 31, 2003. There was no difference between basic and diluted earnings per share for the prior fiscal year period.

Results for the quarter ended March 31, 2003 reflect a gain of $2.5 million related to the sale of the Company’s headquarters property located in downtown Washington, D.C. Results for the quarter ended March 31, 2003 also reflect Company estimates for potential refunds to customers based on the outcome of regulatory decisions related to this gain as well as other pending regulatory matters in Virginia. Actual results related to these regulatory contingencies are difficult to predict and could differ significantly from the estimates included in the reported earnings.

Regulated Utility Operating Results

The Company’s utility operations are weather sensitive with a significant portion of its revenue coming from deliveries of natural gas to residential and small commercial heating customers. The utility segment’s net income for the second quarter of fiscal year 2003 was $82.1 million, an increase of $28.6 million, or 53 percent, over the same period last year due primarily to significantly colder weather. Weather for the second quarter of fiscal year 2003, as measured by heating degree days, was nearly 32 percent colder than the same period last year. The current quarter was 16.2 percent colder than normal, while the same period last year was 11.8 percent warmer than normal. The colder weather contributed an estimated $0.29 per share to current quarter results compared to normal weather. Reducing the $0.26 per share decrease to earnings in the second quarter of 2002 caused by warmer than normal weather was a $4.9 million after-tax benefit from weather insurance. Also improving current period results were new rates that went into effect in Virginia on November 12, 2002, subject to refund, and new rates in Maryland that went into effect on September 30, 2002. Tempering these year-over-year improvements were higher operating expenses of, exclusive of gas costs, $28.2 million that included higher labor and benefit costs, higher depreciation levels and increased expense for uncollectible accounts and higher general taxes. Further discussion of the operating results of the regulated utility for the three months ended March 31, 2003, is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations for Washington Gas.

Non-Utility Operating Results

In the second quarter of fiscal year 2002 the Company recorded an impairment reserve of $7.3 million and a net loss from operations of $2.2 million for its former residential heating, ventilating and air conditioning (HVAC) operation. This operation represented the Company’s former 50-percent equity investment in Primary Investors LLC (Primary Investors). The current quarter does not include any impact from Primary Investors because the Company no longer has an investment in this entity.

The results reported from two primary unregulated operating segments and other minor non-utility

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

activities decreased to a net loss of $1.2 million in the current quarter from net income of $1.7 million during the quarter ended March 31, 2002.

The following table compares the financial results from non-utility activities for the quarters ended March 31, 2003 and 2002.


Net Income (Loss) Applicable to Non-Utility Activities
(In thousands of dollars)

		Three Months Ended
		March 31,

		2003			2002			Variance

Retail energy-marketing		$	(598	)	$	1,327		$	(1,925	)
Commercial HVAC			(231	)		385			(616	)
Other non-utility activities			(338	)		(35	)		(303	)

	Subtotal	$	(1,167	)	$	1,677		$	(2,844	)

Residential HVAC *			—			(9,473	)		9,473

	Total	$	(1,167	)	$	(7,796	)	$	6,629

* Not an operating unit in the 2003 period.

Retail Energy-Marketing

WGL Holdings’ retail energy-marketing subsidiary, WGEServices, had a net loss of $598,000 in the current quarter compared to net income of $1.3 million in the same period last year. WGEServices’ total revenues increased to $222.7 million in the quarter ended March 31, 2003, from $172.9 million in the quarter ended March 31, 2002 due to colder weather and increased customers.

At the end of the quarter, the retail energy-marketing segment supplied natural gas to 162,000 customers, a 10 percent increase over the same period last year. Electricity accounts totaled 79,000 at the end of the current quarter, an increase of 36 percent over the second quarter of fiscal year 2002. WGEServices sells natural gas and electricity in competition with other unregulated marketers.

WGEServices’ seasonal storage flexibility, combined with other risk mitigation strategies, provided significant protection from the effects of the sustained colder-than-normal weather and high gas prices that occurred in the second quarter of fiscal year 2003. However, the actual conditions experienced in late February and early March were more extreme than the planning parameters prescribed in the Company’s risk management policy. Accordingly, the colder-than-normal weather in the quarter ended March 31, 2003, caused WGEServices to make some additional purchases of natural gas in the spot market at a cost above its retail selling price to meet its commitments to customers. Consequently, the retail energy-marketing segment’s results for the current quarter were dampened by these high-price spot market purchases.

HVAC - Commercial Operations

Two subsidiaries, American Combustion Industries, Inc. and Washington Gas Energy Systems, Inc., offer large-scale HVAC installations and related services to commercial and government customers. Revenues from the commercial HVAC activities were $7.6 million for the three months ended March 31, 2003, compared to $12.0 million in the same period last year.

The Company’s commercial HVAC operations had a net loss of $231,000 in the current quarter, compared to net income of $385,000 in the same quarter of the prior year, reflecting reduced business activity and lower gross margins. The management of the commercial HVAC operations is working to rebuild the backlog of orders for its services.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

Other Income (Expenses)-Net

For the quarter ended March 31, 2003, Other Income (Expenses)-Net reflected a small net loss of $85,000, a decrease of $1.9 million from the $1.8 million of income recorded in same period in fiscal year 2002. This decrease was largely due to a $4.9 million benefit recorded in the second quarter of fiscal year 2002 for the proceeds from a weather insurance policy, partially offset by the gain related to the sale of the Company’s headquarters property. Other minor miscellaneous changes account for the remaining difference.

Interest Expense

WGL Holdings’ total interest expense of $11.6 million for the second quarter of fiscal year 2003 reflected an increase of $246,000 over the same period last year due primarily to an increase in the average balance of long-term debt outstanding, partially offset by a decrease in the weighted average interest rate of these borrowings. The average balance of short-term debt outstanding and related interest rates decreased during the current period. The components of interest expense are reflected below.


Composition of Interest Expense Changes
(In thousands of dollars)

		Three Months Ended
		March 31,

		2003		2002		Variance

Long-Term Debt		$	10,671	$	10,610	$	61
Short-Term Debt			299		548		(249	)
Other (Includes AFUDC)			607		173		434

	Total	$	11,577	$	11,331	$	246

RESULTS OF OPERATIONS — SIX MONTHS ENDED MARCH 31, 2003 vs. MARCH 31, 2002

Earnings

For the first six months of fiscal year 2003, the Company’s net income was $132.6 million, or $2.72 per share, a 74 percent improvement over net income of $76.0 million, or $1.56 per share, for the same period in fiscal year 2002.

As mentioned previously, the sale of the Company’s Washington, D.C. headquarters property resulted in an after-tax gain of $2.5 million in the first six months of fiscal year 2003. Also, improving the current period results was a $926,000 gain on the sale of an investment property in the first quarter of fiscal year 2003.

Regulated Utility Operating Results

Net income for the utility segment was $129.0 million for the first six months of fiscal year 2003, an increase of $46.2 million over the six months ended March 31, 2002, due primarily to 38 percent colder weather in the current period. The 18 percent colder-than-normal weather in the current six-month period contributed $0.46 per share to current fiscal year results, whereas the warmer-than-normal weather last year reduced earnings in that period by approximately $0.55 per share before the mitigating effect of an $0.18 per share benefit associated with the Company’s weather insurance policy. Firm gas deliveries of 1,115 million therms for the six months ended March 31, 2003, increased 300 million therms over the same period last year. New rates put into effect since the end of the second quarter last year in Maryland and Virginia also improved results. The utility segment results also benefited from an adjustment to income taxes that added $2.7 million to net income in the first quarter

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

of fiscal year 2003. The first six months of fiscal year 2002 included a $1.7 million after-tax charge attributable to business activities the Company had with a bankrupt energy trader. Further discussion of the operating results of the regulated utility for the six months ended March 31, 2003, is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations for Washington Gas.

