Pepco's (NYSE:POM) shareholders were treated to some invigorating earnings results on Friday. The Mid-Atlantic power supplier flipped the switch for the first quarter of 2004 and posted earnings of $51.2 million, or $0.30 a share. This was a real recharge after the company was zapped with a $24.9 million loss, or $0.15 per share, the same quarter the year before. That's quite an earnings reversal and it begs the question: What changed?

Well, for starters, Pepco's first quarter last year reflected the loss of a contract for the delivery of four combustion turbines. Poof, there went $31 million. What's more, the company lost almost $27 million in that quarter as the result of "net energy trading losses prior to the cessation of proprietary trading" according to its press release.

The brass at Pepco made it known that the most recent quarter reflects "more normal operating results." However, one other nugget of interest here is the fact that Pepco benefited from tax regulations that became effective in Feb. 2004 and were retroactive to 2001. This allowed Pepco to inflate earnings by $0.07 a share in this year's first quarter.

Now, the stellar results seem to have a bit more perspective. Another telling piece of information to consider is revenue for the current quarter and its 2003 counterpart. For the current quarter, operating revenue clocked in at $1.8 billion. Surprisingly, for the same quarter in 2003, operating revenues were $1.9 billion. Increased earnings without increased revenue should throw up a red flag.

While the current quarter's earnings certainly look good, they aren't a reason to accept the results without considering other factors. It remains to be seen whether Pepco can increase revenues and post solid earnings in the future, especially compared to quarters where the company has not suffered from unusual losses. Fools should also take note that Pepco will not be able to expect future tax regulation benefits to the tune of $0.07 a share.

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Fool contributor Jason Matthews could use some pep when he competes in his first triathlon in June. He owns no shares of the company discussed in this article.