For Immediate Release
April 27, 2000

Potomac Electric Power Company (NYSE: POM) today announced that, as an early step in the implementation of its strategy for success following the divestiture of its generation business, the company's Board of Directors has approved a common stock repurchase of up to $200 million.

"We are now far enough along in the divestiture process that we feel it's appropriate to implement this aspect of our post-divestiture strategy," said Pepco Chairman, President and Chief Executive Officer John M. Derrick, Jr. "The management and Board of Directors believe that the company's stock is undervalued and that repurchasing stock is one of the primary ways to maximize shareholder value."

The company will repurchase common stock in the open market or in privately negotiated transactions from time to time over the next 12 months. The actual amount of stock repurchased will be determined by management depending on market conditions. Pepco expects to finance a significant portion of the repurchases through the sale of short-term debt and/or mortgage bonds, which would be repaid upon final closing of the generation divestiture.

Pepco's sale of its generation assets is progressing on schedule and is expected to be completed by year-end. Based on non-binding indications of interest received from prospective bidders, the company anticipates that the proceeds from the sale will be within a reasonable range around the company's and analysts' expectations. Of course there can be no assurance that the sale will occur or what the proceeds will be. Once the divestiture bidding is complete and the winner is announced, Pepco will consider what further actions with respect to its capital structure and dividend policy are appropriate and consistent with future operations.

Pepco's strategy for post-divestiture operations has three principal features:

• Continuing its regulated business.
• Continuing to develop and expand its involvement in cutting-edge, "last mile" broad band telecommunications ventures such as its Starpower Communications joint venture with RCN Corporation.
• Expanding its competitive retail energy and energy services business.

"The action we have announced today is part of an overall strategy to redeploy the capital which will become available from our planned generation divestiture," said Derrick. "We have identified the businesses we want to be in, and we intend to deploy the available capital in those businesses to the extent we can do so with the expectation of returns superior to those which can be achieved through the repurchase of stock."