Non-Utility Operating Results

Net income for the non-utility operations were $3.5 million for the six months ended March 31, 2003. This compares to a net loss of $6.9 million in the year earlier period, which includes the residential HVAC impairment provision and a net loss from operations for the residential HVAC business. There was no impact on financial results in the current six-month period from the former residential HVAC business because the Company no longer has an investment in this entity.

The following table compares the financial results from non-utility activities for the six months ended March 31, 2003 and 2002.


Net Income (Loss) Applicable to Non-Utility Activities
(In thousands of dollars)

		Six Months Ended
		March 31,

		2003			2002			Variance

Retail energy-marketing		$	3,702		$	2,257		$	1,445
Commercial HVAC			(616	)		1,240			(1,856	)
Other non-utility operations			458			(97	)		555

	Subtotal	$	3,544		$	3,400		$	144

Residential HVAC *			—			(10,251	)		10,251

	Total	$	3,544		$	(6,851	)	$	10,395

* Not an operating unit in the 2003 period.

Retail Energy-Marketing

The retail energy-marketing subsidiary, WGEServices, sells natural gas and electricity in competition with other unregulated marketers. Net income of $3.7 million from the retail energy-marketing segment increased $1.4 million over the same period last year. WGEServices’ total revenues increased to $396.6 million for the six months ended March 31, 2003, from $302.0 million in the same period ended March 31, 2002 due primarily to colder weather and additional customers being served.

Gas sales were 485 million therms in the current period, an increase of 75 million therms over last year and electric sales for the six months ended March 31, 2003, of 3,731 million kilowatt-hours rose 1,213 million kilowatt-hours over the same period last year.

HVAC - Commercial Operations

The Company’s commercial HVAC operations had a net loss of $616,000 in the first half of the current fiscal year and net income of $1.2 million in the same period last year. The decrease was primarily due to reduced business activity and lower gross margins.

Other Income (Expenses)-Net

A $1.3 million decrease in Other Income (Expenses)-Net for the six-month period ended March 31, 2003, compared to the same period last year was primarily due to benefits recorded last

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

year from the Company’s weather insurance policy. This decrease was partially offset by a current period after-tax gain of $2.5 million from the sale of the Company’s headquarters building, a $926,000 after-tax gain in the first quarter of fiscal year 2003 from the sale of non–utility property. In addition, in the first quarter of fiscal year 2002 a $1.7 million after-tax charge was recorded related to business activities with a bankrupt energy trader.

Interest Expense

WGL Holdings’ total interest expense of $23.5 million for the six months ended March 31, 2003, was essentially unchanged from the same period last year. The components of interest expense are reflected below.


Composition of Interest Expense Changes
(In thousands of dollars)

		Six Months Ended
		March 31,

		2003		2002		Variance

Long-Term Debt		$	21,623	$	21,363	$	260
Short-Term Debt			653		1,329		(676	)
Other (Includes AFUDC)			1,200		549		651

	Total	$	23,476	$	23,241	$	235

LIQUIDITY AND CAPITAL RESOURCES

General Factors Affecting Liquidity

It is important for the Company to have access to short-term debt markets to maintain satisfactory liquidity to operate its businesses on a near-term basis. Acquisition of natural gas, electricity, pipeline capacity and the need to finance accounts receivable are the most significant short-term financing requirements of the Company. The need for long-term capital is primarily driven by capital expenditures and maturity of long-term debt.

Significant swings can take place in the level of short-term debt needed by the Company due primarily to changes in the price of natural gas and the impact of weather on the volumes of natural gas and electricity that need to be purchased to satisfy customer demand. Satisfactory backup financing to the Company’s commercial paper program in the form of revolving credit agreements and bank lines of credit enables the Company to maintain access to short-term debt markets. The ability of the Company to obtain such financing depends on its credit ratings, which are greatly affected by financial performance and the liquidity of financial markets. Also potentially affecting access to short-term debt capital is the nature of any restrictions that might be placed upon the Company such as ratings triggers or a requirement to provide creditors with additional credit support in the event of a determination of unreasonable creditworthiness.

The ability to procure sufficient levels of long-term capital at reasonable costs is determined by the level of the Company’s capital expenditure requirements, its financial performance, and the impact of these factors on its credit ratings and investment alternatives available to investors. The Company’s access to short- and long-term capital may be affected by contract provisions related to a change in the Company’s creditworthiness.

The Company has a goal to maintain its common equity ratio in the mid-50 percent range of total consolidated capital. In addition, the Company’s short-term debt balances are reduced in the

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

spring, because a significant portion of the Company’s current assets are converted into cash at the end of the heating season. Accomplishing these objectives and maintaining sufficient cash flow are necessary to maintain attractive credit ratings for the Company and Washington Gas and to allow access to capital at relatively low costs. As of March 31, 2003, total consolidated capitalization, including current maturities of long-term debt, comprised 56.1 percent common equity, 1.8 percent preferred stock and 42.1 percent long-term debt. The cash flow requirements of the Company and the ability to provide satisfactory resources to satisfy those requirements are primarily influenced by the activities of Washington Gas and to a lesser extent the non-utility operations.

Short-Term Cash Requirements and Related Financing

The regulated utility’s business is weather-sensitive and seasonal, causing short-term cash requirements to vary significantly during the year. Approximately 75 percent of the total therms delivered in the regulated utility’s service area (excluding deliveries to two electric generation facilities) occur in the first and second fiscal quarters. Cash requirements peak in the fall and winter months when accounts receivable, accrued utility revenues and storage gas inventories are at their highest levels. After the winter heating season, many of these assets are converted into cash, which the Company generally uses to reduce and sometimes eliminate short-term debt and acquire storage gas for the next heating season.

The retail energy-marketing subsidiary, WGEServices, has seasonal short-term cash requirements resulting from purchasing gas in periods that are not matched with the sale of this commodity. In addition, WGEServices must finance its accounts receivable for the gas and electricity that it sells, and the accounts receivable balances are seasonal.

Storage gas inventories represent gas purchased from producers and are stored in facilities primarily owned by interstate pipelines. Both the regulated utility and the retail energy-marketing segment maintain storage gas inventory. The regulated utility generally pays for storage gas between heating seasons and withdraws it during the heating season. Significant variations in storage balances are usually caused by the price paid to producers and marketers, which is a function of short-term market fluctuations in gas costs, and the level of storage volumes on hand. For the regulated utility such costs become a component of the cost of gas recovered from customers when volumes are withdrawn from storage. In addition, the regulated utility is able to charge carrying costs related to the level of storage gas inventory in the amount it recovers in its gas cost recovery mechanism from its customers in two of the three jurisdictions in which it operates.

Variations in the timing of collections of gas costs under the regulated utility’s gas cost recovery mechanisms and the level of refunds from pipeline companies that will be returned to customers can significantly affect short-term cash requirements.

The Company and Washington Gas utilize short-term debt in the form of commercial paper or unsecured short-term bank loans to fund seasonal requirements.

The regulated utility has regulatory authority to issue up to $300 million of short-term debt. As of March 31, 2003, the regulated utility had bank facilities totaling $230 million in support of its short-term debt requirements. WGL Holdings had bank credit facilities of $95 million. The Company’s policy is to maintain bank credit facilities in an amount equal to or greater than its expected maximum short-term debt position.

