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Date:

December 16, 2015

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Time:

10:00 a.m., Eastern time (the doors will open to the public at 9:15 a.m.)

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Place:

Delmarva Power Conference Center
4100 South Wakefield Drive
Newark, Delaware 19702

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Record Date: 

October 19, 2015

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Approval, on an advisory basis, of the compensation of our named executive officers

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Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015

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Transaction of any other business that may properly come before the meeting

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Voting:

Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.

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Admission to
the Meeting: 

If you plan to attend the meeting in person, you must present an admission ticket and a valid form of government-issued photo identification. If you are a record holder, your admission ticket is:

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attached to your proxy card, if you received a full set of proxy materials by mail;

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the e-mail you received, if you received proxy materials by e-mail; or

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the Notice of Availability, if you did not receive proxy materials by mail or e-mail.

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If you hold your shares through a broker or other intermediary and you are planning to attend the meeting in person, you must send us a written request for an admission ticket, which we must receive by December 2, 2015. For more information, see “The Pepco Holdings, Inc. Annual Meeting — Attending the Annual Meeting in Person” beginning on page 4.

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Appropriately Sized Board (Nine Members Nominated for 2015 – 2016)

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Eight Out of Nine Nominated Directors are Independent

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Diverse Board Members (as to Gender, Ethnicity, Experience and Skills)

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Compensation Committee Engaged Independent Compensation Consultant During 2014

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Independent Directors Routinely Meet Without Management Present

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Robust Director Nomination Process to Identify Talented and Diverse Board Members

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Board and Committees Conduct Annual Self-Evaluations

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Non-Employee Directors Receive a Portion of Compensation in Equity

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Significant Portion of Executive Compensation Tied to Our Performance

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Executive Officers’ and Directors’ Interests Aligned with Stockholders through Mandatory Stock Ownership Requirements

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Compensation Recovery Provisions, or Clawbacks, in Employment Agreements, the 2012 Long-Term Incentive Plan, or 2012 LTIP, and Award Agreements Intended to Comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act)

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Code of Business Conduct and Ethics for Directors and Corporate Compliance Program

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“Say on Pay” Advisory Vote Conducted Annually

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Engage with Stockholders Annually on Compensation and Corporate Governance Matters

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Policy and Public Disclosure Related to Corporate Political and Lobbying Expenditures

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Our Board is furnishing this proxy statement in connection with the solicitation of proxies to vote on matters to be submitted at our 2015 Annual Meeting of Stockholders and at any adjournment or postponement of the meeting. The Notice of Annual Meeting, this proxy statement, the accompanying proxy card or voting instruction form and our 2014 Annual Report to Stockholders, or the 2014 Annual Report, was first sent or given on or about November 2, 2015 to stockholders of record as of October 19, 2015, which is referred to in this proxy statement as the “record date.”

In this proxy statement, unless the context requires otherwise:

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references to the “Board” mean the Board of Directors of Pepco Holdings, Inc.;

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references to “common stock” mean the common stock, $0.01 par value per share, of Pepco Holdings, Inc.; and

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except as otherwise provided, references to “we,” “us,” “our,” the “Company,” “Pepco Holdings” or “PHI” are to Pepco Holdings, Inc. without its subsidiaries.

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The meeting will be held at 10:00 a.m., Eastern time, on Wednesday, December 16, 2015, at the Delmarva Power Conference Center, located at 4100 South Wakefield Drive, Newark, Delaware 19702. The doors will open to the public at 9:15 a.m.

Admission to the Annual Meeting will be limited to our stockholders or their authorized proxies. If you plan to attend the meeting in person, you must have a valid, government-issued photo identification, as well as an admission ticket, which must be obtained from us in advance. See “—Attending the Annual Meeting in Person“ beginning on page 4 of this proxy statement.

Directions to the location of the meeting are available on our website at http://www.pepcoholdings.com/​meetingdirections.

A webcast of the meeting, including a slide presentation, can be accessed during the meeting via our website, http://www.pepcoholdings.com/investors. An audio-only version will also be available. The access information for the webcast and audio-only presentations will be announced on our website. The meeting webcast will be archived and available for 30 days after the meeting on our website at http://www.pepcoholdings.com/webcasts.

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All stockholders of record as of the record date are entitled to vote at the meeting. As of the close of business on the record date, 253,617,191 shares of our common stock were outstanding. Each outstanding share of common stock entitles the holder of record to one vote on each matter submitted to the vote of stockholders at the meeting. However, holders of awards of our restricted stock units, or RSUs, and related dividend equivalents, are not entitled to vote any shares of common stock underlying those awards at the meeting. Also, PHI phantom shares credited to participants under PHI’s deferred compensation plans are not entitled to vote at the meeting.

Under our bylaws, the holders of a majority of the outstanding shares of our common stock at the close of business on the record date must be present at the meeting, either in person or by proxy, to constitute a quorum and to transact business at the meeting. Abstentions and broker non-votes are included in the determination of shares present at the meeting for quorum purposes.

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If you own shares that are registered in your own name, you can attend the meeting and vote in person. You also can vote by proxy without attending the meeting in any of the following ways:

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Via Our Internet Voting Site at http://www.
voteproxy.com. If you received printed proxy materials, follow the instructions for Internet voting printed on your proxy card. If you received a Notice of Availability, follow the instructions provided in the Notice of Availability. If you vote via the Internet and currently receive printed proxy materials, you also can elect to receive future proxy statements and annual reports electronically.

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By Telephone. Call toll-free 1-800-PROXIES (1-800-776-9437). You also can vote by telephone by following the instructions provided on the Internet voting site or, if you received printed proxy materials, by following the instructions provided on your proxy card or Notice of Availability.

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By Mail. If we mailed you a printed copy of this proxy statement and a paper proxy card, you can vote by completing, signing, dating and returning the proxy card in the enclosed postage-paid envelope.

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The Internet and telephone voting facilities for stockholders of record will close at 5:00 p.m., Eastern time, on December 15, 2015. Your signed proxy card or

the proxy you grant via the Internet or by telephone will be voted in accordance with your instructions.

If you own shares that are registered in your own name and return a signed proxy card or grant a proxy via the Internet or by telephone, but do not indicate how you wish your shares to be voted, your shares will be voted:

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FOR the election of each of the Board’s nine director nominees;

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FOR the approval, on an advisory basis, of the compensation of our named executive officers; and

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FOR the ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015.

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In the absence of instructions to the contrary, proxies will be voted in accordance with the judgment of the person exercising the proxy on any other matter properly presented at the meeting.

If you received more than one proxy card or Notice of Availability, your shares are likely registered in different names or with different addresses or are in more than one account.

You must separately vote the shares shown on each proxy card or Notice of Availability that you receive in order for all of your shares to be voted at the meeting.

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If you hold shares through a brokerage firm, trustee, bank, other financial intermediary or nominee (known as shares held in “street name”), you will receive from that broker, trustee, bank or other nominee (the

“intermediary”) a voting instruction form which will explain how to direct the voting of your shares through the intermediary, which may include the ability to provide voting instructions via the Internet or by telephone.

If your shares are held in street name through a brokerage firm that is a member of the New York Stock Exchange, or the NYSE, and you want to vote on Proposal 1 or Proposal 2, you MUST indicate how you wish your shares to be voted. The broker will vote shares held by you in street name in accordance with your voting instructions, as indicated on your signed voting instruction form or by the instructions you provide via the Internet or by telephone. Absent such instructions, NYSE rules would prohibit a broker from exercising discretion to cast a vote with respect to your shares. Accordingly, a proxy submitted by the broker with respect to your shares would indicate that the broker is unable to cast a vote with respect to the matter, which is commonly referred to as a “broker non-vote.” Under NYSE rules, Proposal 3 is considered a “routine matter,” and thus a broker would be permitted in its discretion to cast a vote on that proposal as to your shares in the event that you do not provide the broker with voting instructions. Accordingly, if your shares are held in street name, it is important that you provide voting instructions to the broker or other intermediary so that your vote will be counted.

If you hold shares in street name and wish to vote your shares in person at the meeting, you must first obtain a valid legal proxy from the intermediary. To attend the meeting in person (regardless of whether you intend to vote your shares in person at the meeting), you must obtain an admission ticket in advance of the meeting by following the instructions under “— Attending the Annual Meeting in Person — Admission Tickets — Holders of Shares in Street Name and Legal Proxies” beginning on page 5 of this proxy statement.

If you received more than one voting instruction form or Notice of Availability, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately follow the foregoing voting procedures for each voting instruction form or Notice of Availability that you receive in order for all of your shares to be voted at the meeting.

The Internet and telephone voting facilities for shares held in street name will close at 11:59 p.m., Eastern time, on December 15, 2015.

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Retirement Savings Plan

The Pepco Holdings, Inc. Retirement Savings Plan, referred to in this proxy statement as the 401(k) Plan, is the successor plan to:

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the Potomac Electric Power Company Savings Plan for Bargaining Unit Employees;

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the Potomac Electric Power Company Retirement Savings Plan for Management Employees (which itself is the successor to the Potomac Electric Power Company Savings Plan for Non-Exempt, Non-Bargaining Unit Employees), and which was formerly known as the Potomac Electric Power Company Savings Plan for Exempt Employees;

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the Conectiv Savings and Investment Plan and the Conectiv PAYSOP/ESOP; and

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the Atlantic Electric 401(k) Savings and Investment Plan-B.

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If you are a current or former employee who has any portion of your 401(k) Plan account allocated to common stock, you have received a printed copy of this proxy statement and related materials. You may direct the voting of the number of shares allocated to your 401(k) Plan account, which is printed on the enclosed voting instruction form, in accordance with the directions provided. By completing, dating, signing and returning the voting instruction form or transmitting voting instructions via the Internet or by telephone, you will be providing the

plan trustee with instructions on how to vote the shares of common stock allocated to your 401(k) Plan account.

If you do not provide voting instructions for these plan shares on a matter, the 401(k) Plan trustee will vote these shares on that matter in proportion to the voting instructions given by all of the other participants in the 401(k) Plan.

You will not be able to vote these plan shares in person at the meeting without a legal proxy from the 401(k) Plan

trustee. If you wish to attend the meeting in person (regardless of whether you intend to vote your shares in person at the meeting), you must present your admission ticket at the meeting. See “—Attending the Annual Meeting in Person — Admission Tickets — Registered Holders” beginning on page 5 of this proxy statement.

The Internet and telephone voting facilities for participants in the 401(k) Plan will close at 11:59 p.m., Eastern time, on December 13, 2015.

We maintain the Direct Stock Purchase and Dividend Reinvestment Plan, referred to in this proxy statement as the DRP, which permits participants to automatically reinvest, in shares of our common stock, cash dividends we pay on our common stock, and to purchase additional shares of our common stock. For purposes of voting shares at the meeting, shares held through the DRP (other than shares allocated to your 401(k) Plan account) will be treated as shares that are registered in your name, and will be voted in accordance with your completed, signed and dated proxy card.

