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For Immediate Release

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Pepco Seeks Change in D. C. Delivery Rates

WASHINGTON - Pepco today asked the D.C. Public Service Commission (PSC) to authorize an increase in electricity distribution rates in the District of Columbia, the first delivery rate increase in more than a decade. If approved, the change would add about 7.79 percent to monthly residential electric bills. The typical bill for a Standard Offer Service residential customer using 750 kilowatt-hours a month would increase $5.97, from $76.64 to $82.61.

The proposed increase, a total of $50.5 million, reflects ever increasing costs since the mid-1990s to maintain the poles, wires and critical high-tech equipment of the electric distribution system. 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. The proposed 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.

Customers have benefited from stable electric delivery rates for more than a decade while Pepco's costs have continued to increase during this same period.  The Consumer Price Index has recorded inflation of about 32 percent during this same period as well. At the proposed rate levels, Pepco's distribution rates still would be below the 1995 levels in inflation-adjusted terms.

"Our objective is to provide safe and reliable electric service while keeping operating expenses as low as possible," says Thomas H. Graham, President of Pepco Region.  "The increase we are requesting now is necessary for us to keep up with inflation and technology improvements necessary to continue to provide quality service for our customers."

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 customers who do not contract with an alternative 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 District customers. If approved by the PSC, the new delivery rate for District customers should, under the Commission's policy, become effective in September 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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