On May 2, 2003, WGL Holdings and Washington Gas executed new revolving credit agreements with a banking group in the amounts of $130 million for WGL Holdings and $175 million for Washington Gas, respectively. The new credit agreements replace previously existing credit agreements of $85 million for WGL Holdings and $220 million for Washington Gas. WGL Holdings and Washington Gas pay facility

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

fees of 13 basis points and 11 basis points respectively for the new revolving credit agreements, which will expire on May 1, 2004. Other permanent and seasonal bank lines of credit available to WGL Holdings and Washington Gas during the period October 1, 2002 through March 31, 2003 had expired or were terminated as of May 2, 2003.

At March 31, 2003, the Company had outstanding notes payable of $110.7 million, compared to $90.9 million outstanding at September 30, 2002. At March 31, 2003, current maturities of long-term debt were $28.2 million compared to $42.4 million at September 30, 2002.

Long-Term Cash Requirements and Related Financing

The Company’s long-term cash requirements primarily depend upon the level of capital expenditures, long-term debt maturity requirements and decisions to refinance long-term debt. The Company devotes the majority of its capital expenditures to adding new regulated utility customers in its existing service area. At March 31, 2003 Washington Gas was authorized to issue up to $143.0 million of long-term debt under an existing shelf registration. Washington Gas filed a new $250.0 million shelf registration that was declared effective by the Securities and Exchange Commission (SEC) on April 24, 2003.

Securities Ratings

The table below shows the ratings on both WGL Holdings’ and Washington Gas’ debt instruments.

If the Company and/or the regulated utility were to experience a downgrade in its debt ratings, the cost of its future short-term and long-term debt issues would likely rise. Furthermore, a downgrade would result in an increase in facility fees paid to banks.


	WGL Holdings, Inc.		Washington Gas

	Unsecured		Unsecured
Rating Service	Medium-Term Notes*	Commercial Paper	Medium-Term Notes	Commercial Paper

Fitch, Inc.	A+	F1	AA-	F1+
Moody’s Investors Service	**	P-2	A2	P-1
Standard & Poor’s Corporation	AA-	A-1+	AA-	A-1+


*		Indicates the ratings that would be applicable if WGL Holdings were to issue unsecured medium-term notes.
**		Unpublished

Contractual Obligations, Off-Balance Sheet Arrangements and Other Commercial Commitments

Washington Gas has entered into contracts in the normal course of business that require it to make fixed and determinable payments for many years in the future. These obligations consist of long-term debt issued to finance the regulated utility’s capital investment, and obligations to purchase natural gas and pipeline transportation capacity for its regulated utility operations.

Please refer to the section entitled “Contractual Commitments and Obligations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002, for a detailed discussion of these contractual obligations. Note 5 of the Notes to Consolidated Financial Statements in the Company’s 2002 Annual Report on Form 10-K includes a discussion of long-term debt, including debt maturities. Note 13 of the Notes to Consolidated Financial Statements in the Company’s 2002 Annual Report on Form 10-K reflects information about natural gas purchase contracts and pipeline

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

capacity contracts of Washington Gas and similar contracts of WGEServices. The comparable information as of March 31, 2003 is not materially different from that disclosed in the Company’s fiscal year 2002 Annual Report on Form 10-K.

The Company’s non-regulated consumer financing operation has, in the past, extended credit to certain residential and small commercial customers to purchase gas appliances and other energy-related products. The operation transferred, with recourse, certain of these accounts receivable to commercial banks. As of March 31, 2003 the recourse obligation to banks, net of related reserves, was $8.4 million. The Company also finances certain construction projects managed by its commercial HVAC segment. Under the terms of certain agreements with a lender related to certain contracts, all payments received from the project owners are used to satisfy principal and interest obligations. The Company accounts for these transfers as sales in accordance with Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Please refer to Note 13 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002, for a detailed discussion of these transactions.

In addition to the contractual obligations shown above, WGL Holdings and an affiliate have guaranteed certain purchases of natural gas and electricity for its retail energy-marketing subsidiary, WGEServices. At March 31, 2003, these guarantees totaled $303.3 million. Termination of the guarantees is coincident with the satisfaction of all obligations of WGEServices covered by the guarantees. WGL Holdings may also cancel any or all future obligations imposed by the guarantees upon written notice to the counterparty, but WGL Holdings would continue to honor the obligations which had been created under the guarantee prior to the date of the notice of cancellation.

Cash Flow from Operating Activities

Net cash provided from operating activities totaled $114.1 million for the first six months of fiscal year 2003, a decrease of $17.3 million from the $131.4 million for the same period in fiscal year 2002. The decrease primarily reflected the net effect of several issues that were due in large part to the colder weather experienced in the current period versus the unseasonably warm weather in the six months ended March 31, 2002. Decreasing cash was a $153.5 million increase in accounts receivable compared to the prior fiscal year period. Partially offsetting the change from period-to-period was a $105.0 million increase in accounts payable to fund increased natural gas and electricity purchases.

Cash Flow Used in Financing Activities

Financing activities in the current period reflected an increased use of cash of $27.7 million compared to the same period last year primarily due to a $66.3 million decline in new long-term debt issued and $29.0 million higher debt retirements. This was largely offset by a $67.0 million increase in notes payable.

Cash Flow Used in Investing Activities

During the six months ended March 31, 2003, cash used in from investing activities decreased cash by $28.8 million compared to a decrease of $87.5 million in the same period of fiscal year 2002. WGL Holdings had consolidated capital expenditures of $60.5 million for the first half of fiscal year 2003 versus $69.0 million for the six months ended March 31, 2002. The proceeds from the sale of the headquarters property provided cash in March 2003 business of $16.0 million.

PRICE RISK RELATED TO RETAIL ENERGY MARKETING OPERATIONS

The Company’s subsidiary, WGEServices, markets both natural gas and electricity. In the course of its business, WGEServices makes fixed-price or index-price sales commitments to customers. Many of these sales are full requirements committments. WGEServices purchases the corresponding physical supplies at prices to lock in margins.

WGL Holdings, Inc.
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

WGEServices has exposure to changes in gas prices related to the volumetric differences between the purchase commitments and sales commitments. Purchases of natural gas to fullfill the sales commitments are made under fixed volume contracts. WGEServices manages the risk associated with gas price and volume fluctuations by closely matching purchases from suppliers with sales commitments to customers. The price and volume risk for gas is also mitigated by maintaining storage gas inventory, utilizing peaking services obtained from the regulated natural gas utility, and purchasing call and put options for natural gas as described below. The price and volume risk for electricity is mitigated with a full-requirements contract with a wholesale electric supplier.

WGEServices is responsible for managing daily demand fluctuations that result from changes in its customers’ daily usage. For its electric business, WGEServices has an all requirements supply contract with a major generator. For its gas business, WGEServices has the responsibility to deliver the appropriate level of gas to its customers on a daily basis. WGEServices will continue to avail itself of certain peak shaving capacity that the regulated utility provides for a fee and also has acquired a pro-rata portion of the utility’s storage gas capacity to manage its load. Therefore, variations in demand caused by fluctuations in weather applicable to approximately 60 percent of WGEServices’ annual natural gas sales volumes could result in WGEServices having contracted for more or less gas than its customers require on any given day. As a result, WGEServices has modified its risk management and procurement policies to reflect the need to obtain storage capacity and other contractual arrangements to meet the weather-related variability in its demand and to ensure the financial exposure caused by this variability in demand is adequately controlled. As part of managing this exposure WGEServices purchases natural gas options in accordance with its risk management policy. The option values are marked-to-market in accordance with the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. WGEServices is responsible for managing daily demand fluctuations that result from changes in its customers’ daily usage. At the end of the second quarter of fiscal years 2002 and 2003, WGEServices had no such contracts outstanding. The risk management policy of WGEService is designed around serving customer load associated with “normal weather” usage patterns.

