For Immediate Release
January 12, 2000

Potomac Electric Power Company (NYSE: POM) today announced the beginning of the yearlong auction process by which the company will sell its electric generating facilities. The generation assets offered for sale total 5,320 megawatts of capacity in four fossil-fuel power plants and the company`s 10 percent share in a Pennsylvania plant. Six purchased-power contracts totaling 735 Mw are also for sale.

"Pepco`s generating assets are low-cost, high efficiency operations with dual-fuel capability," said Bill Sim, Group Vice President-Generation. "Their location also is attractive to prospective buyers who want to sell directly into the densely populated power markets of the Mid-Atlantic, Northeast, Midwest and Southeast."

The estimated book value of the assets is $1.8 billion.

Pepco announced early last year that it would exit the generation business to focus on delivering electricity into the newly deregulated energy markets and sell new products and services from its subsidiaries. The Public Service Commissions of the District of Columbia and Maryland approved Pepco`s divestiture plan last month.

The company began the two-stage auction process with the mailing this week of "early interest" letters to about 2,000 potential bidders. Initial bids are expected to be due in March. The number of bidders then will be narrowed, with the winner or winners selected in June. Closing on the sale is expected by the end of the year.

Prospective buyers can bid on any or all of Pepco`s generating assets and purchased-power contracts. The power plants include:

• Chalk Point Generating Station, 2,423 Mw, located on the Patuxent River in Prince George`s County, Md.;

• Dickerson Generating Station, 837 Mw, located on the Potomac River in Montgomery County, Md.;

• Morgantown Generating Station, 1,412 Mw, located on the Potomac River in Charles County, Md., and

• Potomac River Generating Station, 482 Mw, located on the Potomac River in Alexandria, Va.

• Pepco`s 10 percent share (166 Mw) in the Conemaugh Power Plant near Johnstown, Pa.

Also included in the auction is a 140,000 square foot central generation maintenance and office facility in Forestville, Md.

In addition, while the company is retaining ownership in two oil-fired plants located in the District of Columbia, it is seeking bids for operating agreements for the plants.

Pepco`s generating assets are maintained and operated by a skilled and experienced work force of about 1,000 employees that the company will actively market to bidders.

Pepco has retained Navigant Consulting to head the auction team. Merrill Lynch is the financial advisor.

Pepco is an investor-owned utility that provides electricity in Washington, D.C. and the Maryland suburbs, serving nearly 700,000 customers. Pepco, through its family of unregulated subsidiaries, also offers electric energy, natural gas, high-speed Internet access, local and long distance telephone, cable television and energy management services in the mid-Atlantic region.

Information contained in this press release may include forward-looking statements, which should be considered in light of the risks inherent in the company`s business, as discussed in the company`s public documents filed with the Securities and Exchange Commission.