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For Immediate Release


Pepco's DC Residential Prices to Increase for First Time in Nearly a Decade; Based on Competitive Bidding Process

For Immediate Release
November 3, 2004

Pepco today filed with the District of Columbia Public Service Commission new rates based on a competitive bidding process. The new rates would raise the average annual electric bill for residential customers in DC by about 18 percent, or approximately $10 a month, beginning Feb. 8. The increase is the result of a competitive bidding process ordered by the DC Public Service Commission and conducted by Pepco under the commission's supervision.

Pepco's residential base rates have not increased since 1995; rates were reduced 7 percent in 2001.

The new rates reflect the prices offered to Pepco by the lowest bidders in the competitive wholesale market and were filed today with the PSC for its review.

Escalating prices for fuels to produce electricity have pushed up wholesale power prices nationally. These prices have increased significantly over the past five years, including natural gas, up 54 percent; fuel oil, up nearly 80 percent; and coal up 113 percent. These fuels are used to produce electricity and none of these increases have been reflected in Pepco's DC electricity bills to date.

Under the new rate for power supply, the total bill for electricity (including supply and delivery) will increase an average of about $10 a month, from $56.50 to $66.50 for the typical DC residential customer. Pepco serves 200,000 residential customers and about 25,000 commercial customers in the District. Pepco's residential customers in Maryland saw a similar increase that began in July.

Each customer's bill is based on individual use, so the effects will vary with different customers. However, the rate for low-income customers qualifying for Pepco's Residential Aid Discount Program will remain capped until February 2007.

Pepco President Bill Sim said, "No one likes price increases, but if you consider that during the last four years Pepco's residential rates were held below wholesale market prices for electricity, the increases are well within the range that could be expected, especially considering the cost increases that have occurred in other energy products."

The new market-based rates were established following a competitive bidding process with the objective of obtaining for Pepco the lowest available price for Standard Offer Service, the supply rate for customers after Feb. 8 who do not have an alternative electricity provider. Deregulation brought a 7 percent reduction of Pepco's residential base rates in the District in 2001. Those below-market rates were capped for four years to ensure an orderly transition to competition; from the outset, these caps were set to expire on Feb.8, 2005.

Since 2001, District customers have been free to select alternative electricity suppliers. In fact, nearly 17,000 customers in the District already do so. Pepco continues to deliver the electricity to all customers whether or not they choose another supplier. A cap on the cost to deliver electricity, also implemented in 2001, remains in effect.

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About Pepco: Pepco, a wholly owned subsidiary of Pepco Holdings, Inc. (NYSE: POM), delivers electricity at regulated rates to 725,000 customers in Washington and major portions of Montgomery and Prince George's counties in suburban Maryland.

Point of Contact:
Robert Dobkin

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