POTOMAC ELECTRIC POWER CO, S-3, 1995-07-28

POTOMAC ELECTRIC POWER CO
S-3, 1995-07-28
ELECTRIC SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1995
REGISTRATION NO. 33-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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POTOMAC ELECTRIC POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DISTRICT OF COLUMBIA AND VIRGINIA 53-0127880
(IRS EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
----------------
1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068
(202) 872-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ELLEN SHERIFF ROGERS
ASSOCIATE GENERAL COUNSEL, ASSISTANT SECRETARY AND ASSISTANT TREASURER
POTOMAC ELECTRIC POWER COMPANY
1900 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20068
(202) 872-3526
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)
----------------
WITH COPIES TO:
GEORGE B. REID, JR., ESQ. STEPHEN K. WAITE, ESQ.
COVINGTON & BURLING WINTHROP, STIMSON, PUTNAM & ROBERTS
1201 PENNSYLVANIA AVENUE, N.W. ONE BATTERY PARK PLAZA
WASHINGTON, D.C. 20004 NEW YORK, NEW YORK 10004
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Debt Securities.................................. $250,000,000 $86,206.90
</TABLE>
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(1)Estimated solely for the purpose of calculating the registration fee.
----------------
Pursuant to Rule 429 under the Securities Act of 1933, each of the
Prospectuses filed as part of this Registration Statement may be used as a
combined prospectus in connection with the securities registered under this
Registration Statement and unsold debt securities having an aggregate offering
price of $100,000,000 previously registered under Registration Statement No.
33-50377 for which a registration fee of $31,250 was paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus to be used in
separate offerings of Debt Securities: First Mortgage Bonds and Medium-Term
Notes, in an aggregate principal amount of $350,000,000, including
$100,000,000 in principal amount of debt securities registered under
Registration Statement No. 33-50377. One prospectus will be used in connection
with the offering of First Mortgage Bonds (the "First Mortgage Bond
Prospectus"). The other prospectus will be used in connection with the
offering of Medium-Term Notes (the "Medium-Term Note Prospectus"). The First
Mortgage Bond Prospectus and the Medium-Term Note Prospectus are identical
with the exception of their respective Cover Pages, the section headed "Plan
of Distribution," the sections describing the respective Debt Securities, and
minor conforming changes to the sections headed "Use of Proceeds," "Experts,"
and "Legal Opinions." The First Mortgage Bond Prospectus includes a section
headed "Description of Bonds and Mortgage" and the Medium-Term Note Prospectus
includes a section headed "Description of the Notes."
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS DATED JULY 28, 1995,
SUBJECT TO COMPLETION

POTOMAC ELECTRIC POWER COMPANY

FIRST MORTGAGE BONDS

-----------

Potomac Electric Power Company (the "Company") may offer from time to time up
to $350,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds"), which may be offered in one or more series in amounts, at prices
and on terms to be determined by market conditions at the time of sale. The
aggregate principal amount, rate (or method of calculation) and time of payment
of interest, maturity, offering price, any redemption terms, and other specific
terms of the series of New Bonds in respect of which this Prospectus is being
delivered, are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"). The amount of First Mortgage Bonds to be offered
hereby will be reduced by the amount of any Medium-Term Notes sold pursuant to
the Registration Statements of which this Prospectus is a part. See
"Description of Bonds and Mortgage."

The Company may sell the New Bonds through underwriters designated by the
Company or through dealers, directly to a limited number of institutional
purchasers, or through agents. See "Plan of Distribution." The Prospectus
Supplement sets forth the names of such underwriters, dealers or agents, if
any, any applicable commissions or discounts and the net proceeds to the
Company from such sale.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

-----------

THE DATE OF THIS PROSPECTUS IS , 1995
<PAGE>

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN
OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT SPEAKS AS OF THE DATE THEREOF AND DOES NOT PURPORT TO
REFLECT ANY CHANGES IN THE AFFAIRS OF THE COMPANY THEREAFTER.

----------------

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports and other information with the Securities
and Exchange Commission (the "Commission"). Information concerning directors
and officers, their remuneration and any material interest of such persons in
transactions with the Company, as of particular dates, is disclosed in such
reports and in proxy statements distributed to shareholders of the Company and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison
Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, New York, New
York. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy statements and other information
concerning the Company can be inspected at the offices of the New York Stock
Exchange, Inc., where certain securities of the Company are listed.

The Company has filed with the Commission registration statements on Form S-
3 relating to the First Mortgage Bonds (herein, together with all amendments
and exhibits, referred to as the "Registration Statements") under the
Securities Act of 1933, as amended (the "1933 Act"). This Prospectus does not
contain all of the information set forth in the Registration Statements,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statements.

----------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
under the 1934 Act are incorporated by reference in this Prospectus:

(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.

(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.

All documents subsequently filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in an
incorporated document shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other incorporated document subsequently filed or in an accompanying
Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

THE COMPANY HEREBY UNDERTAKES TO FURNISH, WITHOUT CHARGE, TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ELLEN SHERIFF ROGERS,
ASSOCIATE GENERAL COUNSEL, ASSISTANT SECRETARY AND ASSISTANT TREASURER,
POTOMAC ELECTRIC POWER COMPANY, 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON,
D.C. 20068 (202-872-3526).

2
<PAGE>

THE COMPANY

Potomac Electric Power Company, a District of Columbia and Virginia
corporation (the "Company"), is engaged in the generation, transmission,
distribution and sale of electric energy in the Washington, D.C. metropolitan
area, including the District of Columbia and major portions of Montgomery and
Prince George's Counties in Maryland. It also supplies, at wholesale, electric
energy to the Southern Maryland Electric Cooperative, Inc., which distributes
electricity in Calvert, Charles, Prince George's and St. Mary's Counties in
southern Maryland. The Company's wholly owned nonutility subsidiary, Potomac
Capital Investment Corporation ("PCI"), was organized in late 1983 with the
objective of supplementing utility earnings and building long-term value. The
principal assets of PCI are portfolios of securities and equipment leases, and
to a lesser extent real estate and other investments. In May 1995, PCI
announced adoption of a plan to end its investment in the aircraft equipment
leasing business. The mailing address of the Company's executive offices is
1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068, and its telephone
number is 202-872-2000.

USE OF PROCEEDS

The Company may offer from time to time pursuant to this Prospectus up to an
aggregate principal amount of $350,000,000 of its First Mortgage Bonds.

The proceeds from the sale of the securities offered hereby will be used to
refund short-term debt incurred primarily to finance, on a temporary basis,
the Company's utility construction program and operations, and to refund the
Company's senior securities, including the retirement of long-term debt and
the satisfaction of contractual sinking fund requirements.