Some of the supplier companies that sell gas to WGEServices and the sole provider of electricity under the full-requirements contract mentioned above, have relatively low or below investment grade credit ratings as determined by major credit rating agencies. Depending on the future ability of these suppliers to deliver natural gas or electricity under existing contracts, WGEServices could be financially exposed for the difference between the price at which WGEServices has contracted to buy natural gas and electricity, and the cost of any replacement natural gas or electricity that may need to be purchased. WGEServices also has a wholesale supplier credit policy that is designed to mitigate wholesale credit risks in the current energy environment. Per the terms of this policy, WGEServices has obtained credit enhancements from various gas and electric suppliers.

WGEServices measures the market risk of its energy marketing portfolio and employs risk control mechanisms to mitigate market risk including value at risk. Value at risk is the maximum loss that can be expected at some level of probability if a portfolio is held for a given time period. WGEServices’ value at risk as of March 31, 2003 was approximately $172,000, while the value of the open position was approximately $1.8 million.

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

WASHINGTON GAS LIGHT COMPANY

This section of the Quarterly Report on Form 10-Q discusses the financial position and results of operations of Washington Gas for the reported periods. In many cases, the reasons for the changes in financial position and results of operations for both WGL Holdings and Washington Gas are essentially the same.

RESULTS OF OPERATIONS — THREE MONTHS ENDED MARCH 31, 2003 vs. MARCH 31, 2002

Earnings

For the quarter ended March 31, 2003, Washington Gas reported net income applicable to common stock of $82.2 million, an increase of $28.2 million over the same period last year.

Utility Net Revenues

Net revenues for Washington Gas were $237.4 million for the current quarter, an increase of $59.0 million over the three months ended March 31, 2002. The higher net revenues were primarily due to additional volumes sold as a result of nearly 32 percent colder weather than the same period last year. Also improving current period results were new rates that went into effect in Virginia on November 12, 2002, subject to refund, and new rates in Maryland that went into effect on September 30, 2002. Key gas delivery, weather and meter statistics are shown in the table below for the three months ended March 31, 2003 and 2002.


Gas Deliveries, Weather and Meter Statistics

					Three Months Ended
					March 31,								Percent
													Increase
					2003		2002			Variance			(Decrease)

Gas Sales and Deliveries (thousands of therms)
	Firm
		Gas Sold and Delivered				440,970		335,735			105,235			31.3
		Gas Delivered for Others				227,663		161,331			66,332			41.1

			Total Firm			668,633		497,066			171,567			34.5

	Interruptible
		Gas Sold and Delivered				2,849		3,249			(400	)		(12.3	)
		Gas Delivered for Others				80,072		93,880			(13,808	)		(14.7	)

			Total Interruptible			82,921		97,129			(14,208	)		(14.6	)

	Electric Generation—Delivered for Others					14,794		14,099			695			4.9

				Total Deliveries		766,348		608,294			158,054			26.0

Degree Days
	Actual					2,463		1,870			593			31.7
	Normal					2,120		2,121			(1	)		—
		Percent (Warmer) Colder than Normal				16.2		(11.8	)		n/a			n/a
Customer Meters (end of period)						962,954		932,817			30,137			3.2

Gas Service to Firm Customers

The level of gas delivered to firm customers is highly sensitive to weather variability, because a large portion of the natural gas delivered by Washington Gas is used for space heating. The regulated utility’s rates are based on normal weather and none of the tariffs for the jurisdictions in which it operates have a weather normalization provision. Nonetheless, declining block rates in the regulated utility’s Maryland and Virginia jurisdictions, and the existence of a fixed demand charge in all jurisdictions to collect a portion of revenues, reduces the impact that variations from normal weather have on net revenues.

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

During the quarter ended March 31, 2003, firm therm deliveries increased to 669 million therms or 34.5 percent over the same quarter last year. This increase primarily reflects the significantly colder weather in the current quarter compared to last year and additional customers being served. Weather for the quarter ended March 31, 2003, was 16.2 percent colder than normal, while weather for the same period last year was 11.8 percent warmer than normal.

An increasing number of customers are choosing to buy the natural gas commodity from third-party marketers, rather than purchasing the natural gas commodity and delivery service from Washington Gas on a “bundled” basis. Gas sold and delivered to firm customers increased to 441.0 million therms during the quarter ended March 31, 2003, a 31.3 percent rise over the 335.7 million therms in the quarter ended March 31, 2002. Volumes of firm gas delivered for others increased to 227.7 million therms in the quarter ended March 31, 2003, up 41.1 percent over the same period in the prior year. On a per unit basis, the net revenues that Washington Gas earns from delivering gas for others are the same as net revenues it earns from bundled gas sales in which customers purchase both the natural gas commodity and the associated delivery service from Washington Gas. Therefore, the regulated utility does not experience any loss in net revenues when customers choose to purchase the natural gas commodity from a third-party marketer.

Gas Service to Interruptible Customers

Therm deliveries to interruptible customers were 14.6 percent lower during the quarter ended March 31, 2003 than in the same period last year, primarily reflecting curtailment and higher natural gas prices. This decrease was mitigated by colder weather in the current quarter. The volumes delivered to interruptible customers as a result of the colder weather would have been greater if Washington Gas was not required to curtail service to this customer class in the current quarter in order to meet the demands of its firm customers.

The effect on net income of any changes in delivered volumes and prices to the interruptible class is minimized by margin-sharing arrangements embedded in the Washington Gas rate designs. Under these arrangements, Washington Gas applies a majority of the margins earned on interruptible gas sales and deliveries to firm customers’ rates. This margin sharing occurs in exchange for shifting many of the fixed costs of providing service to the interruptible class to the firm class of customers.

Gas Delivered for Electric Generation

Washington Gas sells and/or delivers natural gas for use at two electric generation facilities in Maryland, which are each owned by separate companies that are independent of WGL Holdings. During the current quarter, deliveries to these customers increased 695,000 therms to 14.8 million therms reflecting relatively little change over the quarter ended March 31, 2002.

Washington Gas shares a significant majority of the margins earned from gas deliveries to these customers with firm customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not have a material impact on either net revenues or net income.

Utility Operating Expenses

Operation and maintenance expenses for the current quarter of $56.4 million, an increase of $3.6 million, or 6.8 percent over the second quarter of fiscal year 2002. The increase reflects $1.6 million higher labor costs and $2.0 million of increased pension and other postretirement costs. Also, increasing operation and maintenance expenses was a $1.9 million increase in uncollectible accounts expense due largely to colder weather in the current period compared to unseasonably

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

warm weather experienced in the same period last year. Tempering these increases were lower costs for consulting services.

Depreciation and amortization expense for the second quarter of fiscal year 2003 was $21.0 million, an increase of $3.1 million, or 17.5 percent, over the same period last year reflecting additional plant investment and higher depreciation rates in effect for the Virginia jurisdiction beginning in November 2002.

For the three months ended March 31, 2003, general taxes were $11.8 million, an increase of $1.2 million, or 10.9 percent. This increase was largely due to higher rights-of-way fees as a result of increased sales volumes in the current period. Also contributing to the increase were higher property taxes as a result of increased investment in plant and equipment.

Other Income (Expenses)-Net

Other Income (Expenses)-Net declined $2.9 million from the same period of the prior year to a net level of expense of $81,000 for the three months ended March 31, 2003. The primary reason for the decrease was a $4.9 million after-tax benefit from the weather insurance policy recorded in the second quarter of fiscal year 2002. There were no proceeds from the weather insurance policy recorded in the quarter ended March 31, 2003. For a further discussion of weather insurance please refer to the Company’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2002. Partially offsetting the effect of the year-over-year change attributable to the weather insurance was the current period gain of $2.5 million after-tax recorded on the sale of the headquarters property.

