Pepco Reports Second-Quarter Earnings

Thursday, July 25, 2002

Conference Call Scheduled
Dividend on Preferred Stock Declared

For Immediate Release
July 25, 2002

Potomac Electric Power Company (NYSE: POM) today reported consolidated second-quarter earnings for the period ended June 30, 2002 of $45.7 million, or 43 cents per share, on operating revenues of $593.8 million. These results, which are in line with management`s expectations, compare with consolidated earnings of $48.2 million, or 45 cents per share, on operating revenues of $622.5 million in the same period a year ago.

Per-share earnings for the 2002 second quarter include 36 cents from utility operations and 7 cents per share from the utility’s wholly owned subsidiary, POM Holdings, Inc. For the same quarter last year, Pepco earned 42 cents per share from utility operations and 3 cents per-share from POM Holdings. Potomac Capital Investment Corporation (PCI) and Pepco Energy Services (PES) are wholly owned subsidiaries of POM Holdings. The decrease in utility second quarter per-share earnings was due primarily to increased customer migration to alternative energy suppliers.

Consolidated earnings for the six-month period ended June 30, 2002 were $69 million, or 64 cents per share, on consolidated operating revenues of $1.1 billion, compared to consolidated earnings of $111.9 million, or $1.02 per share, on consolidated operating revenues of $1.2 billion in the same period last year. The six-month earnings in 2001 included a one-time, after-tax gain of $22.4 million, or 21 cents per share, primarily as a result of the sale of the company`s interest in a Pennsylvania generating plant. With normalized sales, utility year-to-date 2002 earnings per share would have been approximately 6 cents higher.

Preferred Dividend Declared

Dividends on preferred stock were declared payable Sept. 1, 2002, to shareholders of record on Aug. 5, 2002. A special dividend of $.00271739 per day per share of common stock for the period from July 1, 2002, through and including the day preceding the effective time of the merger had been previously declared in connection with Pepco`s planned merger with Conectiv, a Wilmington, Del.- based utility serving customers in parts of Delaware, Maryland, New Jersey and Virginia. The $.00271739 per day rate applied to the entire quarter equals 25-cents per share. The special dividend is payable only if the merger occurs during the third quarter to shareholders of record at the close of business on the day preceding the effective time of the merger. This special dividend will be paid within 10 business days after the merger is consummated.

Conference Call for Investors

Pepco will host a conference call to discuss second-quarter results on Friday, Aug. 2, 2002 at 9 a.m. EDT. Individual investors, members of the news media and other interested parties may access the conference call "live" on the Internet at http://www.pepco.com or by telephone at (212) 346-0205. A taped replay of the conference call will be available at 11 a.m. EDT and will remain available through 11 a.m. on Aug. 9, 2002. To hear it, call (800) 633-8284 or (402) 977-9140 and enter access code 20767088. An audio archive also will be available on Pepco`s Web site.

About Pepco: Pepco is an investor-owned utility that delivers electricity in Washington, D.C., and the Maryland suburbs to more than 700,000 customers. Through its family of subsidiaries, Pepco also operates in the mid-Atlantic region in the competitive arenas of diversified energy products and services and telecommunications.

Forward-Looking Statements: Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law. These statements contain management`s beliefs based on information currently available to management and on various assumptions concerning future events. Forward-looking statements are not a guarantee of future performance or events. They are subject to a number of uncertainties and other factors, many of which are outside the company`s control. Factors that could cause actual results to differ materially from those in the forward-looking statements herein include general economic, business and financing conditions; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors. These uncertainties and factors could cause actual results to differ materially from such statements. Pepco disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results and prospects of Pepco.

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Note: Year to date per share amounts contained in the attached Earnings Per Share Detail are not the cumulative earnings per share totals of all quarterly amounts due to the impact on earnings per share from the number of shares outstanding for the year to date period.

Attachments Containing Earnings Per Share Detail,
Consolidated Quarterly and Six Months Ended Results,
and Selected Financial Information.

Point of Contact:
Robert Dobkin