If you own shares in the DRP and return a signed proxy card but do not indicate how you wish your shares to be voted as to a particular matter, your shares will be voted “FOR” that matter, except that shares allocated to a participant in the 401(k) Plan through the DRP will be voted as set forth above under “Retirement Savings Plan.”

The Internet and telephone voting facilities for participants in the DRP will close at 5:00 p.m., Eastern time, on December 15, 2015.

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If you own shares in your own name or through the DRP, or with respect to shares allocated to your 401(k) Plan account, you may revoke any prior proxy or voting instructions, regardless of how your proxy or voting instructions were originally submitted, by:

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sending a written statement to that effect to our Corporate Secretary, which must be received by us before the meeting;

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submitting a properly signed proxy card or voting instruction form dated a later date;

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submitting a later dated proxy or providing new voting instructions via the Internet or by telephone; or

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attending the meeting in person and voting your shares.

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If you hold shares in street name, you should follow the instructions provided on your voting instruction form or contact the intermediary for instructions on how to change your vote.

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If you plan to attend the meeting in person, you must have an admission ticket, along with a valid, government-issued photo identification, such as a driver’s license, that matches your name on the admission ticket, prior to the start of the meeting. We reserve the right to deny admission to any person who does not have a valid admission ticket and valid photo identification.

Attendees will not be permitted to bring food or beverages, cameras, camera phones, cell phones, recording equipment, electronic devices, computers,

large bags, briefcases, weapons (including any item we may deem to be a weapon in our sole discretion) or packages into the meeting. If you bring any of these prohibited items to the meeting, you will be required to leave them outside the meeting room until the meeting has concluded. Furthermore, no weapons are permitted anywhere on our property, including in your vehicle if it is parked on our property.

To ensure the safety and security of all persons, attendees will be required to pass through a security screening device prior to entering the meeting.

Under our bylaws, the Board or chairman of the meeting may impose additional reasonable restrictions on the conduct of the meeting and the ability of individuals to

attend the meeting in person. These procedures are designed to ensure the safety and security of all attendees at the meeting.

Registered holders, holders of shares through the DRP, persons whose shares are held through an intermediary, and persons who have shares allocated to them in their 401(k) Plan account, each as of the record date, or their legal proxies, are the only persons eligible to receive admission tickets.

Please note that seating is limited. If you are required to submit a written request for an admission ticket, please note that requests for admission tickets will be accepted on a first-come, first-served basis. Requests for admission tickets will be processed in the order in which they are received and must be received at our corporate headquarters no later than Wednesday, December 2, 2015.

For further information on how to contact our transfer agent or the address of our corporate headquarters, see “Communications, Stockholder Proposals and Company Information — Contacting Us or Our Transfer Agent” on page 96 of this proxy statement.

Registered Holders

If your shares are registered in your name or are held through the DRP or through the allocation of shares to your 401(k) Plan account, you will receive an admission ticket in one of three different ways:

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If you received your proxy materials by mail, your admission ticket is attached to your proxy card or 401(k) Plan voting instruction form.

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If you received your proxy materials by e-mail, your admission ticket is the e-mail, which you must print out and bring with you to the meeting.

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If you received a Notice of Availability, your admission ticket is the Notice of Availability.

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The original admission ticket attached to your proxy card or the original Notice of Availability must be presented. Photocopies of these documents will not be accepted. If

you lose your admission ticket, please contact our transfer agent, American Stock Transfer & Trust Company, to request a replacement.

Holders of Shares in “Street Name” and Legal Proxies

If you hold your shares in street name or you hold a valid legal proxy and you plan to attend the meeting in person, you must send us a written request for an admission ticket. Please include the following information with your request:

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A signed cover letter stating:

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your name and complete mailing address, including daytime and evening telephone numbers;

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the number of shares that you own in street name or that are the subject of the legal proxy; and

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the name, address and telephone number of the intermediary, or the stockholder who gave the legal proxy, if applicable.

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An originally signed letter from the bank, broker or intermediary holding your shares (or, in the case of a legal proxy, the shares owned by the stockholder who gave the legal proxy) verifying beneficial ownership of common stock as of the record date. A copy or printout of a brokerage statement (including any statement retrieved through the Internet) WILL NOT be sufficient without an originally signed letter from the bank, broker or other intermediary that is the registered holder of the shares.

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If you are a holder of a valid legal proxy, a copy of the proxy, which must be properly executed, notarized and dated.

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A copy of your valid, government-issued photo identification.

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Under the “Notice and Access” rules approved by the Securities and Exchange Commission, or the SEC, we are permitted to deliver this proxy statement and our 2014 Annual Report by providing access to the documents on the Internet instead of mailing printed copies. Accordingly, certain stockholders have received a “Notice of Availability” instead of printed copies of the proxy materials. The Notice of Availability instructs a stockholder on how to access and review all of the proxy materials on the Internet. The Notice of Availability also has instructions on how a stockholder may vote his or her shares. Although the Notice of Availability identifies the items to be voted on at the meeting, you cannot vote your shares merely by marking the Notice of Availability and returning it.

Beginning on the date of mailing of the Notice of Availability, stockholders will be able to access all of the proxy materials on a website referred to in the Notice of Availability. If you received a Notice of Availability and would like to receive free of charge a paper or electronic copy of our proxy materials, you may elect to do so by following the instructions in the Notice of Availability for requesting such materials.

If you previously requested a paper copy of the proxy materials (and you have not revoked that request) or if delivery of printed proxy materials is required by law, you will receive a copy of the proxy materials, instead of the Notice of Availability.

To the extent we are not required by law to mail our proxy materials to you in paper form, you can eliminate all such future paper mailings, including mailing of the Notice of Availability, by electing to receive an e-mail that will provide Internet links to these documents and the online proxy voting website. Opting to receive all future proxy materials electronically will save us the cost of producing and mailing documents to you and will help us conserve natural resources. To request complete electronic delivery, please contact American Stock Transfer & Trust Company, our transfer agent. See “Communications, Stockholder Proposals and Company Information — Contacting Us or Our Transfer Agent” on page 96 of this proxy statement. This election is not available for shares held through the 401(k) Plan.

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The Board is currently comprised of nine members, consisting of eight independent directors and Joseph M. Rigby, our Chairman of the Board, President and Chief Executive Officer.

The Board held 12 meetings during 2014. During the period for which each director served as such, he or she attended at least 75% of the combined number of Board meetings and meetings of the Board committees on which he or she served. The Board has adopted an attendance policy, set forth in our Corporate Governance Guidelines, under which attendance in person is required at all regularly scheduled stockholder, Board and committee meetings (except where scheduled as a

conference call) and is the preferred method of attendance at all special meetings. The Chairman of the Board has the authority to waive this requirement and allow participation by telephone if, in the Chairman’s opinion, it is in our best interests to do so. Each of our then current directors attended the 2014 annual meeting of stockholders.

At each Board meeting, time is set aside for the directors to meet in executive session without any management director or other management personnel present. The executive session of the Board is convened by the Lead Independent Director, whose responsibilities are described under “— Board Leadership Structure.”

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The Board has five separately designated standing committees:

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the Compensation/Human Resources Committee, referred to as the Compensation Committee;

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the Corporate Governance/Nominating Committee, referred to as the Nominating Committee;

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Each committee has a charter, which can be found on the Company’s website at http://www.pepcoholdings.com/​corporategovernance.

Each of the Board committees (other than the Executive Committee) sets aside time to meet in executive session without management personnel present. The Compensation Committee regularly meets separately with its independent compensation consultant. The Audit Committee regularly meets separately with the Company’s General Auditor and representatives of the Company’s independent registered public accounting firm. The membership and primary responsibilities of each of the standing Board committees are as described below.

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The Board has adopted a procedure for reviewing and approving or ratifying transactions with related persons to ensure compliance with the Company’s Conflicts of Interest Business Policy and Corporate Governance Guidelines, and applicable law. This procedure, entitled the Procedure for Evaluating Related Person Transactions, may be found on the Company’s website at http://​www.pepcoholdings.com/businesspolicies.

Under this procedure, related persons include directors, director nominees and certain executives (collectively, “covered persons”), as well as specified immediate family members of covered persons and any other person sharing a covered person’s household. This procedure generally applies to any current or proposed transaction involving the Company or any subsidiary in which any related person has or will have a direct or indirect interest. This procedure requires that each covered person provide to the Corporate Secretary annually a completed questionnaire setting forth all business relationships and other affiliations that relate in any way to the business and other activities of the Company or any subsidiary. Each covered person also must update the information provided in the questionnaire as necessary throughout the year.

When a related person transaction is contemplated, all of the material facts regarding the substance of the proposed transaction, including the material facts relating to the related person’s or other party’s relationship or interest, must be fully disclosed to the Nominating Committee (excluding any member of such committee who has an interest in the transaction). The disinterested members of the Nominating Committee will review the contemplated transaction and make a recommendation to the disinterested members of the Board. The standards to be considered by the Nominating Committee in evaluating a related person transaction include the following:

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the related person’s relationship to the Company and interest in the transaction;

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the material facts of the proposed related transaction, including the proposed aggregate value of the transaction;

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benefits or advantages to the Company of the proposed transaction;

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availability of other sources of comparable products or services that are the subject of the transaction;

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an assessment of whether the proposed transaction is on terms and conditions that are comparable to terms available to an unrelated third party or to employees generally; and

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any effect on a director’s independence if the transaction involves a director.

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Approval of the transaction requires the affirmative vote of a majority of the disinterested directors voting on the matter after disclosure to the Board of all of the material facts relating to the transaction.

This procedure generally requires that related person transactions be approved in advance. On occasion, however, it may be in the Company’s interest to commence a transaction before the Nominating Committee or Board has had an opportunity to meet, or a transaction may have commenced before it is discovered that a related person is involved with the transaction. In such instances, this procedure requires that the covered person consult with the Chairman of the Nominating Committee to determine the appropriate course of action, which may include subsequent ratification by the affirmative vote of a majority of the disinterested directors. If the Chairman of the Nominating Committee is an interested director, this procedure requires that the covered person consult with the Lead Independent Director to determine the appropriate course of action.