3
<PAGE>

SELECTED FINANCIAL INFORMATION

The following is a selection of certain consolidated financial information
of the Company which was derived from, and is qualified in its entirety by,
the audited consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, and the
unaudited consolidated financial information contained in its Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995, which are available as
described herein under "Incorporation of Certain Documents by Reference." The
interim financial data are unaudited; however, in the opinion of the
management of the Company, such data reflect all adjustments, consisting of
normal recurring accruals, necessary for a fair statement of the results of
operations for the interim periods presented.

<TABLE>
<CAPTION>
12 MONTHS ENDED
-----------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income Statement Data:
Total Revenue................. $ 1,772,847 $ 1,823,074 $ 1,725,205 $ 1,601,558
Operating Revenue............. 1,761,147 1,790,600 1,702,442 1,562,167
Net Income.................... 87,646 227,162 241,579 216,782
Earnings for Common Stock..... 70,949 210,725 225,324 202,390
Earnings Per Share of Common
Stock........................ .60 1.79 1.95 1.80
Balance Sheet Data at end of
period:
Property and Plant, net....... $ 4,343,543 $ 4,298,260 $ 4,131,142 $ 3,931,257
</TABLE>
- --------
(1) In 1992, Net Income and Earnings for Common Stock include $16,022,000, and
Earnings Per Share of Common Stock includes $.14, from the cumulative
effect of a change in accounting to provide for the accrual of revenue for
service rendered but unbilled.

<TABLE>
<CAPTION>
AS OF JUNE 30,
1995
----------------------
AMOUNT RATIO
----------- -----
(THOUSANDS)
<S> <C> <C> <C>
Capital Structure (excluding nonutility subsidiary debt
and current maturities):
Long-Term Debt....................................... $1,703,370 44.9%
Preferred Stock...................................... 268,886 7.1
Common Equity........................................ 1,818,554 48.0
---------- -----
Total Capitalization............................... $3,790,810 100.0%
==========
Parent Company Long-Term Debt Due in One Year and
Short-Term Debt....................................... $ 419,000
==========
</TABLE>

RATIOS OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
12 MONTHS ENDED
-----------------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parent company only....... 2.87 3.23 3.20 2.73 2.86 2.79
Fully consolidated........ 1.47 2.37 2.31 2.19 2.23 2.14
</TABLE>

For purposes of computing the ratio of earnings to fixed charges for rate-
regulated public utilities, earnings represent net income before cumulative
effect of accounting changes plus income taxes and fixed charges. Fixed
charges represent interest charges on debt (exclusive of credits arising from
the allowance for funds used during construction) and the portion of rentals
deemed representative of the interest factor.

4
<PAGE>

DESCRIPTION OF BONDS AND MORTGAGE

GENERAL. The New Bonds are to be issued under the Mortgage and Deed of Trust
dated July 1, 1936, between the Company and The Riggs National Bank of
Washington, D.C., as Trustee (the "Trustee"), as amended and supplemented and
as to be supplemented by a separate supplemental indenture (the "Supplemental
Indenture") each time New Bonds are offered under this Prospectus and the
accompanying Prospectus Supplement. Said mortgage, as so amended and
supplemented and to be supplemented, is herein sometimes called the
"Mortgage." Copies of the documents currently constituting the Mortgage are
exhibits to the Registration Statements, as is the form of the Supplemental
Indenture.

Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to the
New Bonds being offered thereby: (1) the designation and aggregate principal
amount of such New Bonds; (2) the date on which such New Bonds will mature;
(3) the rate per annum at which such New Bonds will bear interest, or the
method of determining such rate; (4) the dates on which such interest will be
payable; (5) any redemption terms; and (6) other specific terms applicable to
the New Bonds.

The New Bonds will be available only in fully registered form without
coupons in denominations of $1,000 or any multiple thereof, except as may be
set forth in the accompanying Prospectus Supplement. Both principal and
interest on the New Bonds will be payable at the agencies of the Company, The
Riggs National Bank of Washington, D.C. and Bankers Trust Company, New York,
N.Y. The Company will not impose charges for any exchanges of New Bonds.

The Supplemental Indenture will contain no provisions for an improvement and
sinking fund or any maintenance and replacement requirement or dividend
restriction; neither does the Mortgage nor any indenture supplemental thereto
relating to any outstanding Series of Bonds contain any such provisions.

The Mortgage does not contain any covenants or other provisions that
specifically are intended to afford holders of the New Bonds special
protection in the event of a highly leveraged transaction.

The following statements are outlines of certain provisions contained in the
Mortgage and do not purport to be complete. They are qualified by express
reference to the cited Sections and Articles of the Mortgage. Certain terms
used are as defined in the Mortgage.

SECURITY. The New Bonds will be secured, together with all other Bonds now
or hereafter issued under the Mortgage, by a valid and direct first lien
(subject to certain leases, Permitted Liens and other minor matters) on
substantially all the properties and franchises of the Company (the principal
properties being its generating stations and its electric transmission and
distribution systems), other than cash, accounts receivable and other liquid
assets, securities (including securities evidencing investments in
subsidiaries of the Company), leases by the Company as lessor, equipment and
materials not installed as part of the fixed property, and electric energy and
other materials, merchandise or supplies produced or purchased by the Company
for sale, distribution or use. The Company's 9.72% undivided interest in a
mine-mouth, steam-electric generating station, known as the Conemaugh
Generating Station, which is located in Indiana County, Pennsylvania, and its
associated transmission lines is that of a tenant in common with eight other
utility owners. Substantially all of the Company's transmission and
distribution lines of less than 230,000 volts, portions of its 230,000 and
500,000 volt transmission lines, substantially all of the Conemaugh
transmission lines, and 11 substations are located on land owned by others or
on public streets and highways.

The Mortgage contains provisions subjecting after-acquired property (subject
to pre-existing and Permitted Liens) to the lien thereof. The lien on such
property is, however, subject to rights of persons having superior equities
attaching prior to the recording or filing of an appropriate supplemental
indenture.

ISSUANCE OF ADDITIONAL BONDS. Additional Bonds ranking equally with the New
Bonds may be issued in an aggregate amount of up to (i) 60% of the Net
Bondable Value of Property Additions not subject to an

5
<PAGE>

Unfunded Prior Lien, (ii) the amount of cash deposited with the Trustee (which
may thereafter be withdrawn on the same basis that Additional Bonds are
issuable under (i) and (iii)), and (iii) the amounts of Bonds retired or to be
retired (except out of trust moneys or by any sinking or analogous fund if the
fund prevents such use) (Secs. 4, 6 and 7, Art. III; Sec. 4, Art. VIII).

