PEPCO Reports First Quarter Earnings
Unusually Mild Weather Impacts Results

        Addressing PEPCO`s Annual Meeting of Shareholders today, President and Chief Executive Officer John M. Derrick, Jr., announced consolidated earnings per share of 3 cents for the first quarter ended March 31, 1998, compared with 16 cents for the period in the previous year.

        For the quarter, unusually mild weather had a significant impact on kilowatt-hour sales and consequently on earnings results. As measured in heating degree days, the winter weather was 17 percent warmer than the 20-year average and 4 percent warmer than in 1997. As a result, kilowatt-hour sales decreased 2 percent from the corresponding quarter in 1997.

        Consolidated earnings for the first quarter of 1998 reflect a loss of 2 cents per share from utility operations and a contribution of 5 cents per share from PEPCO`s wholly owned, non-utility subsidiary Potomac Capital Investment Corporation (PCI). In the same period in 1997, utility operations earned 5 cents per share and the subsidiary contributed 11 cents per share. The difference in the subsidiary contribution was due to the timing of sales of various assets.

Results from operations were:

Twelve-month Period

        For the 12 months ended March 31, 1998, kilowatt-hour sales were unchanged from sales in the 12-month period ended March 31, 1997. In the period ended in 1998, utility earnings per share were $1.46 excluding the one-time 28-cent per share write-off of costs related to the proposed merger with Baltimore Gas and Electric Company that was canceled in December 1997. This compares with $1.69 per share earned in the corresponding period ended March 31, 1997. Affecting utility earnings for the current twelve-month period were unrecovered costs in 1997 of a purchased-power contract, a $7.3 million reduction in the incentive award in 1997 in Maryland for the Company`s demand-side management programs, and increases in operating and maintenance expenses. Sales during both twelve-month periods were affected by unusually mild weather, and the current twelve month period ended March 1998 reflects only a portion of the $24 million rate increase that became effective in Maryland in November 1997.

        The 8-cent per share contribution to consolidated results from PCI compares with 24 cents per share from the same period in the previous year. This difference primarily results from the timing of transactions.

        Quarterly dividends will be considered at the Board of Directors meeting immediately following the conclusion of the Annual Meeting of Shareholders.