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Mr. Rigby serves as President and Chief Executive Officer of the Company and is also Chairman of the Board. Under the Company’s Corporate Governance Guidelines, if the person elected Chairman of the Board is not an independent director as defined in the Corporate Governance Guidelines, then the independent directors will, upon the recommendation of the Nominating Committee, also annually elect an independent director to serve as Lead Independent Director. Mr. Silverman currently serves as Lead Independent Director and was first elected to that position in May 2014. The purpose of the Lead Independent Director is to facilitate communication among the independent directors, the Board and management. The Lead Independent Director has the following responsibilities:

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chairs all executive sessions of the Board’s non-management directors and has authority to call meetings of the non-management directors;

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determines the agenda for the executive sessions of the directors and participates with the Chairman of the Board in establishing the agenda for Board meetings;

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presides at Board meetings when the Chairman of the Board is not present;

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coordinates feedback to the chief executive officer and other members of management;

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in consultation with the Chairman of the Board, consistent with Board policy, recommends to the Nominating Committee proposed committee assignments and chairmanships to be adopted if approved at the annual organizational meeting of the Board;

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oversees the development of appropriate responses to communications from stockholders and other interested persons addressed to the non-management directors as a group;

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on behalf of the non-management directors, retains such counsel or other advisors deemed appropriate; and

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performs such other duties as the Board deems appropriate.

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In 2009, when Mr. Rigby was elected Chairman of the Board, the Board examined the issue of separating the chairman and chief executive officer roles and concluded that it was in the best interests of the Company to continue with the combined roles and to elect a Lead Independent Director annually. Since 2012, the Nominating Committee has reviewed this matter annually and has made an annual recommendation regarding the separation of these positions to the Board, which recommendations have been approved.

In February 2015, the Nominating Committee re-examined the issue of separating the chairman and chief executive officer roles and recommended retaining the current Board leadership structure and its current review practice. The Nominating Committee noted that a review of Board leadership structure in connection with a change in the position of chief executive officer would be appropriate. The Board reviewed and concurred with the Nominating Committee’s recommendations. The Nominating Committee will continue to review this matter as appropriate in light of potential or future changes in the position of chief executive officer.

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One of the responsibilities of the Board is the oversight of the Company’s risk management activities, which is discharged by the Board as well as through its standing committees. In discharging this responsibility, the Board and its committees, with the assistance of management, monitors and evaluates the major risks faced by the Company and oversees and monitors the design and implementation of guidelines and programs to manage these risks.

As noted in “Board Committees” above, the Audit Committee is responsible for assisting the Board in overseeing the Company’s accounting controls and the

design and performance of the internal audit function. The Audit Committee also oversees the activities of the Risk Management Committee, the members of which consist of many of the Company’s senior executives and the business unit employees who manage the day-to-day risk management responsibilities for the Company. The Risk Management Committee meets at least six times a year. The Risk Management Committee’s areas of focus include competitive, economic, operational, financial (including accounting, credit, liquidity and tax), legal, regulatory, health, safety and environmental, political and reputational risks.

The charters of the Nominating Committee, the Finance Committee and the Compensation Committee require each committee to review and assess risks and risk mitigation strategies applicable to its specific areas of primary responsibility.

The Company also has a Risk Working Group, composed of management employees across the organization, which is responsible for identifying and assessing new and emerging risk issues and developing mitigation strategies. The Risk Working Group reports monthly to the Risk Management Committee. The Audit Committee periodically discusses and reviews with management the Company’s risk assessment and risk management and also considers whether management has provided appropriate disclosure in the Company’s financial statements.

The Board and the Finance Committee also discuss with management the Company’s risk mitigation profile as part of their review of the Company’s strategic and financing plans. This review includes management’s consideration of risk management associated with the Company’s strategic and financing plans, as well as with the implementation of those plans.

Since 2010, management, using a framework provided by the Compensation Committee’s independent compensation consultant, Pearl Meyer & Partners, referred to as PM&P, has conducted an annual risk assessment of the Company’s compensation policies and practices for all employees, including executives. In February 2015, the results of management’s risk assessment, which included the Company’s 2014 short-term and long-term incentive-based compensation, were reviewed with the Compensation Committee and PM&P. This assessment sought to identify features of the Company’s compensation policies and practices that could encourage excessive risk-taking.

In order to focus employees on performance objectives that promote the best interests of the Company and its

stockholders, short-term and long-term incentive-based compensation are linked to the achievement of measurable financial and business goals, and, in the case of short-term incentives, individual performance goals. The risk assessments conducted by management found that these arrangements are coupled with compensation design elements and other controls that discourage business decision-making that is focused solely on the compensation consequences. These compensation design elements and other controls include:

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strong enterprise-wide risk management policies and programs, which have undergone third-party risk assessments;

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cash incentives that are earned only if, in addition to the satisfaction of stated performance metrics, a corporate or business unit earnings threshold is exceeded;

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the absence of compensation arrangement features often identified as encouraging excessive risk-taking as applied to companies in the regulated utility industry;

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program designs that provide a balanced mix of cash and equity and short-term and long-term incentives;

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performance metrics, not all of which are financial in nature, such as safety, reliability, diversity and customer satisfaction;

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share ownership guidelines that are applicable to officers of the Company at the level of vice president and above.

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On the basis of its review of the Company’s compensation programs, management concluded, and advised the Compensation Committee, that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

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We have adopted our Corporate Business Policies, which in their totality constitute our code of business conduct and ethics. These policies apply to all of our directors, employees and others working at the Company and its subsidiaries. Current copies of these policies, including amendments to, or waivers from, these policies, are made available on our website at http://www.pepcoholdings.com/businesspolicies.

The Board also has adopted Corporate Governance Guidelines and charters for the Audit Committee, the Compensation Committee, the Nominating Committee,

the Executive Committee and the Finance Committee. Current copies of these documents are available on our website at http://www.pepcoholdings.com/​corporategovernance and also can be obtained by sending us a written request. See “Communications, Stockholder Proposals and Company Information — Contacting Us or Our Transfer Agent” on page 96 of this proxy statement.

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We believe it is important to participate in the political process, including engaging in substantive discussions with officials whose decisions impact our business and making contributions to candidate campaigns and political committees to support candidates who understand our industry and its issues. Political engagement activities can shape the execution of our core mission of providing safe, reliable and affordable electric and gas service to the communities within our service territories.

We have adopted a Political Engagement Policy to provide transparency related to our rigorous process regarding political engagement and to provide public disclosure of

our political expenditures. We use corporate funds to make contributions to tax-exempt organizations and trade associations that engage in political activities. In addition, eligible employees may make voluntary contributions to our non-partisan, employee-run political action committees which help ensure that we will have a voice in the political process. This policy is made available on our website at http://www.pepcoholdings.com/ politicalengagement.

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In accordance with our restated certificate of incorporation and bylaws, the number of directors is fixed from time to time by the Board, but may not be less than six or more than 15. There are currently nine members of the Board, each of which has been named as director nominees for election at the meeting. Proxies may not be voted for more than these nine nominees.

The Board, on the recommendation of the Nominating Committee, has nominated for election at the annual meeting the following persons: Paul M. Barbas; Jack B. Dunn, IV; H. Russell Frisby, Jr.; Terence C. Golden; Barbara J. Krumsiek; Lawrence C. Nussdorf; Patricia A. Oelrich; Joseph M. Rigby; and Lester P. Silverman. Each of these nominees is currently a member of the Board. It is intended that each nominee would hold office until the date of the 2016 Annual Meeting, or until his or her successor is elected and qualified, or until his or her earlier death or resignation.

Each director nominee identified in this proxy statement has confirmed that he or she is willing and able to serve as a director, if elected. Should any of the nominees, prior to the meeting, become unavailable to serve as a director for any reason, the Board may either reduce the number of directors to be elected or select another nominee recommended by the Nominating Committee. If another nominee is selected, all proxies will be voted for the substitute nominee.

In accordance with our bylaws, any incumbent nominee who does not receive a majority of votes cast “FOR” his or her election is required to resign from the Board no later than 90 days after the date of the certification of the election results.

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The NYSE’s listing standards require that:

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a majority of our directors satisfy the NYSE’s independence standards applicable to all directors;

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all of the members of the Audit Committee satisfy the NYSE’s independence standards applicable to Audit Committee members;

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all of the members of the Compensation Committee satisfy the NYSE’s independence standards applicable to Compensation Committee members; and

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all of the members of the Nominating Committee satisfy the NYSE’s independence standards.

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Applying these standards, the Board has determined that eight of our nine current directors, consisting of Messrs. Barbas, Dunn, Frisby, Golden, Nussdorf and Silverman, and Mmes. Krumsiek and Oelrich, qualify as independent. The Board has also determined that each of Messrs. Barbas, Golden, and Nussdorf, and Dr. Oelrich, satisfies the NYSE’s independence standards for Audit Committee members, and each of Messrs. Barbas, Dunn, Frisby and Silverman, satisfies the NYSE’s independence standards for Compensation Committee members. The Board also determined that Patrick T. Harker, our former director who served on the Board during 2014, qualified as independent and satisfied the relevant NYSE independence standards with respect to his service on the Audit and Compensation Committees while serving as a director.

For a director to be considered independent under the NYSE listing standards, a director cannot have any of the disqualifying relationships enumerated by the NYSE listing standards. Furthermore, the Board also must determine that the director does not otherwise have any direct or indirect material relationship with the Company. The Board of Directors considers all relevant facts and circumstances when assessing the materiality of a director’s relationship with the Company, not only from the standpoint of the director but also from that of persons or organizations with which the director has an affiliation. Material relationships can include, for example, commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. To assist the Board in considering these relationships, the Board has adopted, as part of our Corporate Governance Guidelines, non-exclusive guidelines of material director relationships. Our Corporate Governance Guidelines can be found on our website at http://www.pepcoholdings.com/corporategovernance. Under these guidelines, which are based in significant part on the disqualifying relationships enumerated by the NYSE listing standards and the SEC’s independence standard for audit committee members, a PHI director is not “independent” if the director has any of the material relationships specified in the table below.

Furthermore, in determining the independence of members of the Compensation Committee, in addition to the requirements described above, the NYSE’s standards require the Board to consider all factors in determining whether a director has a relationship to us which is material to that director’s ability to be independent from our management in connection with the duties of a Compensation Committee member. These factors include, but are not limited to:

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the source of a director’s compensation, including any consulting, advisory or other compensatory fee paid by us to the director; and

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whether the director is affiliated with us, one of our subsidiaries or an affiliate of one of our subsidiaries.

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In making its director independence determinations, the Board considered the following relationships in accordance with its procedures for evaluating related person transactions. See “The Board of Directors and Corporate Governance — Board Review of Transactions with Related Persons” on page 9 of this proxy statement.

Since 2009, Mr. Frisby has been a partner with Stinson Leonard Street LLP. Prior to Mr. Frisby’s appointment to the Board in September 2012, Stinson rendered legal and other services to the Company with respect to two matters, which services had ceased as of January 2012. Since January 2012, Stinson has not provided, and presently does not provide, services to the Company or any of its subsidiaries.

In reviewing this relationship, the Board examined the specific services that Stinson provided to the Company. The Board also noted the fact that the total amounts paid by the Company to Stinson for legal services rendered in 2012 were $45, and that the services provided by Stinson were terminated in January 2012.