Additional Bonds may not be issued unless Net Earnings of the Company
Available for Interest and Property Retirement Appropriations (i.e., earnings
before depreciation, amortization, income taxes and interest charges) during
12 of the immediately preceding 15 months shall have been at least twice the
annual interest charges on all Bonds and Prior Lien Bonds then outstanding and
then being issued, unless they are being issued on the basis of Bonds paid at
or redeemed or purchased within two years of maturity or on the basis of
Property Additions subject to an Unfunded Prior Lien (which simultaneously
becomes a Funded Prior Lien) and the Bonds are issued within two years of the
maturity of the Prior Lien Bonds secured by such Prior Liens (Secs. 3, 4 and
7, Art. III). Giving effect to the issuance of the New Bonds at an assumed
rate of interest of 8%, such Net Earnings for the twelve months ended June 30,
1995 would be approximately 5.1 times the aggregate annual interest charges
referred to above. Such coverage would permit issuance of approximately $2.2
billion of mortgage bonds (in addition to the New Bonds) at an assumed average
interest rate of 8% per annum, against property additions or cash deposits,
although only approximately $360 million of such additional bonds could
currently be issued in compliance with unbonded net property addition
limitations contained in the Mortgage.

So long as any New Bonds are outstanding, Property Additions constructed or
acquired on or before December 31, 1946 may not be made the basis for the
issue of Bonds, or the withdrawal of cash, or the reduction of cash required
to be paid to the Trustee (Sec. 2, Part IV, Supplemental Indenture).

Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the
circumstances and subject to the limitations contained in the Mortgage (Sec.
16, Art. IV).

After giving effect to the issuance of the New Bonds (which are to be issued
against Property Additions), approximately $600 million of the Property
Additions as of June 30, 1995 will remain available for the purposes permitted
in the Mortgage, including the issuance of Bonds.

RELEASE OF PROPERTY. The Mortgage permits property to be released from the
lien of the Mortgage upon compliance with the provisions thereof. Such
provisions generally require that cash be deposited with the Trustee in an
amount equal to the fair value of the property to be released. The Mortgage
permits the Company to reduce such amounts of cash otherwise required to be
deposited by substituting a like amount of Bonds retired. The Mortgage also
contains certain requirements relating to the withdrawal of cash deposited to
obtain a release of property (Art. VII and Art. VIII).

MODIFICATION OF MORTGAGE. With the consent of the holders of 80% in amount
of Bonds and of 80% in amount of Bonds of each series affected if less than
all are affected, the Mortgage may be changed except to affect the terms of
payment of the principal or interest on any Bonds or to reduce the percentage
of Bondholders required to effect any change (Sec. 6, Art. XV).

The Supplemental Indenture, however, provides that the foregoing percentages
shall be reduced to 60% upon the consent or agreement to such change by the
holders of all outstanding Bonds. Purchasers of the New Bonds will be deemed
to have agreed to such reduction pursuant to the terms of the Supplemental
Indenture.

EVENTS OF DEFAULT. The holders of 25% in amount of Bonds, upon any Event of
Default, may require the Trustee to accelerate maturity of the Bonds (although
a majority in amount of Bonds may waive such default and rescind such
acceleration if such default is cured) and to enforce the lien of the Mortgage
upon being indemnified to its satisfaction (Sec. 1 and 4, Art. IX).

The holders of a majority in amount of Bonds may direct proceedings for the
sale of the trust estate, or for the appointment of a receiver or any other
proceedings under the Mortgage, but have no right to involve the Trustee in
any personal liability without indemnifying it to its satisfaction (Sec. 11,
Art. IX).

6
<PAGE>

Events of Default include failure to pay principal, failure for 30 days to
pay interest or to satisfy any improvement, maintenance or sinking fund
obligation, failure for 60 days (after notice by the Trustee or the holders of
15% in amount of Bonds) to perform any other covenant, and certain events of
bankruptcy, insolvency or reorganization (Sec. 1, Art. IX).

While the Mortgage by its terms does not require that periodic evidence be
furnished to the Trustee as to the absence of default or as to compliance with
the terms of the Mortgage, the Trust Indenture Act of 1939, as amended, now
requires that annual certificates as to the absence of such defaults be
furnished to the Trustee.

RELATIONSHIPS WITH TRUSTEE. The Riggs National Bank of Washington, D.C.
("Riggs Bank") is Trustee under the Company's General Retirement Plan, Savings
Plan for Exempt Employees, Savings Plan for Non-Bargaining Unit, Non-Exempt
Employees, and Savings Plan for Bargaining Unit Employees. The Company has
with Riggs Bank, as it has with various other banks, demand deposit accounts.
Riggs Bank is one of a number of banks with which the Company has conventional
and revolving credit arrangements and also performs various other banking-
related services for the Company.

PLAN OF DISTRIBUTION

The Company may sell the New Bonds: (i) through underwriters or dealers;
(ii) directly to one or more purchasers; (iii) through agents or; (iv) through
a combination of any such methods of sale. The Prospectus Supplement with
respect to any New Bonds being offered thereby sets forth the terms of the
offering of such New Bonds, including the name or names of any underwriters,
the purchase price of such New Bonds and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such New Bonds may be listed.

If underwriters are used in the sale, the New Bonds will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The New
Bonds may be offered to the public, either through underwriting syndicates
represented by the underwriter or underwriters to be designated by the Company
or directly by one or more of such firms. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the New
Bonds offered thereby will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such New Bonds if any are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.

New Bonds may be sold directly by the Company or through agents designated
by the Company from time to time. The Prospectus Supplement sets forth the
name of any agent involved in the offer or sale of the New Bonds in respect of
which the Prospectus Supplement is delivered as well as any commission payable
by the Company to such agent. Unless otherwise indicated in the Prospectus
Supplement, any such agent is acting on a best efforts basis for the period of
its appointment.

If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase the New Bonds from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.

Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the 1933 Act. Agents and underwriters
may be customers of, engaged in transactions with, or perform services for the
Company in the ordinary course of business.

7
<PAGE>

EXPERTS

The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.

With respect to the unaudited consolidated financial information of the
Company for the three month periods ended March 31, 1995 and 1994, and the six
month periods ended June 30, 1995 and 1994 incorporated by reference in this
Prospectus, Price Waterhouse LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports dated May 1, 1995 and July 28,
1995, incorporated by reference herein, state that they did not audit and they
do not express opinions on that unaudited consolidated financial information.
Price Waterhouse LLP has not carried out any significant or additional audit
tests beyond those which would have been necessary if such reports had not
been incorporated by reference. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Price Waterhouse LLP is not subject
to the liability provisions of Section 11 of the 1933 Act for their reports on
the unaudited consolidated financial information because each such report is
not a "report" or a "part" of the registration statement prepared or certified
by Price Waterhouse LLP within the meaning of Sections 7 and 11 of the 1933
Act.

The statements as to matters of law and legal conclusions contained under
"Description of Bonds and Mortgage--Security" have been prepared under the
supervision of, and reviewed by, William T. Torgerson, Esq., Senior Vice
President and General Counsel for the Company, and are made on his authority.

