Pepco Reports Third Quarter Earnings

For Immediate Release
October 15, 1999

Results of Operations
Potomac Electric Power Company today reported consolidated earnings per share of $1.28 for the three months ended Sept. 30, 1999, compared with earnings per share of $1.27 for the same period in 1998. For the nine-and 12-month periods ended Sept.30, 1999, consolidated earnings per share were $2.10 and $2.08, respectively, compared with earnings per share of $1.78 and $1.51 for the corresponding periods in 1998.

Consolidated earnings per share for the nine- and 12-month periods ended Sept. 30, 1999, include 12 cents as the net effect of a contract termination fee to be received from Southern Maryland Electric Cooperative, Inc. (SMECO) in January 2001 under an agreement that became effective Jan. 1,1999. The contract termination fee compensates Pepco for future earnings that would have been received under the previous 10-year full-service power supply requirements contract. In addition, Pepco Energy Services, a wholly owned unregulated subsidiary of Pepco Holdings, Inc, signed a four-year agreement commencing Jan. 1, 2001, to meet SMECO`s power requirements.

Consolidated earnings per share for the nine- and 12-month periods ended Sept. 30, 1998 included a 6-cent reduction for premiums paid in connection with the June 1, 1998, redemption of 2.3 million shares of serial preferred stock. The redemption was funded through issuance of Trust Originated Preferred Securities that will result in an annual after-tax cost reduction of approximately $3 million, or about 3 cents per share. Consolidated earnings per share also included a 2-cent reduction for the three months ended Sept. 30, 1998, and a 4-cent per share reduction for the nine- and 12- month periods ended Sept. 30, 1998 associated with Pepco`s targeted employee severance plan.

Additionally, consolidated earnings per share for the 12-month period ended Sept. 30, 1998, included the effects of a one-time write-off of 28 cents per share for costs related to the proposed merger with Baltimore Gas and Electric Company that was canceled in December 1997.

Utility Results
Results for the three, nine- and 12- months ended Sept. 30, 1999, were affected by increases of 2.8, 2.7, and 1.5 percent in kilowatt-hour sales, respectively, compared with the corresponding periods in 1998. The increases in sales reflect 1999 summer temperatures that were 7 percent hotter, as measured in cooling degree hours, than the corresponding period in 1998. Temperatures in the first quarter, as measured in heating degree-days, were 15 percent colder than the corresponding period in 1998.

Pepco Holdings, Inc. Results
Consolidated earnings for Pepco Holdings, Inc., formerly Potomac Capital Investment Corporation, reflect 3 cents lower, 6 cents higher, and 4 cents higher earnings for the three-, nine- and 12-month periods ended Sept. 30, respectively. These differences in the subsidiary contributions were mainly due to the timing of transactions.