Dr. Harker served on the Board during 2014, and on March 6, 2015 notified the Company of his intention to resign from the Board effective as of June 30, 2015, as required by his election as President of the Federal Reserve Bank of Philadelphia effective July 1, 2015. Prior to becoming President of the Federal Reserve Bank of Philadelphia, Dr. Harker served as President of the University of Delaware (UDel). In UDel’s fiscal year ending June 2012, Pepco Energy Services, Inc., a wholly owned subsidiary of the Company, supplied natural gas to UDel under a gas master agreement. In each of UDel’s fiscal

years ending June 2014, 2013 and 2012, Delmarva Power & Light Company, or DPL, a wholly owned utility subsidiary of the Company, delivered, and in some cases also supplied, electricity and natural gas to various UDel accounts on terms specified in tariffs approved by the Delaware Public Service Commission. Also, the Company provides tuition assistance payments as a benefit to its employees under a broad-based, non-discriminatory policy, some of whom have used these benefits to attend UDel.

Mr. Nussdorf is Chairman and Chief Executive Officer of Clark Enterprises. Clark Enterprises and its affiliates purchased electricity from Pepco in 2014, 2013 and 2012. Electricity was purchased from Pepco on terms specified in tariffs approved by the applicable public service commission. In August 2012, Pepco Energy Services also entered into a teaming agreement with an affiliate of Clark Enterprises with respect to a proposed energy savings performance contract bid. In February 2015, the August 2012 teaming agreement was superseded by a new teaming agreement on substantially similar terms. If Pepco Energy Services wins the bid, Pepco Energy Services would then be required under the teaming agreement to enter into a subcontract with the Clark Enterprises affiliate for specified work. To date, no payments by Pepco Energy Services have been made to the Clark Enterprises affiliate and no contract has been entered into with the proposed customer. The Board is monitoring this relationship, and, if such a contract were to be entered into, the Board would make a determination as to any further action that may be warranted.

Pauline A. Schneider served on the Board during 2014, and her term expired on the date of the 2014 annual meeting of stockholders. Ms. Schneider did not stand for re-election as a director due to the age limitations set forth in our bylaws. While she served on the Board, she was a partner with the law firm of Ballard Spahr LLP. Ballard rendered legal services to the Company and certain of its subsidiaries in 2014, 2013 and 2012. In 2014, Ms. Schneider had informed the Board that:

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she did not direct Ballard’s work on any of these matters; and

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Ballard’s representation of the Company or its subsidiaries did not have any effect on the amount of compensation she received from Ballard.

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In reviewing this relationship, the Board examined the specific services that Ballard provided to the Company and its subsidiaries during 2014, 2013 and 2012, as well as the nature and substance of the relationship with Ballard. The Board noted the fact that the amounts paid by the Company and its subsidiaries to Ballard for legal services rendered in 2014, 2013 and 2012 were $52,495, $83,886 and $39,347, respectively.

With respect to each of the PHI directors discussed above, the Board determined that:

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the relationship between each respective related entity (or its affiliates) and PHI or a subsidiary thereof was solely a business relationship which did not convey any special benefits upon the PHI director who was affiliated with such related entity;

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the amounts paid to PHI or its subsidiary under the contract were below the numerical threshold set

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forth in the Corporate Governance Guidelines with respect to payments for property and services between the Company or its subsidiaries and a related entity; and

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in the case of each director other than Mr. Frisby and Ms. Schneider, the amounts paid by the related entity to PHI or its subsidiary under the contract constituted payment for electricity and/or natural gas made in the normal course of business at prices generally applicable to similarly situated customers.

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For these reasons, the Board determined that these business relationships did not serve to disqualify Mr. Frisby, Dr. Harker, Mr. Nussdorf or Ms. Schneider as independent directors.

In making independence determinations under the NYSE listing standards with respect to a PHI director, the Board has, where applicable, reviewed whether, and to what extent, a director or certain related entities have purchased electricity or natural gas from any of the Company’s regulated utility subsidiaries at rates prescribed by applicable law or governmental authority. Where such purchases would not disqualify the director from a determination of independence under the NYSE listing standards, the Board has determined that such relationships do not create a direct or indirect material relationship with the Company which would preclude a determination of independence. Further, the Board reached its conclusions with respect to Mr. Frisby and Ms. Schneider without concluding that Mr. Frisby’s relationship as a partner of Stinson or Ms. Schneider’s relationship as a partner of Ballard constituted a relationship covered by the Corporate Governance Guidelines.

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The Board believes that it is important for the Board to include an appropriate blend of independent and management directors, which should result in independent directors being predominant and the views of the Company’s management being effectively represented. Accordingly, the number of independent directors should never be less than seven and the management directors should always include the chief executive officer, there should never be more than three management directors, and any management directors, other than the chief executive officer, should be selected from the Company’s executive leadership team.

For independent directors, the Nominating Committee seeks the appropriate balance of experience, skills and personal characteristics required of a director. In order to be considered for nomination to the Board, a director candidate should possess most or all of the following attributes:

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independence, as defined by the NYSE listing standards as then currently in effect;

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Independent directors should possess, in the aggregate, skill sets that include but are not limited to:

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financial acumen equivalent to the level of a chief financial officer or senior executive of a capital markets, investment or financial services firm;

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operational or strategic acumen germane to the energy industry, or other industry with similar characteristics (construction, manufacturing, etc.);

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public and/or government affairs acumen germane to complex enterprises, especially in regulated industries;

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customer service acumen germane to a service organization with a large customer base;

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legal acumen in the field of regulatory or commercial law at the partner or chief legal officer level;

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technology expertise at the chief technology officer level;

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salient community ties in areas of operation of PHI’s enterprises; and

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corporate governance acumen, gained through service as a senior officer or director of a large publicly held corporation or through comparable academic or other experience.

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In identifying director candidates, the Nominating Committee also gives weight to other attributes that it believes contribute to Board effectiveness, including:

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a willingness and ability to constructively and collaboratively engage with management and each other; and

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the ability and commitment to devote significant time to service on the Board and its committees.

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In accordance with the Corporate Governance Guidelines, the Nominating Committee also follows the principle that a board of directors composed of individuals with a broad range of experiences and backgrounds brings diverse perspectives and contributes to the Board’s overall effectiveness. Thus, independent directors are also selected to ensure diversity, in the aggregate, which diversity should include expertise or experience germane to the Company’s overall business needs, in addition to other generally understood aspects of diversity.

The Board monitors the mix of skills, experience and backgrounds of the Board members to assure that the Board has the necessary composition to effectively perform its oversight function. The Board took these diversity considerations and attributes into account in determining the director nominees and planning for director succession and believes that, as a group, the nominees bring a diverse range of expertise, experience and perspectives, as well as generally understood aspects of diversity, to the Board.

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During 2014, each non-management director of PHI was eligible to receive an annual Board retainer comprised of $50,000 in cash and $65,000 in PHI equity. The equity portion of the retainer was paid in the form of RSU awards issued under the 2012 LTIP. These RSUs vest upon the earlier of one year after the date of grant or upon the date of the next annual meeting of stockholders. During 2014, the annual committee chair and Lead Independent Director retainers were $10,000 and $25,000, respectively. The meeting fee was $2,000 per meeting.

Under the terms of the PHI Non-Management Directors Compensation Plan, or the Directors Plan, our non-management directors were permitted to elect to receive their cash retainer payments and meeting fees in cash or in shares of common stock. No shares were acquired under the Directors Plan during 2014, which expired by its terms on December 31, 2014.

These directors are also permitted to elect to defer the receipt of their cash retainer and meeting fees under the terms of the PHI Second Revised and Restated Executive and Director Deferred Compensation Plan, or the Deferred Compensation Plan. Contributions to a director’s PHI Deferred Compensation Plan account may be credited to a prime rate interest account, an investment fund account determined by the Compensation Committee, or a phantom share account that mirrors an investment in shares of common stock. For information on the PHI Deferred Compensation Plan, see “Proposal 2: Advisory Vote to Approve The Compensation of our Named Executive Officers — Executive Compensation —

Nonqualified Deferred Compensation — Description of Nonqualified Deferred Compensation Plans and Arrangements — PHI Deferred Compensation Plan.”

The Board has approved a non-management director deferral program that permits such directors to elect to defer the payment of shares of common stock underlying RSU, performance share and performance unit awards, until:

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another date to be specified by the director in advance, which with respect to 2014 deferrals may not be before January 31, 2017.

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We provide non-management directors with travel accident insurance for Company-related travel and directors’ and officers’ liability insurance coverage, and reimburse them for travel, hotel and other out-of-pocket expenses incurred in connection with the performance of their duties as directors.

We also provide non-management directors with free parking at our headquarters. Directors also may use these parking spaces other than in connection with the performance of their duties as directors. In addition, during 2014, Company-leased entertainment venues and Company-purchased tickets to sporting and cultural events were made available to non-management directors for personal use when not being used by us for business purposes. There was no incremental cost to us for providing these benefits to non-management directors.

Non-management directors are required to own common stock or common stock equivalents (including, without limitation, phantom shares under the PHI Deferred Compensation Plan and restricted stock units or other stock-based awards made under the 2012 LTIP) that have a market value equal to at least four times the annual board cash retainer. Currently, the annual Board cash

retainer is $50,000 per year. Non-management directors serving on the Board as of May 18, 2012 have until May 18, 2017 to reach this share ownership level. Directors elected or appointed to the Board for the first time thereafter will have five years after the date of their initial election or appointment to meet this requirement.

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Under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are required to present the compensation paid to our named executive officers as disclosed in this proxy statement to our stockholders for a non-binding, advisory vote. The disclosures related to compensation of our named executive officers consist of the Compensation Discussion and Analysis, the 2014 Summary Compensation Table, and the other required compensation tables and narrative disclosures in this proxy statement.

The Board believes that our executive compensation program aligns compensation with the long-term interests of stockholders. The objectives of our executive compensation program are to attract, motivate and retain talented executives while promoting our interests and the interests of our customers and stockholders. The Board believes that our executive compensation philosophy and practices have resulted in executive compensation decisions that are appropriate and that have benefitted PHI and its stockholders over time.

As a result, we are asking stockholders to indicate their support for our executive compensation by voting “FOR” the following resolution:

“RESOLVED, that the stockholders of Pepco Holdings, Inc. (the “Company”) approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion in the Company’s 2015 Proxy Statement.”

Because the vote on this proposal is advisory, it will not be binding on us. However, both the Compensation Committee and the Board value the opinions expressed by our stockholders in their vote on this matter and will take the outcome of the vote into account when considering the future compensation of the named executive officers.