LEGAL OPINIONS

Certain legal matters in connection with the securities to be offered hereby
will be passed upon for the Company by Covington & Burling, 1201 Pennsylvania
Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900
Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly
employed by the Company as Senior Vice President and General Counsel. Unless
otherwise indicated in the accompanying Prospectus Supplement, the legality of
such securities will be passed upon for the underwriter, dealer or agents by
Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, N.Y.,
who will, however, not pass on the incorporation of the Company.

8
<PAGE>

POTOMAC ELECTRIC POWER COMPANY

MEDIUM-TERM NOTES

-----------

Potomac Electric Power Company (the "Company") may offer from time to time up
to $350,000,000 aggregate principal amount of its Medium-Term Notes (the
"Notes") having maturities ranging from nine months to thirty years from the
date of issuance. Each Note will bear interest at a rate or pursuant to an
interest rate formula determined by the Company at or prior to the sale
thereof. The aggregate principal amount, the interest rate or formula for
determining such rate, interest payment dates for floating rate Notes, purchase
price, date of maturity, redemption terms, if any, and certain other variable
terms with respect to the Notes will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement") or Pricing Supplement
thereto (the "Pricing Supplement") to be filed with respect to the issuance and
sale of Notes. The terms upon which each issuance and sale of Notes are
offered, together with the names of the agents and the agents' commissions or
discounts, if applicable, will also be set forth in the Prospectus Supplement
or Pricing Supplement. See "Plan of Distribution" regarding possible
indemnification arrangements for agents. The amount of Medium-Term Notes to be
offered hereby will be reduced by the amount of any First Mortgage Bonds sold
pursuant to the Registration Statements of which this Prospectus is a part. See
"Description of the Notes."

The Notes may be offered on a continuous basis by the Company through agents.
The Notes may also be sold by the Company to any agent at negotiated discounts
for its own account or for resale to one or more investors. The Notes will not
be listed on any securities exchange. The Company or the agents may reject, in
whole or in part, any offer to purchase the Notes. See "Plan of Distribution."

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

-----------

The date of this Prospectus is , 1995
<PAGE>

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS SPEAKS AS
OF ITS DATE AND DOES NOT PURPORT TO REFLECT ANY CHANGES IN THE AFFAIRS OF THE
COMPANY THEREAFTER.

----------------

AVAILABLE INFORMATION

The Company has filed with the Commission registration statements on Form S-
3 relating to the Notes (herein, together with all amendments and exhibits,
referred to as the "Registration Statements") under the Securities Act of
1933, as amended (the "1933 Act"). This Prospectus does not contain all of the
information set forth in the Registration Statements, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration
Statements.

----------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
under the 1934 Act are incorporated by reference in this Prospectus:

(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.

(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.

2
<PAGE>

THE COMPANY

USE OF PROCEEDS

The Company may offer from time to time pursuant to this Prospectus up to an
aggregate principal amount of $350,000,000 of its Medium-Term Notes.

The proceeds from the sale of the Notes will be used to refund short-term
debt incurred primarily to finance, on a temporary basis, the Company's
utility construction program and operations, and to refund the Company's
senior securities, including the retirement of long-term debt and the
satisfaction of contractual sinking fund requirements.

3
<PAGE>

SELECTED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
12 MONTHS ENDED
-----------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income Statement Data:
Total Revenue................ $ 1,772,847 $1,823,074 $1,725,205 $1,601,558
Operating Revenue............ 1,761,147 1,790,600 1,702,442 1,562,167
Net Income................... 87,646 227,162 241,579 216,782
Earnings for Common Stock.... 70,949 210,725 225,324 202,390
Earnings Per Share of Common
Stock....................... .60 1.79 1.95 1.80
Balance Sheet Data at end of
period:
Property and Plant, net...... $ 4,343,543 $ 4,298,260 $ 4,131,142 $3,931,257
</TABLE>
- --------
(1) In 1992, Net Income and Earnings for Common Stock include $16,022,000, and
Earnings Per Share of Common Stock includes $.14, from the cumulative
effect of a change in accounting to provide for the accrual of revenue for
service rendered but unbilled.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
---------------------
AMOUNT RATIO
------------ -------
(THOUSANDS)
<S> <C> <C>
Capital Structure (excluding nonutility subsidiary debt
and current maturities):
Long-Term Debt....................................... $ 1,703,370 44.9%
Preferred Stock...................................... 268,886 7.1
Common Equity........................................ 1,818,554 48.0
------------ -------
Total Capitalization............................... $ 3,790,810 100.0%
============
Parent Company Long-Term Debt Due in One Year and
Short-Term Debt....................................... $ 419,000
============
</TABLE>

RATIOS OF EARNINGS TO FIXED CHARGES

For purposes of computing the ratio of earnings to fixed charges for rate-
regulated public utilities, earnings represent net income before cumulative
effect of accounting change plus income taxes and fixed charges. Fixed charges
represent interest charges on debt (exclusive of credits arising from the
allowance for funds used during construction) and the portion of rentals
deemed representative of the interest factor.

4
<PAGE>

DESCRIPTION OF THE NOTES

The Notes will be issued under an Indenture between the Company and The Bank
of New York, as Trustee (the "Trustee"), dated as of July 28, 1989 (such
Indenture as originally executed and delivered and as thereafter supplemented
and amended, together with any constituent instruments establishing the terms
of particular Notes, being herein called the "Indenture"). The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
of the provisions of the Indenture, a copy of which has been incorporated by
reference as an exhibit to the Registration Statements of which this
Prospectus is a part. The terms and conditions set forth below will apply to
each Note unless otherwise specified in the applicable Prospectus Supplement
or Pricing Supplement. Certain terms used are defined in the Indenture.

As of the date of this Prospectus, $350,000,000 aggregate principal amount
of Indenture Securities (defined herein) are issued and outstanding (not
including the Notes offered hereby). The Notes, issued and to be issued, will
be unsecured and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company from time to time outstanding. As
of the date of this Prospectus, an aggregate of $1,266,600,000 of secured debt
is outstanding. The terms of the Notes will not restrict the further
incurrence of secured debt by the Company. The Notes will not be subject to
any sinking fund.

Unless otherwise specified in a Prospectus Supplement, the Notes will mature
on any day from 9 months to 30 years from the date of original issue (the
"Original Issue Date"), as selected by the purchaser and agreed to by the
Company. Each Note will bear interest at either (a) a fixed rate (a "Fixed
Rate Note") or (b) rates determined by reference to a Base Rate (as hereafter
defined), which may be adjusted by a Spread or Spread Multiplier (as hereafter
defined) (a "Floating Rate Note").

The Notes will be offered on a continuous basis. Reference is made to the
Prospectus Supplement or the applicable Pricing Supplement with respect to the
Notes described therein for the following terms: (1) the purchase price of
such Notes (the "Issue Price"), or a statement that the Notes are being
offered by an agent as principal at varying market prices; (2) the Original
Issue Date; (3) the stated maturity date of such Notes (the "Maturity Date");
(4) the rate per annum at which such Notes if Fixed Rate Notes will bear
interest (the "Interest Rate"); (5) the interest rate formula and other
variable terms with respect to Floating Rate Notes; (6) the date or dates from
which any such interest shall accrue; (7) the terms for redemption, if any;
and (8) any other terms of such Notes.

