For Immediate Release

May 21, 1999

Potomac Electric Power Company (NYSE: POM) today announced a reorganization of its non-regulated subsidiaries into two major operating groups to aggressively compete for new market share in the telecommunication, electric, natural gas and energy services industries.

"The move to give customers a choice of energy and telecommunication suppliers provides an unprecedented opportunity for Pepco through its subsidiaries to significantly expand our business, customer base and shareholder value. Accordingly, we are taking the necessary steps to focus our subsidiaries as they expand beyond our traditional utility service territory," said Dennis R. Wraase, Pepco's Executive Vice President and Chief Financial Officer.

As part of the reorganization, a new unregulated company, Pepco Holdings, Inc., was created as the parent of Potomac Capital Investment Corp. and Pepco Energy Services, Inc.

John McCallum, 49, was promoted to Chief Executive Officer and President of Potomac Capital Investment Corp. The PCI group of companies, which includes Pepco Communications, Pepco Enterprises, Inc., and various PCI financial investment companies, are responsible, respectively, for telecommunications services, utility industry services, and numerous financial investments. PCI also is an equal partner with RCN Corp. of Princeton, N.J. in Starpower Communications, a provider of telephone, cable TV and high-speed Internet access to customers in the District of Columbia, Maryland and Northern Virginia.

Edward R. Mayberry, 51, was promoted to Chief Executive Officer and President of Pepco Energy Services, Inc., a newly created company that will serve as the parent for Pepco Services and Pepco Connections, as well as three other newly organized companies to be known as Pepco PowerChoice, Pepco Building Services and Pepco Gas Services. This group of companies will market energy products (electricity and natural gas) and services (including energy efficiency contracting, consulting services, construction management, and facilities operation and maintenance) to current Pepco customers and to businesses and institutions throughout the mid-Atlantic region.