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The following is a brief overview of the more detailed discussion and analysis set forth in this CD&A section, which focuses on compensation paid with respect to 2014 to each of the Company’s executive officers who are named in the 2014 Summary Compensation Table (each, a named executive officer, or NEO). The NEOs include:

Exelon Merger Agreement

On April 29, 2014, Pepco Holdings entered into the Merger Agreement with Exelon Corporation (Exelon) and an indirect, wholly owned subsidiary of Exelon (the Merger Agreement). Upon closing of the merger with Exelon (the Merger), Pepco Holdings will be the surviving corporation and will become an indirect, wholly owned subsidiary of Exelon. The Merger Agreement provides for the treatment of award opportunities under the EICP and the 2012 LTIP. For more information, please refer to the descriptions of the EICP and 2012 LTIP in “— Executive Compensation — Amended and Restated Annual Executive Incentive Compensation Plan” and “— Executive Compensation — 2012 Long-Term Incentive Plan.”

Compensation Philosophy

Our executive compensation philosophy is straightforward: we reward our executives for their contributions to our business and operational performance and stockholder value creation by tying a significant portion of their total compensation directly to our short-term and long-term performance.

Our executive compensation program is designed to:

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provide executives with competitive compensation opportunities and benefits;

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tie a significant portion of compensation to our operational and financial performance;

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align the financial interests of our named executive officers with those of the stockholders;

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provide rewards for executive performance that target recognized key drivers of performance in the utility industry;

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utilize performance metrics that serve to measure increases in value to our stockholders and reflect key operational and regulatory criteria;

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strike a careful balance between risk and reward so as to not encourage executives to take excessive risk; and

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ensure that executives’ interests are aligned with stockholders through the use of executive stock ownership requirements.

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Pay for Performance

We have designed a compensation program that makes a substantial percentage of executive pay variable, subject to payout or increase when performance goals are achieved or exceeded and forfeiture or reduction when they are not achieved. Also, a significant portion of the compensation paid to our President and Chief Executive Officer during 2014 was equity-based, which further aligns his compensation with the interests of our stockholders and provides for compensation that is tied directly to the continued positive performance of the Company. See “— Executive Summary — Highlights of Significant 2014 Compensation Actions” and “— Corporate Governance and Pay for Performance.”

2014 Business Results

During 2014, we continued to focus on the successful achievement of our 2014 financial and operational objectives. For the year ended December 31, 2014, the Company reported consolidated net income from continuing operations of  $242 million, or $0.96 per diluted share, as compared to $110 million, or $0.45 per diluted share, for the year ended December 31, 2013. Our core Power Delivery Business remained strong and performed well, with net income from continuing operations of  $320 million in 2014 compared to $289 million in 2013. Pepco Energy Services’ consolidated net income from continuing operations decreased to a net loss of  $39 million in 2014 as compared to net income of $3 million in 2013.

Our 2014 consolidated earnings included $48 million ($81 million pre-tax) of asset impairment losses associated with Pepco Energy Services’ combined heat and power

thermal generating facilities and operations in Atlantic City, New Jersey. During 2014, we also incurred $23 million in incremental Merger-related transaction costs ($25 million pre-tax), and $8 million of incremental Merger-related integration costs ($9 million pre-tax). Excluding all of these items, our adjusted consolidated net income from continuing operations would have been $321 million, or $1.27 per diluted share, for 2014.

Our 2013 consolidated earnings included interest associated with changes in the assessment of corporate tax benefits related to our former cross-border energy lease investments totaling $66 million; the establishment of valuation allowances related to certain deferred tax assets of  $101 million; and impairment charges related to Pepco Energy Services’ long-lived assets of  $3 million. Excluding these items, our adjusted consolidated net income from continuing operations for 2013 would have been $280 million, or $1.14 per diluted share.

Our management believes that adjusted consolidated net income from continuing operations is representative of our ongoing consolidated business operations. Our management uses this information internally to evaluate the Company’s period-over-period consolidated financial performance and, therefore, believes that this information is useful to investors. The presentation of our adjusted consolidated net income from continuing operations is intended to complement, and should not be considered as an alternative to, reported earnings presented in accordance with generally accepted accounting principles in the United States.

During 2014, we also spent a significant amount of our business focus on supporting activities that are helping us comply with the many conditions necessary to close the Merger, including obtaining required regulatory approvals.

Highlights of Significant 2014 Compensation Actions

To further align compensation received by our named executive officers with the interests of our stockholders and to reinforce good corporate governance practices, the Compensation Committee approved the following actions related to our executive compensation programs in 2014:

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We increased 2013 base salaries modestly, with the goal of providing a level of fixed compensation that is competitive with other comparable utilities.

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In connection with the extension of Mr. Rigby’s employment agreement with the Company in April 2014 (which employment agreement was effective as of January 1, 2012) (the Original Employment Agreement), the Company issued to Mr. Rigby in April 2014 vested and unvested

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restricted stock awards under the 2012 LTIP. The unvested shares will vest upon the last day of the Employment Extension Period (as defined in “— Executive Compensation — Employment Agreements — Joseph M. Rigby”), subject to certain exceptions. None of the vested shares may be transferred or sold until after his employment with the Company ends.

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We utilized relative total shareholder return (TSR) as the sole performance goal for annual performance-based awards under the 2012 LTIP, for all named executive officers.

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We continued the practice of using RSUs, instead of restricted stock, for grants of annual time-based awards, because dividend equivalents under RSUs will not vest except to the extent that the underlying RSUs vest.

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We continued the practice of including compensation recovery (clawback) provisions in our equity award agreements.

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Throughout this CD&A section, unless the context otherwise requires, with respect to compensation decisions involving our President and Chief Executive Officer, references to the “Compensation Committee” shall mean the independent members of the Board.

Base Salary

Base salary increases for our named executive officers have been modest, ranging from 1.31% to 3.09% (excluding a $16,000 special base salary upward adjustment provided to Mr. Boyle) in 2014, and 2.36% to 3.00% in 2015. Two of our five named executive officers did not receive a base salary increase for 2014, and, in accordance with the terms of that certain Employment Extension Agreement, dated April 29, 2014, by and between Mr. Rigby and the Company (the Employment Extension Agreement), Mr. Rigby did not receive a base salary increase for 2015. For a description of the Employment Extension Agreement, see “—Executive Compensation — Employment Agreements — Joseph M. Rigby.”

Annual Executive Incentive Compensation Plan

To recognize the efforts, contributions and accomplishments of our executive team which led to the Company’s positive performance in 2014, in December 2014, the Compensation Committee approved a partial cash payment to our executives (other than Messrs. Rigby, Velazquez, Fitzgerald and Huffman, who received restricted stock in settlement of this award) of 2014 EICP awards in amounts that reflected target level of performance (or, with respect to the energy services executives in Pepco Energy Services, performance at 75%). These awards were subject to clawback to the extent that this level of performance was not ultimately achieved.

In February 2015, the Compensation Committee made a final determination that the 2014 EICP awards were earned at levels ranging from 109.5% to 140.8%, based on the performance criteria set forth in these awards, and the amount of each EICP award that exceeded target (or 75%) was paid to each executive in cash.

Long-Term Incentive Plans

The Compensation Committee determined to settle and pay time-based RSU awards with respect to the 2012 to 2014 cycle in shares of common stock on December 31, 2014. Also, the Compensation Committee determined on December 31, 2014, the end of the 2012 to 2014 performance period, that the performance-based RSU awards for that performance period were earned at approximately the 71st percentile, or at a level of 141.2%, based on relative TSR.

For 2014, the Company granted to Messrs. Rigby and Fitzgerald performance-based RSU awards pursuant to the terms of the Original Employment Agreement and Mr. Fitzgerald’s employment agreement, respectively. These awards featured performance criteria and goals tied to key regulatory and business initiatives that the Company believes are drivers of its operational success, and in turn, positive financial performance and creation of stockholder value.

In February 2015, the Compensation Committee determined that 98% of Mr. Rigby’s award and 99% of Mr. Fitzgerald’s award vested based upon the executive’s

performance under each of the applicable goals. However, under the terms of these awards, no shares will be issued in settlement of these awards until the day after each executive’s employment with the Company terminates.

Employment Extension Agreement with Mr. Rigby

In April 2014, in view of the execution of the Merger Agreement, the Board requested that Mr. Rigby extend his employment with the Company until the completion of the Merger, and Mr. Rigby agreed to do so. The Board determined that Mr. Rigby’s continued leadership of the Company was an important factor in securing the required regulatory approvals necessary to consummate the Merger. On April 29, 2014, the Company and Mr. Rigby entered into the Employment Extension Agreement, which extended the term of Mr. Rigby’s employment as the Company’s President and Chief Executive Officer for the duration of the Employment Extension Period.

As consideration for the extension of the term of the Original Employment Agreement, the Company granted to Mr. Rigby awards of vested and unvested restricted stock, all of which were subject to restrictions on transferability until Mr. Rigby’s employment terminates. Subject to certain exceptions, the shares of unvested restricted stock will be forfeited if Mr. Rigby’s employment with the Company terminates before the end of the Employment Extension Period.

In connection with the special meeting of stockholders in September 2014 to approve the Merger, we submitted a merger compensation proposal to our stockholders for an advisory vote. This proposal received the support of the holders of approximately 55% of the shares of common stock present and eligible to vote at the special meeting. Based upon this say on pay vote, we engaged in comprehensive engagement efforts with our stockholders on compensation matters. See “Communications, Stockholder Proposals and Company

Information — Stockholder Outreach” on page 95 of this proxy statement for further discussion of our stockholder outreach program.

At our 2011 annual meeting of stockholders, our stockholders indicated their preference, on an advisory basis, that the say on pay proposal be submitted annually for an advisory vote rather than every two or three years. In response, the Board determined to hold an annual advisory say on pay vote.

The objectives of our executive compensation program are to attract, motivate and retain talented executives while promoting the interests of the Company and its customers and stockholders. The core of our compensation philosophy is to reward executives for the achievement by the Company and its business segments of targeted levels of operational excellence and financial performance and for the achievement of individual performance goals.

As a company that owns three public utilities with operations focused on the transmission and distribution of electricity, and, to a lesser extent, natural gas, substantially all of our revenues and net income are derived directly from our utility subsidiaries’ ability to earn their allowed rates of return as determined through distribution base rate case decisions rendered by the applicable public service commission. The Compensation Committee believes that positive rate case outcomes

stem from our ability to meet or exceed reliability requirements established by our regulators. These positive outcomes also represent the single greatest factor driving the Company’s financial results, and in turn, stockholder value. In light of these considerations, our compensation philosophy rewards our executives when their performance contributes to the achievement by our utilities of key operational, reliability and customer satisfaction metrics, as well as when stockholder value increases, as measured by reference to our stock price and dividend yield.