The Notes will be subject to redemption by the Company on and after the
initial redemption date, if any, fixed at the time of sale and set forth in
the applicable Pricing Supplement (the "Initial Redemption Date"). If no
Initial Redemption Date is indicated with respect to a Note, such Note will
not be redeemable prior to maturity. On and after the Initial Redemption Date
with respect to any Note, such Note will be redeemable in whole or in part in
increments of $1,000 at the option of the Company at a redemption price (the
"Redemption Price") determined in accordance with the following paragraph,
together with interest thereon payable to the date of redemption, on notice
given no more than 60 nor less than 30 days prior to the date of redemption.

The Redemption Price for each Note subject to redemption shall initially be
equal to a certain percentage (the "Initial Redemption Percentage") of the
principal amount of such Note to be redeemed and shall decline at each
anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to maturity
will be fixed at the time of sale and set forth in the applicable Pricing
Supplement.

The Notes will be issued only in fully registered certificated or book-entry
form without coupons and, except as may otherwise be provided in the
applicable Prospectus Supplement or Pricing Supplement, in the denomination of
$1,000 or any multiple thereof. Notes issued in certificated form may be
transferred or

5
<PAGE>

exchanged at the offices described in the immediately following paragraphs. In
the event the Notes are issued in book-entry form through the facilities of
the Depositary (as defined below), transfers or exchanges may be similarly
effected through a participating member of the Depositary.

For Notes issued in certificated form, principal and interest will be
payable, the transfer of the Notes will be registrable, and Notes will be
exchangeable for Notes bearing identical terms and provisions at the office or
agency of the Company in The City of New York designated for such purpose;
provided, however, that payment of interest, other than interest at maturity
(or on any date of redemption if a Note is redeemed prior to maturity), may be
made at the option of the Company by check mailed to the address of the person
in whose name the applicable Note is registered at the close of business on
the Regular Record Date (as hereafter defined) as shown on the security
register maintained by the Trustee. Interest will be payable on each date
specified in the Note on which an installment of interest is due and payable
(an "Interest Payment Date") and at maturity (or any date of redemption).
Notwithstanding the foregoing, if the original issue date of a Note is between
the Regular Record Date and the initial Interest Payment Date, the initial
interest payment will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered holder on such next
succeeding Regular Record Date.

No service charge will be made to holders of Notes for any transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or governmental charge incident to the transfer or exchange.
Transfers and exchanges of Notes may be made at the Corporate Trust Office of
the Trustee.

Interest payments shall be the amount of interest accrued from and including
the next preceding Interest Payment Date in respect of which interest has been
paid (or from and including the date of issue, if no interest has been paid
with respect to such Note), to, but excluding, the Interest Payment Date,
maturity date or date of redemption (an "Interest Accrual Period"). However,
in the case of Floating Rate Notes on which the interest rate is reset daily
or weekly, the interest payments shall include interest accrued only through
and including the Regular Record Date next preceding the applicable Interest
Payment Date, except that the interest payment on the maturity date (or any
date of redemption) will include interest accrued to, but excluding, such
date. The principal and interest payable at maturity (or any date of
redemption) on each Note will be paid upon maturity (or any date of
redemption) in immediately available funds against presentation of the Note at
the Corporate Trust Office of The Bank of New York located at 101 Barclay
Street, New York, New York. Interest payable at maturity (or on any date of
redemption) will be payable to the person to whom the principal of the Note
shall be paid. Notwithstanding the above, a holder of $10,000,000 or more in
aggregate principal amount of Notes issued in certificated form having the
same Interest Payment Date shall be entitled to receive payments of interest
by wire transfer of immediately available funds if appropriate wire transfer
instructions have been received by The Bank of New York on or before the
Regular Record Date immediately preceding the applicable Interest Payment
Date.

The Indenture does not contain any covenants or other provisions that
specifically are intended to afford holders of the Notes special protection in
the event of a highly leveraged transaction.

BOOK-ENTRY NOTES. The Notes may be issued in whole or in part in the form of
one or more fully-registered Notes (each, a "Book-Entry Note") which will be
deposited with, or on behalf of, The Depository Trust Company, New York (the
"Depositary") and registered in the name of the Depositary's nominee. Except
as set forth below, the Book-Entry Note may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any nominee to a successor of the Depositary or a nominee of
such successor.

Upon the issuance of Notes by the Company represented by a Book-Entry Note,
the Depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Notes represented by such
Book-Entry Note to the accounts of participants. The accounts to be credited
shall be designated by the agents for such Notes, or by the Company if such
Notes are offered and sold directly by the Company. Ownership of beneficial
interests in a Book-Entry Note will be limited to participants or persons that
may hold

6
<PAGE>

interests through participants. Ownership of beneficial interests in a Book-
Entry Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary, or by
participants or persons that may hold interests through participants. The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws
may impair the ability to transfer beneficial interests in a Book-Entry Note.

So long as the Depositary for a Book-Entry Note, or its nominee, is the
registered owner of a Book-Entry Note, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Notes
represented by such Book-Entry Note for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in a Book-Entry Note
will not be entitled to have Notes represented by such Book-Entry Note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in certificated form and will not be considered the owners
or holders thereof under the Indenture.

Principal, premium, if any, and interest payments on Notes issued in book-
entry form and represented by one or more Book-Entry Notes will be made by the
Company to the Depositary or its nominee, as the case may be, as the
registered owner of the related Book-Entry Note or Notes. Neither the Company
nor the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Book-Entry Note, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company
expects that the Depositary, upon receipt of any payment of principal,
premium, if any, or interest in respect of a Book-Entry Note, will credit
immediately the accounts of the related participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in such Book-Entry Note as shown on the records of the Depositary.
The Company also expects that payments by participants to owners of beneficial
interests in a Book-Entry Note will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name"
and will be the responsibility of such participants.

The Depositary has advised the Company that it is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
The Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives)
own the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. Persons who are not participants may beneficially own
securities held by the Depositary only through participants.

If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Notes in certificated form in exchange for
each Book-Entry Note. In addition, the Company may at any time determine not
to have Notes represented by one or more Book-Entry Notes, and, in such event,
will issue Notes in certificated form in exchange for the Book-Entry Note or
Notes representing such Notes. Further, if the Company so specifies with
respect to a Book-Entry Note, an owner of a beneficial interest in such Book-
Entry Note may, on terms acceptable to the Company and the Depositary, receive
Notes in certified form. In any such instance, an owner of a beneficial
interest in a Book-Entry Note will be entitled to physical delivery in
certificated form of Notes equal in principal amount to such beneficial
interest and to have such Notes registered in its name. Notes so issued in
certificated form will be issued in the denomination of $1,000 or any multiple
thereof and will be issued in registered form only.

