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For Immediate Release

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Pepco Seeks Change in Maryland Delivery Rates

WASHINGTON - Pepco today asked the Maryland Public Service Commission (PSC) to authorize an increase in electricity distribution rates in Maryland, the first delivery rate increase in nearly a decade.  If approved, the change would add about 3.9 percent to monthly residential electric bills. The typical bill for a Standard Offer Service residential customer using 1,000 kilowatt-hours a month would increase $5.33 from $135.94 to $141.27.

The proposed increase, a total of $55.7 million, reflects ever increasing costs since the mid-1990s to maintain the poles, wires and critical high-tech equipment of the electric distribution system.  The increase also would be used to improve reliability and support investment in new technology to keep pace with growth and increasing customer demand for power. At the proposed rate levels, Pepco's distribution rates still will be below the 1998 levels in inflation-adjusted terms.

Customers have benefited from stable electric delivery rates for nearly a decade while Pepco's costs have continued to increase and the Consumer Price Index has recorded inflation of about 24 percent. In just the last three years, for example, the cost of transformers has more than doubled, and the cost of electric cable jumped 85 percent.

"We have worked hard to hold down operating expenses without sacrificing reliable service," says Thomas H. Graham, President of Pepco Region.  "We recognize the strain that the higher supply costs have put on our customers in recent years and are doing all we can to keep our distribution rates as low as possible. But inflation and higher costs for wages, materials and new technology to improve service make it imperative that distribution rates reflect the current cost of providing safe and reliable service."

Distribution rates are separate from electric supply rates. Supply rates adjust annually to reflect the cost of power that Pepco buys on behalf of its Maryland customers who do not contract with an alternative supplier.  Customers who buy their electricity from a competing supplier will see the same increase in distribution rates, but their new total monthly bill will depend on the per-kilowatt-hour price charged by their supplier.

Supply costs are driven primarily by the cost of fuel to make electricity and were largely responsible for the increase in supply rates earlier this year for Maryland customers.  

If approved by the PSC, the new delivery rate for Maryland customers would become effective in the middle of June 2007.

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Pepco, a subsidiary of Pepco Holdings, Inc. (NYSE: POM), delivers safe, reliable and affordable electric service to more than 745,000 customers in Maryland and the District of Columbia.

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; availability and cost of capital; changes in laws, regulations or regulatory policies; 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.  PHI 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 PHI.

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