Interest Expense

Washington Gas’ total interest expense of $11.7 million for the quarter ended March 31, 2003, was relatively unchanged from the prior year. See the table below for detail of the interest expense changes.


Composition of Interest Expense Changes
(In thousands of dollars)

		Three Months Ended
		March 31,

		2003		2002		Variance

Long-Term Debt		$	10,671	$	10,610	$	61
Short-Term Debt			98		433		(335	)
Other (Includes AFUDC)			898		559		339

	Total	$	11,667	$	11,602	$	65

RESULTS OF OPERATIONS — SIX MONTHS ENDED MARCH 31, 2003 vs. MARCH 31, 2002

Earnings

For the first six months of fiscal year 2003, Washington Gas reported net income of $129.5 million, an increase of $46.3 million, or nearly 56 percent over the same period in the prior year.

Utility Net Revenues

Net revenues were $410.1 million for the current six-month period, an increase of $99.4 million, or 32 percent, over the first six months of fiscal year 2002. Higher net revenues primarily

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

resulted from 38 percent colder weather than the same period last year. Also improving current period results were new rates that went into effect in Virginia on November 12, 2002, subject to refund, and new rates in Maryland effective September 30, 2002. Key gas delivery, weather and meter statistics are shown in the table below for the six months ended March 31, 2003 and 2002.


Gas Deliveries, Weather and Meter Statistics

					Six Months Ended
					March 31,								Percent
													Increase
					2003		2002			Variance			(Decrease)

Gas Sales and Deliveries (thousands of therms)
	Firm
		Gas Sold and Delivered				731,644		544,113			187,531			34.5
		Gas Delivered for Others				383,478		270,539			112,939			41.7

			Total Firm			1,115,122		814,652			300,470			36.9

	Interruptible
		Gas Sold and Delivered				7,336		6,765			571			8.4
		Gas Delivered for Others				163,096		171,715			(8,619	)		(5.0	)

			Total Interruptible			170,432		178,480			(8,048	)		(4.5	)

	Electric Generation—Delivered for Others					37,217		36,368			849			2.3

				Total Deliveries		1,322,771		1,029,500			293,271			28.5

Degree Days
	Actual					4,106		2,977			1,129			37.9
	Normal					3,478		3,491			(13	)		—
		Percent (Warmer) Colder than Normal				18.1		(14.7	)		n/a			n/a
Customer Meters (end of period)						962,954		932,817			30,137			3.2

Gas Service to Firm Customers

Total gas deliveries of 1,115 million therms to firm customers in the current six-month period, increased 300 million therms, or approximately 37 percent, over the same period in the prior year due to significantly colder weather in the first and second quarters of the current fiscal year and a 3.2 percent increase in the number of customer meters. Weather for the six months ended March 31, 2003, was 18.1 percent colder than normal, while weather for the same period last year was 14.7 percent warmer than normal. On a year-over-year basis, weather was 38 percent colder in the first six months of fiscal year 2003.

Gas Service to Interruptible Customers

Therm deliveries to interruptible customers were 4.5 percent lower during the six month period ended March 31, 2003 than the same period last year, primarily reflecting curtailment and higher natural gas prices, this was mitigated by colder weather in the current year. The effect of the colder weather would have been greater if Washington Gas was not required to curtail service to this class of customers in the current period in order to meet the demands of its firm customers.

Gas Service for Electric Generation

During the current period, deliveries to the two electric generation facilities in Maryland increased 849,000 therms to 37.2 million therms reflecting relatively little change over the same six month period ended March 31, 2002.

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

As mentioned previously, Washington Gas shares a significant majority of the margins earned from gas deliveries to these customers with firm customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not have a material impact on either net revenues or net income.

Utility Operating Expenses

For the six-month period ended March 31, 2003, operation and maintenance expense of $111.9 million increased $11.6 million, or 11.6 percent, over the same period last year. The higher operating expenses were largely due to increased labor costs of $1.7 million, higher pensions and other postretirement costs of $4.3 million and increased reserve of $4.0 million for uncollectible accounts that was primarily driven by the significantly colder weather.

Depreciation and amortization expense for the first half of fiscal year 2003 was $40.5 million, an increase of $5.1 million, or 14.4 percent, over the same period last year reflecting additional plant investment and higher depreciation rates in effect for the Virginia jurisdiction beginning in November 2002.

For the six months ended March 31, 2003, general taxes were $21.4 million, an increase of $3.5 million, or 19.4 percent. This increase was largely due to higher rights-of-way fees as a result of increased sales volumes in the current period. Also contributing to the increase were higher property taxes as a result of increased investment in plant and equipment.

Other Income (Expenses)-Net

For the first half of fiscal year 2003, Other Income (Expenses)-Net declined $4.6 million from the same period of the prior year to a net level of expense of $938,000 for the six months ended March 31, 2003. The primary reason for the decrease was an $8.9 million after-tax benefit from the weather insurance policy recorded in the first six months of fiscal year 2002. There were no proceeds from the weather insurance policy recorded in the six-month period ended March 31, 2003. For a further discussion of weather insurance please refer to the Company’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2002. Partially offsetting the effect of the year-over-year change attributable to the weather insurance was the current period gain of $2.5 million after-tax, recorded on the sale of the headquarters property, and a $1.7 million after-tax charge related to a bankrupt energy trader recorded in the first six months of 2002.

Interest Expense

Washington Gas’ total interest expense for the six months ended March 31, 2003, was essentially unchanged from the same period last year. See the table below for detail of the interest expense changes.


Composition of Interest Expense Changes
(In thousands of dollars)

		Six Months Ended
		March 31,

		2003		2002		Variance

Long-Term Debt		$	21,623	$	21,363	$	260
Short-Term Debt			269		1,073		(804	)
Other (Includes AFUDC)			1,780		1,335		445

	Total	$	23,672	$	23,771	$	(99	)

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources for Washington Gas are generally identical to the liquidity and capital resources of WGL Holdings, except for certain items and the transactions between WGL Holdings and the other non-regulated subsidiaries. For purposes of discussing the liquidity and capital resources of Washington Gas, this section incorporates by reference, the disclosures provided in this document under the similar section for WGL Holdings, titled “Liquidity and Capital Resources”.

REGULATORY MATTERS

The status of recent regulatory activity in all jurisdictions is shown below.

District of Columbia Jurisdiction

After considering the effect of the base rate reductions that became effective on April 9, 2003, Washington Gas filed a revision to its February 7, 2003, application on April 23, 2003. This revision increased the amount of the requested increase to $19.9 million. On May 2, 2003, in response to a commission request for supplemental testimony, the requested increase was modified to $18.8 million, supporting a total level of annual revenues of $213.2 million. There are no statutory time requirements for a ruling on the rate request in the District of Columbia, however, Washington Gas requested the PSC of DC to take action on the request within a nine-month period from the February filing date. The PSC of DC held a Pre-hearing Conference in this case on April 10, 2003 to consider interventions and appearances of interested parties, the procedural schedule in the case and proposals for issues to be resolved in this case.

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

The commission has adopted a procedural schedule that requires final briefs to be filed during the first week of October 2003.

Maryland Jurisdiction

On March 31, 2003 Washington Gas filed with the Public Service Commission of Maryland (PSC of MD) an application to increase rates in Maryland. The request seeks to increase overall annual revenues by approximately $35.1 million with a return on common equity of 12.25 percent and an overall rate of return of 9.39 percent.

