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For Immediate Release


Pepco, SMECO Revise Electricity Contract

FOR IMMEDIATE RELEASE  Media Contacts:  Nancy Moses -- Pepco  
January 4, 1999  202-872-2680 
  Ann Knott or Jan Penn -- SMECO 
  Investor Relations: Ernie Bourscheid -- Pepco 

Pepco, SMECO Revise Electricity Contract

Southern Maryland Electric Cooperative (SMECO) and Potomac Electric Power Company (Pepco) today announced they have agreed to revise their contractual relationship in light of competition in the electricity industry.

Under a new arrangement that is subject to acceptance by the Federal Energy Regulatory Commission, Pepco will continue as SMECO`s sole energy supplier for up to three more years. SMECO will gain early access to the wholesale power market, and Pepco will be fairly compensated for its pre-existing, long-term contractual rights.

SMECO has purchased electricity from Pepco since 1945 under numerous contracts of varying lengths. Under the previous contract, which provided for annual renewals of its 10-year term, Pepco supplied all of SMECO`s wholesale power requirements, and, under certain conditions, SMECO could give Pepco notice that it wished to pursue other energy options.

SMECO President I. Wayne Swann and Pepco President and Chief Executive Officer John M. Derrick Jr. referred to the agreement, which began January 1, 1999, and will expire on or before December 31, 2001, as a new chapter in a long and mutually beneficial relationship between these two companies.

"We wanted earlier access to the wholesale power market than was possible under the previous 10-year contract," Swann said, "and Pepco was willing to accommodate us as long as we recognized the company`s contractual rights. It`s a win-win solution that allows us both to go forward in the new marketplace."

"We`ve always worked cooperatively with SMECO," Derrick said. "This arrangement provides us with needed flexibility as we enter a new era of electricity competition and provides us both with a smooth and amicable transition."

SMECO is an electric distribution cooperative that serves 1,150 square miles in Southern Maryland. Pepco is an investor-owned electric utility serving the District of Columbia and surrounding Maryland suburbs.


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Point of Contact:
Camille Smith

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