7
<PAGE>

FIXED RATE NOTES

Each Fixed Rate Note will bear interest from the date of issue at the rate
per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Interest on Fixed Rate Notes will be
payable semiannually on each February 1 and August 1 Interest Payment Date and
at maturity (or any date of redemption). The "Regular Record Date" for Fixed
Rate Notes will be the fifteenth day of the month next preceding the February
1 or August 1 Interest Payment Date. Interest on the Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months. If any
Interest Payment Date or the maturity date (or any date of redemption) on a
Fixed Rate Note falls on a day that is not a Business Day (as hereafter
defined), the payment shall be made on the next Business Day as if it were
made on the date such payment was due and no interest shall accrue on the
amount so payable for the period from and after such Interest Payment Date or
the Maturity Date (or any date of redemption), as the case may be.

FLOATING RATE NOTES

Unless otherwise specified in the applicable Prospectus Supplement or
Pricing Supplement, Floating Rate Notes will be issued as described below.
Interest on Floating Rate Notes will be determined by reference to a "Base
Rate," which shall be the "Commercial Paper Rate" ("Commercial Paper Rate
Notes"), "LIBOR" ("LIBOR Notes"), the "Treasury Rate" ("Treasury Rate Notes"),
the "CD Rate" ("CD Rate Notes") or other interest rate formula, based upon the
Index Maturity and adjusted by a Spread or Spread Multiplier, if any, as
specified in the applicable Pricing Supplement. The "Index Maturity" is the
period to maturity of the instrument or obligation from which the Base Rate is
calculated. The "Spread" is the number of basis points above or below the Base
Rate applicable to such Floating Rate Note, and the "Spread Multiplier" is the
percentage of the Base Rate applicable to the interest rate for such Floating
Rate Note. The Spread, Spread Multiplier, Index Maturity and other variable
terms of the Floating Rate Notes are subject to change by the Company from
time to time, but no such change will affect any Floating Rate Note
theretofore issued or as to which an offer has been accepted by the Company.

The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually, as specified in the applicable
Prospectus Supplement or Pricing Supplement. The "Interest Rate Reset Date"
will be, in the case of Floating Rate Notes which reset daily, each day; in
the case of Floating Rate Notes which reset weekly, the Wednesday of each week
(with the exception of weekly reset Treasury Rate Notes which reset the
Tuesday of each week, except as specified below); in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset semi-
annually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement. If any Interest Rate Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Rate Reset Date
shall be postponed to the next succeeding day that is a Business Day, except
that in the case of a LIBOR Note, if such next succeeding Business Day is in
the next succeeding calendar month, such Interest Rate Reset Date shall be the
next preceding Business Day. Unless otherwise specified in the applicable
Prospectus Supplement or Pricing Supplement, "Business Day" means any day,
other than a Saturday or Sunday, on which banks in The City of New York (and,
with respect to LIBOR Notes, the City of London) are not required or
authorized by law to close.

The interest rate applicable to each Interest Accrual Period commencing on
an Interest Rate Reset Date will be the rate determined on the "Interest Rate
Determination Date." The Interest Rate Determination Date with respect to the
Commercial Paper Rate and CD Rate will be the second Business Day preceding
the Interest Rate Reset Date. The Interest Rate Determination Date with
respect to LIBOR will be the second London Banking Date (defined in "LIBOR
Notes" below) preceding an Interest Rate Reset Date. With respect to the
Treasury Rate the Interest Rate Determination Date will be the day of the week
in which the Interest Rate Reset Date falls on which Treasury bills normally
would be auctioned; provided, however, that if as a result of a legal holiday
an auction is held on the Friday of the week preceding the Interest Rate Reset
Date, the related Interest Rate

8
<PAGE>

Determination Date shall be such preceding Friday; and provided, further, that
if an auction shall fall on any Interest Rate Reset Date then the Interest
Rate Reset Date shall instead be the first Business Day following such
auction.

A Floating Rate Note may also have either or both of the following: (i) a
maximum limit ("Maximum Interest Rate"), or ceiling, on the rate of interest
which may accrue during any Interest Accrual Period; and (ii) a minimum limit
("Minimum Interest Rate"), or floor, on the rate of interest which may accrue
during any Interest Accrual Period. In addition to any Maximum Interest Rate
which may be applicable to any Floating Rate Note pursuant to the above
provisions, the interest rate on the Floating Rate Notes will in no event be
higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under present New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
The limit does not apply to Floating Rate Notes in which $2,500,000 or more
has been invested.

The applicable Prospectus Supplement or Pricing Supplement will specify each
variable term with respect to each Floating Rate Note, including the
following: Initial Interest Rate, Interest Rate Reset Dates, Interest Payment
Dates, Index Maturity, Maturity, Maximum Interest Rate and Minimum Interest
Rate, if any, the Spread or Spread Multiplier, if any, and terms of
redemption, if any.

Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. Except as provided below, interest will
be payable, in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified in the
applicable Pricing Supplement; in the case of Floating Rate Notes which reset
quarterly, on the third Wednesday of March, June, September and December of
each year; in the case of Floating Rate Notes which reset semi-annually, on
the third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; in the case of Floating Rate Notes which reset annually,
on the third Wednesday of the month specified in the applicable Pricing
Supplement; and, in each case, at maturity (or any date of redemption).

If any Interest Payment Date for any Floating Rate Note would fall on a day
that is not a Business Day with respect to such Note, such Interest Payment
Date will be the following day that is a Business Day with respect to such
Note, except that, in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding day that is a Business Day with respect to such LIBOR
Note. If the Maturity Date (or any date of redemption) of any Floating Rate
Note would fall on a day that is not a Business Day, the payment of interest
and principal (and premium, if any) shall be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after the Maturity Date (or any date of redemption).

The "Regular Record Date" with respect to Floating Rate Notes will be the
date 15 calendar days (whether or not a Business Day) prior to the applicable
Interest Payment Date.

With respect to a Floating Rate Note, accrued interest is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to the date for which accrued interest is being
calculated. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360 in the case of CD Rate Notes,
Commercial Paper Rate Notes and LIBOR Notes, or by the actual number of days
in the year in the case of Treasury Rate Notes.

All percentages resulting from any calculation on Floating Rate Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded
upward, (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on Floating Rates Notes will be rounded to the nearest cent (with one-half
cent being rounded upward).