The proposed rate request includes an Incentive Rate Plan (IRP) that would establish incentives to increase efficiencies and would set customer service quality standards that seek to increase the efficiency, safety, and reliability of service. The IRP benefits customers by providing for more stable rates, which would result in less frequent requests for rate increases.

The March 31, 2003, rate request also includes a proposal that would provide benefits to low-income customers who qualify for participation in a new Washington Gas program that would provide bill credits to participants during the winter heating season.

Virginia Jurisdiction

On June 14, 2002, Washington Gas filed an application with the State Corporation Commission of Virginia (SCC of VA) to increase annual revenues in Virginia. The Shenandoah Gas Division of Washington Gas is included in the filing. The application requested to increase overall annual revenues by approximately $23.8 million. Washington Gas requested an overall rate of return of 9.42 percent and a return on common equity of 12.25 percent versus its current return on common equity of 11.50 percent for Washington Gas and 10.7 percent for Shenandoah Gas. Washington Gas also requested approval of an IRP, which includes a 50/50 sharing between customers and Washington Gas of weather-normalized Virginia regulated earnings 100 basis points above or below the SCC of VA’s authorized return on equity. The IRP proposed no change in the method of recovering the cost of natural gas incurred by Washington Gas.

Washington Gas filed rebuttal testimony in this proceeding on December 4, 2002. At a hearing held the week of December 16, 2002, the Company withdrew the IRP from consideration in that proceeding, but reserved the right to propose a performance-based rate plan in a future rate case. The other parties agreed to leave the record open to permit Washington Gas to submit by

Washington Gas Light Company
Part 1 – Financial Information
Item 2– Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)

January 10, 2003, the actuarial studies that support the reasonableness of the updated pension and Other Post Employment Benefits (OPEB) expenses proposed by the Company.

On January 30, 2003, the Staff filed a motion requesting acceptance of the Staff’s comments and accompanying schedules that reflected revisions to the Staff’s original position. Based on its review of additional financial data and actuarial studies, the Staff supports the pension and OPEB costs requested by Washington Gas. After appropriate revisions to reflect the Company’s proposed pension and OPEB costs, the Staff supported an operating revenue increase of $5.0 million for Washington Gas and an operating revenue reduction of $1.2 million for the Shenandoah Division.

Washington Gas cannot predict the ultimate outcome of this pending regulatory proceeding. Under the regulations of the SCC of VA, Washington Gas placed the requested general revenue increase into effect on November 12, 2002, subject to refund pending the SCC of VA’s final decision in the proceeding. The Company has recorded a provision for rate refunds as of March 31, 2003, representing management’s judgment of the rate case outcome.

In accordance with an Order of the SCC of VA, Washington Gas performed a depreciation study, using data as of December 31, 2000, to determine the adequacy of the current depreciation rates that Washington Gas uses to record depreciation expense for property located in its Virginia jurisdiction. Washington Gas submitted the study to the Staff in the first quarter of fiscal year 2002. Following discussions with the Staff, Washington Gas submitted an updated study, based on data as of December 31, 2001, to the Staff in the third quarter of fiscal year 2002. The Staff issued a letter dated October 2, 2002, approving new depreciation rates for Washington Gas and the Shenandoah Gas Division, which would increase annual depreciation expense by approximately $4.0 million. Staff stated its position that the approved rates should be implemented as of January 1, 2002, but recognized that the implementation date should be decided by the SCC of VA in the pending rate case discussed above. Washington Gas believes the new depreciation rates should be implemented coincident with the effective date of new base rates on November 12, 2002. Washington Gas filed testimony supporting this position with the SCC of VA in the base rate proceeding discussed previously. Washington Gas believes that it is reasonably possible that the position it has taken on this matter will be adopted by the SCC of VA in the pending rate case.

The financial statements as reported in this quarterly report on Form 10-Q do not reflect any modification of depreciation rates for periods prior to November 12, 2002. However, Washington Gas did utilize the higher depreciation rates from November 12, 2002 forward. To the extent the position of the Staff of the SCC of VA is adopted by the SCC of VA in the current rate filing, Washington Gas would have to record a charge to income for additional depreciation expense, net of income tax benefits, calculated from January 1, 2002 to November 12, 2002, without a corresponding amount of revenue. The issue is still pending in the previously discussed rate case.

WGL Holdings, Inc.
Washington Gas Light Company

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

WGL Holdings and its subsidiary, Washington Gas, have interest rate risk exposure related to long-term debt. Additionally, WGL Holdings’ subsidiary, WGEServices has price risk exposure related to gas marketing activities. For information regarding the exposure related to these risks, see the caption Price Risk Related to Retail Energy Marketing Operations in the Management’s Discussion and Analysis section of this document and in the caption Price Risk Related to Retail-Energy Marketing Operations and Item 7A in WGL Holdings’ and Washington Gas’ most recently filed Annual Report on Form 10-K. Neither WGL Holdings nor Washington Gas’ risk associated with interest rates have materially changed from September 30, 2002. At March 31, 2003, WGEServices’ open position was not material to WGL Holdings’ financial position or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Senior management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of WGL Holdings’ and Washington Gas’ disclosure controls and procedures as of a date within 90 days of the filing of this report. Based on this evaluation process, the Chief Executive Officer and the Chief Financial Officer have concluded that WGL Holdings’ and Washington Gas’ disclosure controls and procedures are effective. Since the evaluation was completed, there have been no significant changes in internal controls or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meetings of Shareholders of WGL Holdings and Washington Gas were held on March 5, 2003. Below are the matters voted upon at the WGL Holdings meeting.

The following individuals were elected to the Board of Directors of WGL Holdings:


	Votes in Favor		Votes Withheld
Michael D. Barnes		39,689,413		903,058
Daniel J. Callahan, III		39,006,479		1,585,992
George P. Clancy, Jr.		39,872,104		720,367
James H. DeGraffenreidt, Jr.		39,816,018		776,453
Melvyn J. Estrin		34,149,030		6,443,441
Debra L. Lee		38,616,095		1,976,376
Philip A. Odeen		35,471,652		5,120,819
Karen Hastie Williams		37,825,046		2,767,425

The same individuals listed above were elected to the Board of Directors of Washington Gas. At the Washington Gas meeting, all the nominees received 46,479,536 votes in favor, there were no votes withheld.

The following additional matters were introduced and voted upon at the Annual Meetings.

WGL Holdings

The Board of Directors recommended that the Shareholders ratify the appointment of Deloitte & Touche LLP, independent public accountants, to audit the books and accounts of WGL Holdings for fiscal year 2003. This proposal was approved by a vote of 39,707,988 votes in favor of the proposal, and 672,826 against. There were 213,031 abstentions.

The Board of Directors proposed approval of the Directors’ Stock Compensation Plan, as amended and restated. This proposal was approved by a vote of 35,554,274 votes in favor of the

WGL Holdings, Inc.
Washington Gas Light Company

proposal, and 4,236,090 against. There were 803,481 abstentions.

The Board of Directors proposed approval of the 1999 Incentive Compensation Plan, as amended and restated. This proposal was approved by a vote of 35,030,133 votes in favor of the proposal, and 4,752,216 against. There were 811,862 abstentions.

A shareholder proposal relating to cumulative voting was considered. This proposal was defeated by a vote of 19,997,964 against and 9,205,239 votes in favor. There were 1,127,657 abstentions and 10,262,985 broker non-votes.