Our executive compensation program is designed to:

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provide executives with base salaries, incentive compensation opportunities and other benefits that are competitive with comparable companies in our industry;

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tie a significant portion of the total compensation of our executives to our short-term and long-term operational and financial performance;

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align the financial interests of our named executive officers with those of the stockholders with compensation that is substantially variable, that is, subject to payout or increase when corporate targets are achieved or exceeded and forfeiture or reduction when corporate targets are not achieved;

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provide rewards for executive performance that target key drivers of performance in the utility industry, the achievement of which we believe directly contributes to our long-term financial health and is responsible for creating long-term value for our stockholders;

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utilize performance metrics that not only serve to measure increases in value to our stockholders, but also reflect operational and regulatory criteria that are important to the successful resolution of our utility subsidiaries’ base rate cases, as well as to our regulators, customers and other stakeholders;

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strike a careful balance between risk and reward so as to not encourage executives to take excessive risk which could have a material adverse impact on our business, operations and financial results; and

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ensure that executives’ interests are aligned with stockholders through the use of executive stock ownership requirements of between one and five times base salary, depending on the executive’s position.

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The cornerstones of our 2014 compensation program are the Company’s compensation governance framework and pay-for-performance philosophy, which includes the following features:

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We have established a pay-for-performance environment by linking short-term and long-term incentive-based compensation to the achievement of measurable business and individual performance goals.

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Our executive compensation program continued to focus on both long-term and short-term performance, and to emphasize at-risk over fixed compensation.

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Our Compensation Committee regularly receives advice on pay composition and levels of compensation from an independent compensation consultant.

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Base salary increases for the named executive officers are generally modest, and we evaluate base salaries and increases by reference to a named executive officer’s performance and position, as well as to the salary range for that position using competitive market survey data compiled by the Compensation Committee’s independent compensation consultant.

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We use equity-based, long-term incentive compensation as a means to align the interests of our named executive officers with those of our stockholders. To do this, in 2014 we granted RSUs, two-thirds of which are to vest based on performance over a three-year performance period. We have not granted stock options since 2002 and no named executive officer holds any PHI stock options.

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We believe that the reliability of utility service and the positive performance of our utilities have a direct impact on our financial success. Public utility commissions view our utilities’ performance and acceptable levels of compensation through the lens of specific operating metrics. We believe our use of these metrics as a part of incentive compensation performance goals supports our mission to seek positive relationships with our regulators, customers and other stakeholders. As a result, we have continued to incorporate critical utility operating metrics into our short-term and long-term incentive awards as permitted by the relevant plans.

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We have a common stock ownership requirement that applies to all of our named executive officers, except Mr. Huffman, who is not an officer of the Company. Each of these officers has satisfied this requirement.

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We provide our named executive officers with reasonable amounts of perquisites and personal benefits compared to their total compensation.

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We maintain a strong risk management program which includes our Compensation Committee’s ongoing evaluation and oversight of the relationship between our compensation programs and risk.

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We will recoup certain incentive compensation payments made to our Chief Executive Officer and Chief Financial Officer when required under the Sarbanes-Oxley Act. Employment agreements and award agreements under the 2012 LTIP include clawback provisions intended to satisfy the requirements of the Sarbanes-Oxley Act, and, when implemented, the Dodd-Frank Act.

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We have adopted “no hedging”, “no pledging” and “no margining” policies that apply to all of our directors, officers and certain other employees.

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The Compensation Committee is responsible for all executive compensation decisions with respect to each of the named executive officers, except for Mr. Rigby’s compensation, which is approved by all of the independent directors. To assist it in carrying out its responsibilities, the Compensation Committee requests and receives recommendations from the Chief Executive Officer with respect to the compensation packages of the other named executive officers, including the selection and weighting of the specific performance objectives applicable to short-term and long-term incentive awards.

When structuring compensation arrangements for the named executive officers and other executives, the Compensation Committee typically receives advice from its independent compensation consultant concerning pay mix and levels of compensation, as well as information with respect to the financial costs and tax and accounting consequences associated with the various elements of compensation. Since 2007, the Compensation Committee has engaged PM&P as its independent compensation consultant to advise it on various executive compensation matters. Pursuant to this engagement, PM&P annually:

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attends Compensation Committee meetings and provides advice to the Compensation Committee, including a review of materials related to the meeting;

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conducts peer group reviews and periodically provides benchmarking analyses for the Compensation Committee;

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analyzes certain compensation practices of the companies in our peer group;

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upon request of the Compensation Committee, prepares an update on executive compensation trends and changes in proxy advisory firm policies;

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provides advice on compensation packages and proposed new salary ranges to be provided to Company executives, as well as total executive compensation, as requested by the Compensation Committee;

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provides other various industry and compensation data.

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Compensation levels for our named executive officers are determined based on a number of factors, including the individual’s roles and responsibilities within the Company, the individual’s experience, pay levels in the marketplace for similar positions and performance of the individual and the Company as a whole.

The Compensation Committee uses Company-prepared tally sheets for each named executive officer to assist it in its annual compensation review process. The tally sheet identifies each material element of the named executive officer’s compensation, including salary, short-term and long-term incentive compensation opportunities, pension accruals and other benefits, and shows the severance and other payouts to which the executive would be entitled

under various employment termination scenarios. The tally sheet allows the Compensation Committee to review the totality of each named executive officer’s compensation.

Based on benchmarking data provided by PM&P, as well as other data sources, the Compensation Committee assesses competitive market compensation practices. One of the primary ways the Compensation Committee evaluates the Company’s executive compensation arrangements relative to other companies is to compare the Company’s practices to a group of companies that are primarily electricity and natural gas distribution companies with similar amounts of assets and revenues, and similar market capitalization. The composition of this

group of peer companies is reassessed annually and its composition may be changed by the Compensation Committee from year to year to reflect corporate transactions or other events that may affect the comparability of one or more of the constituent companies.

For 2014, the Utility Peer Group consisted of the 18 companies listed below, which we refer to as the 2014 Utility Peer Group. At December 31, 2014, the Company ranked at the 42nd percentile in total assets and at the 21st percentile in market capitalization, relative to the companies that comprised the 2014 Utility Peer Group.

Base Salary

The Compensation Committee considers adjustments to base salary levels annually and also may consider base salary adjustments in connection with promotions and other special circumstances. The Original Employment Agreement provided, and Mr. Fitzgerald’s employment agreement provides, for a minimum base salary that may be increased, but not subsequently decreased, during the term of each agreement. The Employment Extension Agreement provides for a fixed base salary. Neither Mr. Rigby’s nor Mr. Fitzgerald’s base salary was increased for 2014. Furthermore, Mr. Rigby’s base salary was not increased for 2015 in accordance with the terms of the Employment Extension Agreement.

In order to provide greater consistency within the Company, the Compensation Committee has developed base salary levels for the named executive officers and assigned a level to each position based primarily on the decision-making responsibility associated with the position. Each base salary level has a range, with the midpoint of the range fixed at approximately the median of the competitive range as determined by a market survey of salary levels for comparable positions. Each named executive officer’s base salary is determined based

on a combination of factors, including the executive’s level of experience, tenure with the Company in the position and performance; however, in reviewing these factors, the Compensation Committee has the discretion to select a base salary for a named executive officer that is outside the base salary range.

The Compensation Committee annually considers adjustments to the base salary range for each salary level and to individual salaries. The process of setting an executive’s annual base salary begins with a review by the Compensation Committee of available information on salary levels of executives at other companies. If the information shows a change in the base salary range for a particular salary level, the Compensation Committee has the discretion to adjust the Company’s base salary range for that salary level as it believes is appropriate to reflect such change. The Compensation Committee also may consider whether a further base salary adjustment for a particular executive is warranted if the executive’s compensation is significantly below the median of the competitive range for that position, based on the goal of generally paying an executive a competitive salary for the executive’s position.

2014 Base Salary Determinations

To establish base salaries for 2014, the Compensation Committee obtained from PM&P published data, compiled from the same sources as the information used to adjust salary levels, which showed an average base salary budget increase of 3%. Based on this data, the Compensation Committee approved a merit budget increase equal to 3% of total base salaries, which it allocated among the executive group.

The Compensation Committee recommended to the independent directors that Mr. Rigby’s 2014 base salary be retained at the same level as in 2013. In making this recommendation, the Compensation Committee reviewed the benchmarking data for Mr. Rigby’s position provided by PM&P and noted that Mr. Rigby’s 2013 base salary was 102% of the median salary for his position. The Compensation Committee also reviewed chief executive officer compensation data from the Utility Peer Group provided by PM&P.

The Compensation Committee noted Mr. Rigby’s strong performance during 2013 in executing plans to improve and enhance reliability and customer service, and executing the Company’s business strategy, including regulatory, financing and smart grid initiatives. The Compensation Committee also recognized that Mr. Rigby’s leadership, evidenced by his oversight of the Company through customer service and reputational change and changes in regulatory strategy designed to reduce regulatory lag, has been key to the forward progress the Company has made in addressing these issues. However, because Mr. Rigby’s 2013 base salary was already higher than the median salary of the competitive range for his position, the Compensation Committee recommended to the independent directors that his base salary for 2014 be retained at its current level, and the independent directors approved this recommendation.

The Compensation Committee increased Mr. Boyle’s 2013 base salary by 2.98%, and provided for an additional upward adjustment to bring Mr. Boyle’s 2013 base salary slightly higher than the midpoint of the competitive range for his position. The Compensation Committee found that Mr. Boyle’s 2013 base salary was below the midpoint of the competitive range for his position. In approving the base salary increase for Mr. Boyle, the Compensation Committee noted Mr. Boyle’s performance in executing the Company’s strategic, financing and regulatory plan, as well as his efforts to address accounting and financial issues associated with the early termination in 2013 of PHI’s cross-border energy lease investments. In light of this performance, the Compensation Committee approved a base salary increase for Mr. Boyle, which brought his base salary to 97.8% of the midpoint of the competitive range for his position. In addition, the Compensation Committee approved a special base salary adjustment of  $16,000, which brought his base salary to 101.0% of the midpoint of the competitive range for his position.

The Compensation Committee increased Mr. Velazquez’s 2013 base salary by 3.09%. In approving the base salary increase for Mr. Velazquez, the Compensation Committee noted the following:

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his continued efforts to execute plans to improve and enhance reliability and customer service;

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the achievement of key initiatives related to the implementation of the Smart Grid;

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his role in implementing a new billing and customer service information system for all of our utilities;

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his leadership and guidance in navigating storm restoration efforts primarily in New Jersey following Hurricane Sandy;

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his leadership in overseeing the utilities’ cybersecurity efforts; and

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The Compensation Committee also considered Mr. Velazquez’s key role in various regulatory proceedings and public meetings related to our utilities’ base rate cases and undergrounding initiatives in the District of Columbia. The Compensation Committee noted that Mr. Velazquez’s 2013 base salary was slightly below the midpoint of the competitive range for his position, but believed that an upward adjustment was appropriate in light of Mr. Velazquez’s significant contributions to the Company’s utility operations during 2013. In light of all of the foregoing considerations, the Compensation Committee recommended an increase that brought Mr. Velazquez’s 2014 base salary to 107.9% of the midpoint of the competitive range for his position.