9
<PAGE>

Unless otherwise provided for in the applicable Prospectus Supplement or
Pricing Supplement, The Bank of New York will be the "Calculation Agent." Upon
the request of the holder of any Floating Rate Note, the Trustee will provide
the interest rate then in effect and, if determined, the interest rate that
will become effective as a result of a determination made for the next
Interest Rate Reset Date with respect to such Floating Rate Note. The Company,
or the Calculation Agent, will notify the Trustee of each determination of the
interest rate applicable to any such Floating Rate Note promptly after such
determination is made. The "Calculation Date," where applicable, pertaining to
any Interest Rate Determination Date will be the tenth calendar day after such
Interest Rate Determination Date, or, if any such day is not a Business Day,
the next succeeding Business Day.

The interest rate in effect with respect to a Floating Rate Note from the
date of issue to the first Interest Rate Reset Date (the "Initial Interest
Rate") will be specified in the applicable Pricing Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement or Pricing
Supplement, the interest rate determined with respect to any Interest Rate
Determination Date will become effective on and as of the next succeeding
Interest Rate Reset Date; provided, however, the interest rate in effect for
the period from the date of issue to the first Interest Rate Reset Date will
be the Initial Interest Rate, and the interest rate in effect for the ten days
immediately prior to the maturity date (or any date of redemption) will be
that in effect on the tenth day preceding such maturity date (or such date of
redemption). The interest rate for each subsequent Interest Rate Reset Date
will be determined by the Calculation Agent as follows:

CD RATE NOTES

CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.

Unless otherwise specified in the applicable Prospectus Supplement or
Pricing Supplement, "CD Rate" means, with respect to any Interest Rate
Determination Date relating to a CD Rate Note (a "CD Rate Interest
Determination Date"), the rate on such date for negotiable certificates of
deposit having the Index Maturity specified in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest Rates," or any
successor publication ("H.15(519)"), under the heading "CDs (Secondary
Market)," or, if not so published by 3:00 P.M., New York City time, on or
prior to the Calculation Date pertaining to such CD Rate Interest
Determination Date, the CD Rate will be the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not yet published
in either H.15(519) or the Composite Quotations by 3:00 P.M., New York City
time, on the Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 3:00 P.M., New
York City time, on such CD Rate Interest Determination Date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money center banks of the highest credit
standing in the market for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity designated in the Pricing Supplement in
denominations of $5,000,000; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting as set forth above, the
CD Rate will remain the CD Rate then in effect on such CD Rate Interest
Determination Date.

COMMERCIAL PAPER RATE NOTES

Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any) specified in the applicable Pricing Supplement.

10
<PAGE>

Unless otherwise indicated in the applicable Prospectus Supplement or
Pricing Supplement, "Commercial Paper Rate" means, with respect to any
Interest Rate Determination Date relating to a Commercial Paper Rate Note (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield
(as defined below) on such date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement, as such rate
shall be published by the Board of Governors of the Federal Reserve System in
H.15(519), under the heading "Commercial Paper." In the event that such rate
is not published prior to 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Commercial Paper Rate Interest Determination Date,
then the Commercial Paper Rate shall be the Money Market Yield on such
Commercial Paper Rate Interest Determination Date of the rate for commercial
paper of the specified Index Maturity as published in Composite Quotations
under the heading "Commercial Paper." If by 3:00 P.M., New York City time, on
such Calculation Date such rate is not published in either H.15(519) or
Composite Quotations, then the Commercial Paper Rate shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Commercial Paper Rate Interest Determination Date of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the specified Index Maturity placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the rate of interest in effect for the applicable period will
remain the rate of interest then in effect on such Commercial Paper Rate
Interest Determination Date.

"Money Market Yield" shall be the yield calculated in accordance with the
following formula:

Money Market Yield = D X 360 X 100
------------
360 - (D X
M)

where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.

LIBOR NOTES

LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in
the applicable Pricing Supplement.

Unless otherwise indicated in the applicable Prospectus Supplement or
Pricing Supplement, LIBOR with respect to any Interest Rate Determination Date
relating to a LIBOR Note (a "LIBOR Interest Determination Date") will equal
the arithmetic mean (as determined by the Calculation Agent) of the offered
rates which appear as of 11:00 A.M., London time, on the Reuters Screen LIBOR
Page on the Reuter Monitor Money Rates Service for deposits (in United States
dollars for the period of the Index Maturity specified in the applicable
Pricing Supplement) commencing on the second day on which dealings in deposits
in United States dollars are transacted in the London interbank market (a
"London Banking Day") immediately following such LIBOR Interest Determination
Date; provided, however, that if fewer than two such quotations appear, the
Calculation Agent shall request the principal London office of four major
banks in the London interbank market selected by the Calculation Agent to
provide the Calculation Agent with a quotation of their offered rates at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date for deposits (in United States dollars for the period of the applicable
Index Maturity and in a principal amount equal to an amount that is
representative for a single transaction in such market at such time)
commencing on the second London Banking Day immediately following such LIBOR
Interest Determination Date. If at least two such quotations are provided,
LIBOR for such LIBOR Interest Determination Date will equal the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR for
such LIBOR Interest Determination Date will equal the arithmetic mean of the
rates quoted by three major banks in The City of New York, as selected by the
Calculation Agent, at approximately 11:00 A.M., New York City time, on such
LIBOR Interest Determination Date for loans to leading European banks (in
United States dollars for the period of the applicable Index Maturity and in a

11
<PAGE>

principal amount equal to an amount that is representative for a single
transaction in such market at such time) commencing on the second London
Banking Day following such LIBOR Interest Determination Date; provided,
however, that if the banks selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, LIBOR for such LIBOR Interest
Determination Date will remain the LIBOR in effect on such LIBOR Interest
Determination Date.

TREASURY RATE NOTES

Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any) specified in the applicable Pricing Supplement.

Unless otherwise indicated in the applicable Prospectus Supplement or
Pricing Supplement, "Treasury Rate" means, with respect to any Interest Rate
Determination Date relating to a Treasury Rate Note (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or,
if not so published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Treasury Rate Interest Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced
by the United States Department of the Treasury. Treasury bills are usually
sold at auction on Monday of each week unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. In the event that the
results of the auction of Treasury bills having the specified Index Maturity
are not reported as provided by 3:00 P.M., New York City time, on such
Calculation Date, or if no such auction is held in a particular week, then the
Treasury Rate shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Treasury Rate Interest Determination Date,
of three leading primary United States government securities dealers selected
by the Calculation Agent for the issue of Treasury bills with a remaining
maturity closest to the applicable Index Maturity; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the rate of interest in effect for the applicable
period will remain the rate of interest in effect on such Treasury Rate
Interest Determination Date.

EVENTS OF DEFAULT, WAIVER AND NOTICE. An Event of Default with respect to
the Notes of a particular series (the "Series Notes") is defined in the
Indenture as (a) default in the payment of any installment of interest on any
of the Series Notes and the continuance of such default for a period of 30
days; (b) default in payment of the principal of (and premium, if any, on) any
of the Series Notes when due at maturity; (c) default in the deposit of any
sinking fund payment due under the Series Notes and the continuance of such
default for a period of 3 business days; (d) default by the Company in the
performance or breach of any other covenant or warranty contained in the
Indenture and the continuance of such default or breach for a period of 60
days after appropriate notice; (e) certain events of bankruptcy, insolvency
and reorganization of the Company; and (f) any other Event of Default
established with respect to the Series Notes. (Section 501).