Washington Gas

The shareholders ratified the appointment of Deloitte & Touche LLP as independent public accountants for fiscal year 2003, by a vote of 46,479,536 in favor, and no votes opposed.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

99.0 Computation of Ratio of Earnings to Fixed Charges—WGL Holdings, Inc.

99.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—WGL Holdings, Inc.

99.2 Computation of Ratio of Earnings to Fixed Charges—Washington Gas Light Company

99.3 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—Washington Gas Light Company

99.4 Certification of James H. DeGraffenreidt, Jr., the Chairman and Chief Executive Officer, and Frederic M. Kline, the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

• Form 8-K filed on January 14, 2003
On January 13, 2003, Washington Gas received a Tolling Order from the PSC of DC. The Tolling Order extended the time for the PSC of DC to give a ruling on the reconsideration applications of Washington Gas, the Office of the People’s Counsel, and the Apartment and Office Building Association of Metropolitan Washington until February 13, 2003. This proceeding arises from the PSC of DC’s investigation into the reasonableness of Washington Gas’ existing rates and charges for gas service as well as a ruling of Washington Gas’ application to increase its existing rates and charges.

• Form 8-K filed on February 11, 2003
On February 7, 2003, Washington Gas filed with the PSC of DC an application to increase rates. The request seeks to increase overall annual revenues in the District of Columbia by approximately $14.1 million, or 7.0 percent, to $214.2 million. The application seeks a return on common equity of 12.25 percent and an overall rate return of 9.25 percent.

• Form 8-K filed on March 3, 2003
District of Columbia Regulatory Matters
On February 27, 2003, Washington Gas received a Tolling Order from the PSC of DC extending the time to March 31, 2003 for the PSC of DC to issue a ruling on the

WGL Holdings, Inc.
Washington Gas Light Company

reconsideration applications of Washington Gas, the Office of the People’s Counsel, and the Apartment and Office Building Association of Metropolitan Washington. This proceeding arises from the PSC of DC’s investigation into the reasonableness of Washington Gas’ existing rates and charges for gas service as well as a ruling of Washington Gas’ application to increase its existing rates and charges.

Virginia Regulatory Matters
On November 15, 2002, the Staff of the SCC of VA in its testimony recommended that Washington Gas’ revenues are sufficient and do not need to be revised, but recommended that operating revenues for the Shenandoah Gas Division be decreased by $1.4 million. Washington Gas filed rebuttal testimony and hearings were held in December 2002.

On January 30, 2003, the Staff filed a motion requesting acceptance of the Staff’s comments and accompanying schedules that reflected revisions to the Staff’s original position. Based on its review of additional financial data and actuarial studies, the Staff supports the pension and OPEB costs requested by Washington Gas and supported by the actuarial studies. After appropriate revisions to reflect Washington Gas’ proposed pension and OPEB costs, the Staff now supports an operating revenue increase of $5.0 million for Washington Gas and an operating revenue reduction of $1.2 million for the Shenandoah Division.

• Form 8-K filed on March 13, 2003
The Company reported earnings guidance for the quarter ended March 31, 2003, in range of $1.59 to $1.69 per average share from its previous guidance range of $1.50 to $1.60 per average share. The revised earnings guidance reflects assumptions for stronger than expected utility earnings, partially offset by lower than expected results from the Company’s unregulated retail energy-marketing business, Washington Gas Energy Services, Inc. The Company also raised its guidance for its utility segment and reduced its guidance for the energy-marketing segment. Previous guidance for the fiscal year ended September 30, 2003, for WGL Holdings was affirmed in the range of $2.00 to $2.10 per average common share.

• Form 8-K filed on April 14, 2003
Maryland Regulatory Matters
On March 31, 2003, Washington Gas filed an application with the PSC of MD to increase rates in Maryland. The request seeks to increase overall annual revenues by approximately $35.1 million. The application seeks a return on common equity of 12.25 percent and an overall rate of return of 9.39 percent. The proposed rate request includes an Incentive Rate Plan (IRP) that would establish incentives to increase efficiencies and would set customer service quality standards that seek to increase the efficiency, safety, and reliability of service.

District of Columbia Regulatory Matters
After reviewing the applications for reconsideration of the October 2002 order submitted by Washington Gas and other parties in the case, the PSC of DC issued its order on reconsideration on March 28, 2003. In this order, the PSC of DC directed Washington Gas to compute a new revenue requirement and to file supporting information with the PSC of DC. Pursuant to that order, Washington Gas filed new rates that reflect a $5.4 million annual revenue reduction. These lower rates went into effect for service rendered on and after April 9, 2003. In this order, the PSC of DC also reaffirmed its previous ruling that rejected retroactive refunds of asset management revenues collected by Washington Gas in the past and approved the regulated utility’s proposal to share with customers, fifty percent of such future revenues.

On February 7, 2003, Washington Gas filed a new rate case requesting approval by the PSC of DC for an annual revenue requirement of $214.2 million. Based on the level of rates that were in effect at the time of this February 2003 filing, Washington Gas would need to

WGL Holdings, Inc.
Washington Gas Light Company

increase its annual revenues by $14.1 million. The application seeks a return on common equity of 12.25 percent and an overall rate of return of 9.25 percent. After considering the effect of the March 28, 2003 base rate reduction from the PSC of DC discussed in the prior paragraph, the necessary level of the increase in annual revenues needed to earn the requested rate of return will increase to approximately $19.3 million. Total annual revenues needed to earn the requested rate of return will remain at approximately $214.2 million. This proposed rate plan also includes an Incentive Rate Plan similar to the one proposed in the March 31, 2003, Maryland filing discussed above. There are no statutory time requirements for a ruling on the rate request in the District of Columbia. However, Washington Gas requested the PSC of DC to take action on the request within a nine-month period from the February filing date. The PSC of DC held a Pre-hearing Conference in this case on April 10, 2003 to consider interventions and appearances of interested parties, the procedural schedule in the case and proposals for issues to be resolved in this case. The Form 8-K also mentioned that pursuant to the PSC of DC’s rulings during the Pre-hearing Conference, Washington Gas would file on or before April 23, 2003, revised testimony and exhibits reflecting the impact of the PSC of DC’s March 28, 2003, decision in the previous rate case as well as a narrowed, consolidated list of designated issues that establish the scope of the proceeding. (See the discussion in the Management’s Disscussion and Analysis of Financial Condition and Results of Operations in this document for further information on this issue.)

• Form 8-K filed on May 2, 2003
WGL Holdings, Inc. issued an earnings news release on April 30, 2003 covering the results of operations for the quarter and six-month periods ended March 31, 2003, as well as earnings guidance for the third quarter and annual results for fiscal year 2003.

Signature

Pursuant to the 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.


		WGL HOLDINGS, INC.

		and

		WASHINGTON GAS LIGHT COMPANY (Co-Registrants)


Date:	May 15, 2003	/s/ Mark P. O’Flynn Mark P. O’Flynn Controller (Principal Accounting Officer)

CERTIFICATION OF WGL HOLDINGS, INC.

I, James H. DeGraffenreidt, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of WGL Holdings, Inc. and Washington Gas Light Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ James H. DeGraffenreidt, Jr.

James H. DeGraffenreidt, Jr.
Chairman and Chief Executive Officer

CERTIFICATION OF WGL HOLDINGS, INC.

I, Frederic M. Kline, certify that:

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

Date: May 15, 2003

/s/ Frederic M. Kline

Frederic M. Kline
Vice President and Chief Financial Officer

CERTIFICATION OF WASHINGTON GAS LIGHT COMPANY

I, James H. DeGraffenreidt, Jr., certify that:

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

Date: May 15, 2003

/s/ James H. DeGraffenreidt, Jr.