The Compensation Committee noted Mr. Fitzgerald’s contributions in 2013 to improving regulatory processes throughout the Company, supporting the effort to pursue

undergrounding initiatives in the District of Columbia, and supporting the work related to the Company’s cross-border energy lease investments, and his support of Company-wide cultural initiatives within the legal department. Noting that Mr. Fitzgerald’s 2013 base salary was at 111.1% of the midpoint of the competitive range for his position, the Compensation Committee did not increase Mr. Fitzgerald’s base salary for 2014.

The Compensation Committee increased Mr. Huffman’s 2013 base salary by 1.31%. In approving the base salary increase for Mr. Huffman, the Compensation Committee noted that his 2013 base salary was slightly less than the midpoint of the competitive range for his position. The Compensation Committee also considered Mr. Huffman’s achievements in 2013, including:

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the improved financial performance for Pepco Energy Services;

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his leadership in continuing the wind-down of the Pepco Energy Services retail energy supply business;

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the growth of Pepco Energy Services’ underground transmission and distribution construction and maintenance business; and

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his leadership during the strategic review of Pepco Energy Services.

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In light of the foregoing considerations, the Compensation Committee recommended an increase that brought Mr. Huffman’s 2014 base salary to 98.2% of the midpoint of the competitive range for his position.

2015 Base Salary Determinations

To establish base salaries for 2015, and based on published compensation data obtained from PM&P, the Compensation Committee approved a merit budget increase equal to 3% of total base salaries, which it allocated among the executive group.

The Compensation Committee recommended to the independent directors that Mr. Rigby’s 2015 base salary be retained at the same level as in 2014, in accordance with the terms of the Employment Extension Agreement. In making this recommendation, the Compensation Committee reviewed compensation data for Mr. Rigby’s position for the Utility Peer Group provided by PM&P and noted that Mr. Rigby’s 2014 base salary was 98.1% of the median salary for his position.

The Compensation Committee also noted:

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Mr. Rigby’s strong performance in executing plans to improve and enhance reliability and customer service, and executing the Company’s business strategy, including regulatory, financing and Smart Grid initiatives; and

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Mr. Rigby’s leadership, evidenced by:

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his oversight of the Company through the Merger negotiation process with Exelon and others;

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regulatory strategy changes designed to obtain the requisite Merger approvals; and

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strategies implemented to continue to address improvements in reliability and customer satisfaction and enhanced regulatory relationships.

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In light of all of the foregoing, the Compensation Committee recommended to the independent directors that Mr. Rigby’s 2015 base salary be retained at the same level as for 2014, and the independent directors approved this recommendation.

The Compensation Committee increased Mr. Boyle’s 2014 base salary by 3.00%. The Compensation Committee found that Mr. Boyle’s 2014 base salary was slightly below the midpoint of the competitive range for his position. In approving the base salary increase for Mr. Boyle, the Compensation Committee noted his:

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performance in executing the Company’s strategic, financing and regulatory plans;

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efforts in leading the Merger financial analysis process and navigating the accounting and benefits implications of the Merger; and

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In light of this performance, the Compensation Committee approved an increase that brought Mr. Boyle’s base salary to 102.0% of the midpoint of the competitive range for his position.

The Compensation Committee increased Mr. Velazquez’s 2014 base salary by 2.81%. In approving the base salary increase for Mr. Velazquez, the Compensation Committee noted:

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his continued efforts in executing plans to improve and enhance reliability and customer service, including the District of Columbia power line undergrounding initiative;

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his involvement in implementation efforts related to the Company’s integrated customer information system;

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his efforts to advance the Company’s activities with respect to cybersecurity; and

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his key role in various regulatory proceedings and public meetings related to rate case filings and the Merger.

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The Compensation Committee noted that Mr. Velazquez’s 2014 base salary was above the midpoint of the competitive range for his position, but believed that, in light of Mr. Velazquez’s significant contributions to the Company’s utility operations during 2014, an upward adjustment was appropriate. As a result, the Compensation Committee approved an increase that brought Mr. Velazquez’s 2015 base salary to 108.7% of the midpoint of the competitive range for his position.

The Compensation Committee increased Mr. Fitzgerald’s 2014 base salary by 2.36%. The Compensation Committee found that Mr. Fitzgerald’s 2014 base salary was above the midpoint of the competitive range for his position. In approving the base salary increase for Mr. Fitzgerald, the Compensation Committee noted his performance during the year, including:

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his leadership of the Company’s legal department; and

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his oversight of several key legal initiatives, including:

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the Merger negotiation and transaction process; and

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In light of this performance, the Compensation Committee approved an increase that brought Mr. Fitzgerald’s 2015 base salary to 111.5% of the midpoint of the competitive range for his position.

The Compensation Committee increased Mr. Huffman’s 2014 base salary by 2.58%. In approving the base salary increase for Mr. Huffman, the Compensation Committee noted that his 2014 base salary was below the midpoint of the competitive range for his position. The Compensation Committee also considered Mr. Huffman’s achievements in 2014, including:

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the improved financial performance of Pepco Energy Services;

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the growth of its underground transmission and distribution construction business; and

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Mr. Huffman’s leadership of issues related to the Atlantic City economy and Pepco Energy Services’ thermal business.

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In light of the foregoing considerations, the Compensation Committee approved an increase that brought Mr. Huffman’s 2015 base salary to 98.3% of the midpoint of the competitive range for his position.

Annual Cash Incentive Awards under the EICP

Overview of the EICP

In 2014, the Company provided its executives, including the NEOs, with an opportunity to receive an annual cash incentive award under the EICP. For each participating executive, a target short-term incentive opportunity was established, which is equal to a percentage of the executive’s annual base salary. Each executive’s EICP opportunity percentage was determined by the Compensation Committee and was intended to place the executive’s total cash compensation opportunity (consisting of annual base salary and target annual incentive compensation) at a level approximating the midpoint of the competitive range for that position. Annual cash incentive awards were made under the EICP

to the extent performance goals established by the Compensation Committee are achieved.

The performance criteria used as the basis for awards and the specific targets can vary from year to year. The performance criteria can consist entirely, or be a combination, of financial and operational performance objectives for the Company as a whole or performance objectives for a particular business unit. Some executives also have individual performance objectives. The performance criteria and goals for the Company and the respective business units are selected to reward the executive for the achievement of targeted financial results and operational goals. Each executive’s goal allocation is designed to align the executive’s award opportunity with the executive’s management responsibilities. Generally, the financial targets are based on the Company’s annual financial plan. Other quantitative targets are set at levels that, in most cases, exceed the level of performance in prior years.

A payment of an award under the EICP may be made only if the performance goals for the award have been determined by the Compensation Committee to have been satisfied. Except with respect to executives who are covered by Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), the Compensation Committee retains the discretion to adjust awards under the EICP either up or down (up to 30%) taking into account such factors and circumstances as it determines to be appropriate. The Compensation Committee may not

adjust an award with respect to an executive covered by Section 162(m) of the Code if the adjustment would prevent such payment from being performance-based compensation as defined thereunder.

2014 EICP Award Opportunities

In 2014, each of the named executive officers was granted an opportunity to earn a cash incentive award under the EICP. Regardless of an executive’s performance, the award may not exceed 180% of the target award opportunity. The target award opportunity granted in 2014 under the EICP, as a percentage of annual base salary, for each of the eligible named executive officers was as follows:

These 2014 award opportunities are shown in the 2014 Grants of Plan-Based Awards table under the heading “Estimated Future Payouts Under Non-Equity Incentive Plan Awards.”

2014 EICP Award Payouts

Given the estimated strength of our 2014 business and financial performance, the Compensation Committee made a preliminary determination in December 2014 that the performance goals associated with the EICP would be met above the target level of achievement. To recognize the efforts, contributions and accomplishments of our executive team which led to this positive performance, the Compensation Committee approved the payment in December 2014 to our executives of 2014 EICP awards in amounts that reflected target level of performance (or, with respect to the energy services executives in Pepco Energy Services, performance at 75%). Such awards were subject to clawback to the extent that the target (or 75%) level of performance was not ultimately achieved.

To permit EICP payments to Messrs. Rigby, Velazquez, Fitzgerald and Huffman to continue to be deductible under Section 162(m) of the Code, on December 31, 2014, such named executive officers received shares of performance-based restricted stock under the 2012 LTIP in an amount equal to 100% of their target award opportunity under the EICP. Each such named executive officer’s restricted stock grant was to vest upon the determination by the Compensation Committee of the achievement of performance goals that were identical to those in that named executive officer’s EICP award opportunity.

In February 2015, the Compensation Committee determined that the 2014 EICP awards for the named

executive officers were earned at levels ranging from 109.5% to 140.8% based on the performance criteria set forth in these awards, and the amount of each EICP award that exceeded target was paid to each executive in cash. The shares of restricted stock granted to Messrs. Rigby, Velazquez, Fitzgerald and Huffman vested in February 2015 in full in accordance with the Compensation Committee’s final determination regarding the satisfaction of the performance goals.

The Compensation Committee made the following final award decisions based on 2014 performance with respect to the 2014 award opportunities under the EICP for Messrs. Rigby, Boyle and Fitzgerald:

The award decisions based on 2014 performance with respect to the 2014 EICP award opportunity of Mr.  Velazquez were as follows:

The award decisions based on 2014 performance with respect to the 2014 EICP award opportunity of Mr. Huffman were as follows:

These awards are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

Stock-Based Awards Under the 2012 LTIP

Overview

During 2014, we granted stock-based awards to our executives under the 2012 LTIP. The purpose of the 2012 LTIP is to align executive compensation with Company performance and increases in stockholder value.

The Compensation Committee adopted a target long-term stock-based award opportunity for each executive officer that is a percentage of the executive’s salary and is designed to place the executive’s total direct compensation opportunity (consisting of salary, target annual cash incentive compensation and target stock-based compensation, other than awards granted to Messrs. Rigby and Fitzgerald in connection with the Original Employment Agreement and Mr. Fitzgerald’s employment agreement, respectively (collectively, the Employment Agreement Awards)) at a level targeting market median practices.

Excluding the Employment Agreement Awards, the target level of long-term stock-based compensation as a percentage of salary for each of the named executive officers in 2014 was as follows:

Excluding the Employment Agreement Awards, two-thirds of an executive’s target long-term stock-based award opportunity for 2014 was granted in the form of a performance-based RSU award to vest to the extent that performance criteria are achieved at the end of a three-year performance period and the executive generally remains continuously employed with us during that period. The remaining one-third of the executive’s long-term stock-based award opportunity was in the form of a time-based RSU award to vest, subject to the terms of the award agreement and the 2012 LTIP, three years from the date of grant.

