PEPCO Reports Third Quarter Earnings

Earnings

Potomac Electric Power Company today reported consolidated earnings per share of $1.27 for the three months ended September 30, 1998, compared with earnings per share of $1.11 for the same period in 1997. For the nine- and 12-month periods ended September 30, 1998, consolidated earnings per share were $1.78 and $1.51, respectively, compared with earnings per share of $1.66 and $1.72 for the corresponding periods in 1997.

Consolidated earnings per share include a 2 cent per share reduction for the three months ended September 30, 1998, and a 4 cent per share reduction for the nine- and 12-month periods ended September 30, 1998 associated with the Company`s targeted employee severance plan. Earnings for the nine- and 12-month periods ended September 30, 1998 also include a 6 cent per share 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.

Consolidated earnings per share for the 12 months ended September 30, 1998, include 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

Kilowatt-hour sales increased 7.1 percent, 3.7 percent and 3.4 percent for the three-, nine- and 12-month periods ended September 30, 1998, respectively, compared with the corresponding periods in 1997. Although the temperature in the second and third quarters of 1998, as measured in cooling degree hours, was 18 percent hotter than the corresponding periods in 1997, it was nevertheless 7 percent cooler than

PCI Results

Consolidated earnings for the three-, nine- and 12-month periods ended September 30, 1998, reflect a contribution of 3 cents, 14 cents and 15 cents per share, respectively, from PEPCO`s wholly-owned, nonutility subsidiary, Potomac Capital Investment Corporation (PCI). In the corresponding periods in 1997, PCI contributed 1 cent, 13 cents and 14 cents, respectively.

Results from operating were:

	Three Months Ended September 30		Six Months Ended September 30		Twelve Months Ended September 30
	1998	1997	1998	1997	1998	1997
Basic Earnings (Loss) Per Share:
Utility Operations	$1.26	$1.10	$1.74	$1.53	$ 1.74	$1.58
Preferred Stock Redemption Premium	-	-	(.06)	-	(0.06)	-
Severance Costs	(.02)	-	(.04)	-	(0.04)	-
Write-off of Merger Costs	-	-	-	-	(.28)	-
	--------	-------	-------	-------	-------	-------
Net Utility Operations	1.24	1.10	1.64	1.53	1.36	1.58
Nonutility Subsidiary	0.03	0.01	0.14	0.13	0.15	0.14
Consolidated	$1.27	$1.11	$1.78	$1.66	$1.51	$1.72

Diluted Earnings (Loss) Per Share:
Consolidated	$1.23	$1.07	$1.73	$1.62	$1.49	$1.69

Average Commom Shares Outstanding
Basic	118,527,000	118,501,000	118,522,000	118,500,000	118,517,000	118,500,000
Diluted	124,245,000	124,292,000	124,244,000	124,292,000	124,256,000	124,305,000

Operating Revenue	$670,197,000	$618,218,000	$1,519,408,000	$1,432,259,000	$1,897,978,000	$1,804,782,000

Total Revenue	$750,776,000	$633,042,000	$1,659,684,000	$1,473,073,000	$2,050,121,000	$1,886,786,000

Operating Income	$186,000,000	$166,500,000	$317,613,000	$289,342,000	$353,654,000	$332,149,000

Net Earnings (Loss) from
Nonutility Subsidiary	$3,777,000	$875,000	$16,239,000	$15,781,000	$17,539,000	$16,274,000

Net Income (Loss)	$153,100,000	$135,985,000	$226,601,000	$209,091,000	$199,340,000	$220,377,000

Earnings (Loss) for Common Stock	$151,092,000	$131,828,000	$210,479,000	$196,652,000	$179,078,000	$203,782,000