James H. DeGraffenreidt, Jr.
Chairman and Chief Executive Officer

CERTIFICATION OF WASHINGTON GAS LIGHT COMPANY

I, Frederic M. Kline, certify that:

1. I have reviewed this quarterly report on Form 10-Q of WGL Holdings, Inc. and Washington Gas Light Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have:

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

Date: May 15, 2003

/s/ Frederic M. Kline

Frederic M. Kline
Vice President and Chief Financial Officer

*		Filing Format-This Quarterly Report on Form 10-Q is a combined report being filed by two separate registrants: WGL Holdings, Inc. (WGL Holdings or the Company) and Washington Gas Light Company (Washington Gas or the regulated utility). Except where the content clearly indicates otherwise, any reference in the report to “WGL Holdings” or “the Company” is to the consolidated entity WGL Holdings and all of its subsidiaries, including Washington Gas, a distinct registrant that is a wholly owned subsidiary of WGL Holdings.

		Part I — Financial Information of this Quarterly Report on Form 10-Q includes separate financial statements (i.e., balance sheets, statements of income and statements of cash flows) for consolidated WGL Holdings and Washington Gas.


99.0		Computation of Ratio of Earnings to Fixed Charges—WGL Holdings, Inc.

99.1		Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—WGL Holdings, Inc.

99.2		Computation of Ratio of Earnings to Fixed Charges—Washington Gas Light Company

99.3		Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—Washington Gas Light Company

99.4		Certification of James H. DeGraffenreidt, Jr., the Chairman and Chief Executive Officer, and Frederic M. Kline, the Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

•		Form 8-K filed on January 14, 2003 On January 13, 2003, Washington Gas received a Tolling Order from the PSC of DC. The Tolling Order extended the time for the PSC of DC to give a ruling on the reconsideration applications of Washington Gas, the Office of the People’s Counsel, and the Apartment and Office Building Association of Metropolitan Washington until February 13, 2003. This proceeding arises from the PSC of DC’s investigation into the reasonableness of Washington Gas’ existing rates and charges for gas service as well as a ruling of Washington Gas’ application to increase its existing rates and charges.

•		Form 8-K filed on February 11, 2003 On February 7, 2003, Washington Gas filed with the PSC of DC an application to increase rates. The request seeks to increase overall annual revenues in the District of Columbia by approximately $14.1 million, or 7.0 percent, to $214.2 million. The application seeks a return on common equity of 12.25 percent and an overall rate return of 9.25 percent.

•		Form 8-K filed on March 3, 2003 District of Columbia Regulatory Matters On February 27, 2003, Washington Gas received a Tolling Order from the PSC of DC extending the time to March 31, 2003 for the PSC of DC to issue a ruling on the

		reconsideration applications of Washington Gas, the Office of the People’s Counsel, and the Apartment and Office Building Association of Metropolitan Washington. This proceeding arises from the PSC of DC’s investigation into the reasonableness of Washington Gas’ existing rates and charges for gas service as well as a ruling of Washington Gas’ application to increase its existing rates and charges.

		Virginia Regulatory Matters On November 15, 2002, the Staff of the SCC of VA in its testimony recommended that Washington Gas’ revenues are sufficient and do not need to be revised, but recommended that operating revenues for the Shenandoah Gas Division be decreased by $1.4 million. Washington Gas filed rebuttal testimony and hearings were held in December 2002.

		On January 30, 2003, the Staff filed a motion requesting acceptance of the Staff’s comments and accompanying schedules that reflected revisions to the Staff’s original position. Based on its review of additional financial data and actuarial studies, the Staff supports the pension and OPEB costs requested by Washington Gas and supported by the actuarial studies. After appropriate revisions to reflect Washington Gas’ proposed pension and OPEB costs, the Staff now supports an operating revenue increase of $5.0 million for Washington Gas and an operating revenue reduction of $1.2 million for the Shenandoah Division.

•		Form 8-K filed on March 13, 2003 The Company reported earnings guidance for the quarter ended March 31, 2003, in range of $1.59 to $1.69 per average share from its previous guidance range of $1.50 to $1.60 per average share. The revised earnings guidance reflects assumptions for stronger than expected utility earnings, partially offset by lower than expected results from the Company’s unregulated retail energy-marketing business, Washington Gas Energy Services, Inc. The Company also raised its guidance for its utility segment and reduced its guidance for the energy-marketing segment. Previous guidance for the fiscal year ended September 30, 2003, for WGL Holdings was affirmed in the range of $2.00 to $2.10 per average common share.

•		Form 8-K filed on April 14, 2003 Maryland Regulatory Matters On March 31, 2003, Washington Gas filed an application with the PSC of MD to increase rates in Maryland. The request seeks to increase overall annual revenues by approximately $35.1 million. The application seeks a return on common equity of 12.25 percent and an overall rate of return of 9.39 percent. The proposed rate request includes an Incentive Rate Plan (IRP) that would establish incentives to increase efficiencies and would set customer service quality standards that seek to increase the efficiency, safety, and reliability of service.

		District of Columbia Regulatory Matters After reviewing the applications for reconsideration of the October 2002 order submitted by Washington Gas and other parties in the case, the PSC of DC issued its order on reconsideration on March 28, 2003. In this order, the PSC of DC directed Washington Gas to compute a new revenue requirement and to file supporting information with the PSC of DC. Pursuant to that order, Washington Gas filed new rates that reflect a $5.4 million annual revenue reduction. These lower rates went into effect for service rendered on and after April 9, 2003. In this order, the PSC of DC also reaffirmed its previous ruling that rejected retroactive refunds of asset management revenues collected by Washington Gas in the past and approved the regulated utility’s proposal to share with customers, fifty percent of such future revenues.

		On February 7, 2003, Washington Gas filed a new rate case requesting approval by the PSC of DC for an annual revenue requirement of $214.2 million. Based on the level of rates that were in effect at the time of this February 2003 filing, Washington Gas would need to

		increase its annual revenues by $14.1 million. The application seeks a return on common equity of 12.25 percent and an overall rate of return of 9.25 percent. After considering the effect of the March 28, 2003 base rate reduction from the PSC of DC discussed in the prior paragraph, the necessary level of the increase in annual revenues needed to earn the requested rate of return will increase to approximately $19.3 million. Total annual revenues needed to earn the requested rate of return will remain at approximately $214.2 million. This proposed rate plan also includes an Incentive Rate Plan similar to the one proposed in the March 31, 2003, Maryland filing discussed above. There are no statutory time requirements for a ruling on the rate request in the District of Columbia. However, Washington Gas requested the PSC of DC to take action on the request within a nine-month period from the February filing date. The PSC of DC held a Pre-hearing Conference in this case on April 10, 2003 to consider interventions and appearances of interested parties, the procedural schedule in the case and proposals for issues to be resolved in this case. The Form 8-K also mentioned that pursuant to the PSC of DC’s rulings during the Pre-hearing Conference, Washington Gas would file on or before April 23, 2003, revised testimony and exhibits reflecting the impact of the PSC of DC’s March 28, 2003, decision in the previous rate case as well as a narrowed, consolidated list of designated issues that establish the scope of the proceeding. (See the discussion in the Management’s Disscussion and Analysis of Financial Condition and Results of Operations in this document for further information on this issue.)

•		Form 8-K filed on May 2, 2003 WGL Holdings, Inc. issued an earnings news release on April 30, 2003 covering the results of operations for the quarter and six-month periods ended March 31, 2003, as well as earnings guidance for the third quarter and annual results for fiscal year 2003.

1.		I have reviewed this quarterly report on Form 10-Q of WGL Holdings, Inc. and Washington Gas Light Company;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and