The primary objectives of the performance-based RSU awards were to reward the executive for the Company’s performance, align his or her financial interests with the long-term interests of the Company’s stockholders, and retain the executive. The primary objective of the time-based RSU awards was executive retention.

Each RSU entitles the holder, beginning on the date of grant, to receive one share of common stock at the end of

the restriction or performance period (and to the extent any performance goals have been satisfied). During the restriction or performance period, an executive does not own any shares of common stock and cannot vote or receive dividends upon the shares underlying the award. The RSU awards generally are subject to forfeiture, subject to certain exceptions, if the employment of the executive terminates before the end of the restriction or performance period.

Our 2014 annual long-term RSU awards were granted with dividend equivalents. When we pay a dividend on our common stock during the period, the executive will be credited with additional RSUs having a fair market value equal to the number of his or her then outstanding RSUs multiplied by the per share amount of the dividend. These additional RSU credits will vest or be forfeited in proportion to the vesting of the underlying award. The Compensation Committee decided to credit dividends in this way so that the executive will only receive the benefit of dividends if an award is earned.

During 2014, the Compensation Committee granted annual long-term stock-based awards during the first 90 days of the year, so that the Company may provide these awards to executives and establish performance goals at or relatively close to the beginning of the applicable retention period or performance cycle. This timing also permits any payments to be made under performance-based awards to comply with applicable requirements for “performance-based compensation” under Section 162(m) of the Code.

The Compensation Committee has granted, and may continue to grant in accordance with past practice, supplemental long-term stock-based awards under the 2012 LTIP at other times of the year as it deems necessary or desirable to reflect new executive hires, promotions, increases in an executive’s responsibility and other compensatory circumstances as determined by the Compensation Committee. Our current practice is to provide that supplemental awards vest on the same date as the annual awards granted during that year.

We also have granted to Messrs. Rigby and Fitzgerald the Employment Agreement Awards, which are discussed in more detail below. These awards have different terms than the annual RSU grants.

If the Merger is completed, the Merger Agreement provides for terms of the vesting or settlement of outstanding awards under the 2012 LTIP (or its predecessor) that may be different from the vesting or settlement terms otherwise described herein. See “— Termination of Employment and Change in Control Benefits — 2012 Long-Term Incentive Plan” for a description of how these awards would vest or settle if the Merger is completed.

Annual Performance-Based RSU Awards

Grants of RSU Awards for 2014 to 2016 Performance Period

For performance-based awards granted under the 2012 LTIP for the three-year performance period beginning on January 1, 2014, the Compensation Committee utilized relative TSR as the sole performance goal. TSR for the 2014 to 2016 performance period is the sum of:

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the positive or negative change in the price of the Company’s common stock relative to that of the companies in the 2014 Utility Peer Group, calculated using as a starting price the average daily closing price per share during the fourth quarter of 2013 and as an ending price the average daily closing price per share during the fourth quarter of 2016; and

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the aggregate amount of dividends paid over the three-year period.

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The following table shows the percent of the target award that will be earned by a named executive officer based on relative TSR:

In addition, if the Company’s TSR over the three-year period is negative, the payout will be capped at 100% of target, even where the Company’s performance compared to the 2014 Utility Peer Group otherwise allows an award in excess of 100% of the target.

Awards will be prorated when performance falls between the specified levels. For example, for performance at the 62nd percentile, the award would be 125% of target. If, during the course of the three-year performance period, a significant event occurs, as determined in the sole discretion of the Compensation Committee, that the Compensation Committee expects to have a substantial effect on the relative TSR performance objective during the period, whether related to the Company or one or more companies in the 2014 Utility Peer Group, the Compensation Committee may revise the performance objective (except with respect to an award to a “covered employee” as defined under Section 162(m) of the Code).

The Compensation Committee believes relative TSR balances the named executive officer’s overall incentive pay opportunities between goals for Company performance and the Company’s financial performance in relation to the Utility Peer Group, and is representative of current compensation design trends and peer group practices.

For further information on the performance-based awards granted to each NEO in 2014, see the 2014 Grants of Plan-Based Awards table.

Payout of RSU Awards for 2012 to 2014 Performance Period

The Compensation Committee determined the payouts for LTIP awards for the 2012 through 2014 performance period based on the extent to which the performance goal for the award was satisfied. The Compensation Committee determined that relative TSR as calculated under the terms of those awards was at approximately the 71st percentile, and as a result, 141.2% of the target amount of each award was earned. The payment of these awards on December 31, 2014 was effected to mitigate the impact on the Company and its executives of the provisions of the Code related to excess parachute payments; however, the amount of these award payments was unchanged.

Performance-Based Employment Agreement Awards — Mr. Rigby

Overview

Pursuant to the terms of the Original Employment Agreement, Mr. Rigby was entitled to receive a series of three annual performance-based RSU awards, each in the amount of 36,945 RSUs, over the term of the Original Employment Agreement. Each award had a performance period equal to the calendar year in which the award was granted. The vesting of each of these awards was contingent upon Mr. Rigby’s continued employment during the performance period and achievement of the performance goals that were established for the award within 90 days after the beginning of the performance period. For more information, see “— Executive Compensation — Employment Agreements — Joseph M. Rigby.”

The last of these performance-based Employment Agreement Awards was granted to Mr. Rigby under the 2012 LTIP on February 27, 2014 and covered the performance period of January 1, 2014 through December 31, 2014.

Reasons for Award

In executing their responsibilities on behalf of our stockholders, the Compensation Committee and the independent members of the Board believe that this award significantly enhanced the pay-for-performance robustness of our long-term incentive program for the following reasons.

First, the Compensation Committee selected performance criteria for this award that it generally believed to be objective and quantitative. Many of these performance

criteria consist of measurable metrics applicable to our utility subsidiaries through established law, regulations or orders, as well as determinations made by third parties. As was the case in 2013, the Compensation Committee included a one-year relative TSR component for this award. For 2014, the weight of this component was increased from 25% to 50% of the total potential payout for this award. Each of these objective criteria was reviewed by PM&P, the Compensation Committee’s independent compensation consultant. Actual utility performance, which is driven by Mr. Rigby’s leadership, was then measured against these objective numerical metrics to determine whether and the extent to which the performance-based award was earned.

Second, in addition to being quantitatively and objectively measurable, the Compensation Committee and the independent directors believed that the performance criteria (other than relative TSR) addressed operational and regulatory goals that were critical for us to meet both in the context of our base rate cases and in discussions about executive compensation with regulators and our customers. As noted, the operational performance criteria above directly supported key components of our plan to obtain positive rate case outcomes and achieve improvements in our relations with public service commissions, both of which we believed were critical to stockholder value.

Third, the award and its performance criteria were approved by the Compensation Committee to support our long-term financial health and our stockholders’ long-term interests. For example, a significant portion of the performance criteria (in terms of the percentage of this award that could be earned) was based on the reliability of electric service to customers and residential customer satisfaction, all of which are key drivers of long-term performance in the utility industry. A third goal, relative TSR, was used to directly align another 50% of the potential payout under this award with our stockholders’ interests.

While the award’s performance period was measured over the span of one year, the Compensation Committee believed that this period was appropriate because the specific numerical metrics utilized by regulators are also annual metrics. Prior to the initial execution of the Merger Agreement in April 2014, we had been filing rate cases annually in an attempt to mitigate regulatory lag. As a result, we had been able to report our progress in these areas to the public service commissions on a yearly basis. The award’s one-year period was originally aligned with our then regulatory reporting strategy and assessment plans, as well as with how our public service commissions viewed our operational goals.

Moreover, the Compensation Committee intended for these awards to serve collectively as a long-term reward,

rather than as short-term incentives. The performance-based goals have been set with increasing levels of difficulty, which seek to reward Mr. Rigby for continual progress in the Company’s improvement over time in areas that we believed have the greatest impact on increasing long-term stockholder value and were the most critical to our success.

Additionally, the performance-based awards were designed so that no shares of common stock will be issued to Mr. Rigby under the vested portion of any of these awards until his employment with the Company terminates. This requirement further supported the intention of the Compensation Committee and the independent directors to provide Mr. Rigby with compensation that was tied to the Company’s long-term financial health and success. This limitation provided a powerful and continuing incentive for Mr. Rigby to increase the value of the Company’s stock over the three-year term of the Original Employment Agreement.

The Compensation Committee and the Board believed that these performance-based awards work together with our EICP award opportunities and the annual stock-based compensation under the 2012 LTIP as a cohesive unit to achieve our compensation philosophy. We believed that the various metrics combined serve to reward Mr. Rigby for excellence in different areas, which were critical to our long-term success. While Mr. Rigby’s EICP award

opportunity and his 2014 performance-based award feature residential customer satisfaction and system reliability as performance criteria, the common metrics recognize the significance that the public service commissions and our customers place on them and our ability to achieve them. The Compensation Committee believed that both our cash and stock-based incentive programs must explicitly support these critical operational goals. Having both cash-based short-term and stock-based long-term incentive compensation tied to these goals showed both the public service commissions and our customers that our compensation structure was also aligned with their goals.

Finally, this award did not serve to isolate or insulate Mr. Rigby from the cash incentive and annual stock-based incentive opportunities to improve earnings and TSR. Mr. Rigby’s 2014 EICP award opportunity was heavily weighted toward the achievement of the Company’s earnings goal. The EICP award was supplemented by this performance-based award, which rewarded Mr. Rigby largely for the Company’s regulatory and operational achievements, as well as relative TSR, in significant part. In the industry in which we operate, we believed that our stockholders’ interests were much better served by granting awards with measurable performance criteria designed to satisfy and exceed applicable regulatory requirements as supplements to traditional earnings and TSR measures.

In February 2015, the Compensation Committee determined that 98% of Mr. Rigby’s 2014 performance-based award was earned. The table below explains and analyzes the Compensation Committee’s determinations and outcome with respect to each of the performance goals under this award.

Performance-Based Employment Agreement Awards — Mr. Fitzgerald

Overview

Pursuant to the terms of his employment agreement with the Company, on March 28, 2014, Mr. Fitzgerald received the second of a series of three annual performance-based Employment Agreement Awards under the 2012 LTIP. The vesting of each of these Employment Agreement Awards is contingent upon Mr. Fitzgerald’s continued employment during each annual performance period and achievement of the performance goals established for the performance period covered by the award. The performance criteria and goals for these awards are established at or near the beginning of the performance period. For more information, see “—Executive Compensation — Employment Agreements — Kevin C. Fitzgerald.”

Reasons for Award

The Compensation Committee believed that this award generally supported our pay-for-performance philosophy of our long-term incentive program. The majority of the performance criteria described below is directly tied to regulatory and operational initiatives, which we believed directly support our long-term financial health and stockholder value. While the three one-year performance-based awards were granted in the context of Mr. Fitzgerald joining PHI in September 2012, we believe that the purpose and effect of these awards are substantially similar to those of the awards granted to Mr. Rigby.