The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default with respect to the Series Notes, give all the
registered holders of Series Notes then outstanding and any other holder of
Series Notes entitled under the Indenture to receive reports notice of all
incurred defaults known to it (the term default to mean any event which is or
(after notice or lapse of time) would become an Event of Default); provided
that, except in the case of a default in the payment of principal of or
interest on any Series Note, the Trustee shall be protected in withholding
such notice if it determines in good faith that the withholding of such notice
is in the interest of all the holders of the Series Notes. (Section 602).

The Indenture provides that if an Event of Default with respect to the
Series Notes shall have occurred and be continuing, either the Trustee or the
holders of at least 33% in principal amount (calculated as provided in the

12
<PAGE>

Indenture) of the Series Notes may declare the principal of all of the Series
Notes and the interest accrued thereon or any lesser amount specified in the
Series Notes to be due and payable immediately. (Section 502).

Upon certain conditions, such declarations of acceleration with respect to
Series Notes may be annulled and past defaults (except for defaults in the
payment of principal, and premium (if any) or interest on such Series Notes
not theretofore cured or in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the
holder of each Series Note) may be waived with respect to the Series Notes by
the holders of not less than a majority in principal amount (calculated as
provided in the Indenture) of the Series Notes. (Section 513).

The Indenture requires that the Company file with the Trustee annually a
written statement as to the presence or absence of any defaults in the
fulfillment of its obligations under the terms thereof and as to performance
and fulfillment of obligations therein. (Section 1005). Prior to the time the
Company must provide such written statement, the holders of not less than a
majority in principal amount of the Series Notes may waive the Company's
obligation to file a written statement as to the presence or absence of any
such defaults. (Section 1006).

The Indenture provides that the holders of not less than a majority in
principal amount (calculated as provided in the Indenture) of the Series Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee by the Indenture with respect to defaults or
Events of Default with respect to the Series Notes so long as any such
direction does not conflict with any provision of the Indenture or is not
unduly prejudicial to the rights of other holders of the Series Notes.
(Section 512).

In order to require the Trustee to take action with respect to the Series
Notes, holders of at least 33% in principal amount (calculated as provided in
the Indenture) of the Series Notes shall have made a written request upon the
Trustee (Section 507). The Indenture provides that the Trustee shall be under
no obligation, subject to the duty of the Trustee during default to act with
the required standard of care, to exercise any of the rights or powers vested
in it by the Indenture at the direction of the holders of the Series Notes
unless such holders shall have offered to the Trustee reasonable security or
indemnity against expenses and liabilities. (Section 603).

MODIFICATION OF THE INDENTURE. The Indenture contains provisions permitting
the Company and the Trustee, with the consent of the holders of not less than
66 2/3% in principal amount (calculated as provided in the Indenture) of each
series of securities, including the Notes, issued and outstanding pursuant to
the Indenture (the "Indenture Securities") and affected by such amendment to
modify the Indenture or any supplemental indenture or the rights of the
holders of the Indenture Securities affected by such modification; provided
that no such modification shall, without the consent of each holder of the
Indenture Securities affected thereby, change the maturity of principal of or
interest on any Indenture Security, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce
any amount payable upon redemption of any Indenture Security, or reduce the
overdue rate thereof or change the currency of payment of principal or
interest on any Indenture Security or reduce the percentage in principal
amount of Indenture Securities the consent of the holders of which is required
for modification or amendment of the Indenture or for waiver of certain
defaults or reduce the voting or quorum requirements under the Indenture.
(Section 902).

The Indenture also permits the Company and the Trustee to amend the
Indenture in certain circumstances without consent of the holders of any
Indenture Securities to evidence the merger of the Company or the replacement
of the Trustee and for certain other purposes. (Section 901).

RELATIONSHIPS WITH TRUSTEE. The Bank of New York is Trustee for the
Company's 5% Convertible Debentures due 2002. The Company has with the Trustee
and its affiliates, as it has with various other banks, a demand deposit
account and conventional and revolving credit arrangements. The Trustee is the
Issuing and Paying Agent for medium-term notes issued by PCI.

13
<PAGE>

PLAN OF DISTRIBUTION

The Notes may be offered on a continuous basis by the Company through
agents, each of which will agree to use its best efforts to solicit offers to
purchase the Notes. The Company may also sell the Notes to any of the agents
at negotiated discounts for such agent's own account or for resale to one or
more investors at varying prices related to prevailing market prices at the
time of resale, as determined by such agent.

The agents with respect to the offer and sale of any issue of the Notes will
be named in the Prospectus Supplement relating thereto. The Prospectus
Supplement will also describe the discounts and commissions to be allowed or
paid to agents and all other items constituting agents' compensation.

Agents may be entitled under agreements entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the 1933 Act. Agents may be customers of, engage in
transactions with or perform services for the Company in the ordinary course
of business.

The Notes will not be listed on any securities exchange. There currently is
no established trading market for the Notes and no assurance can be given as
to the existence or liquidity of a secondary market for the Notes in the
future.

EXPERTS

----------------

LEGAL OPINIONS

Certain legal matters in connection with the Notes to be offered hereby will
be passed upon for the Company by Covington & Burling, 1201 Pennsylvania
Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900
Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly
employed by the Company as Senior Vice President and General Counsel.

14
<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses relating to the New Bonds (assuming an issuance of
$250,000,000) are as follows:

<TABLE>
<S> <C>
Registration fee............................................... $ 86,207
Recordation taxes.............................................. 1,146,000
Rating Agency fees............................................. 75,000
Printing....................................................... 125,000
Trustee's fees and expenses.................................... 90,000
Fee of independent accountants................................. 45,000
Fees of counsel................................................ 80,000
Expenses incidental to qualification under Blue Sky Laws....... 15,000
Miscellaneous.................................................. 40,793
----------
Total........................................................ $1,703,000
==========
</TABLE>

Estimated expenses relating to the Notes (assuming an issuance of
$250,000,000) are as follows:

<TABLE>
<S> <C>
Registration fee................................................. $ 86,207
Rating Agency fees............................................... 75,000
Trustee's fees and expenses...................................... 20,000
Printing......................................................... 60,000
Fee of independent accountants................................... 45,000
Fees of counsel.................................................. 70,000
Expenses incidental to qualification under Blue Sky Laws......... 15,000
Miscellaneous.................................................... 30,793
--------
Total.......................................................... $402,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The By-Laws of the Company provide that the Company shall indemnify each
director or officer and each former director and officer of the Company
against expenses actually and reasonably incurred in connection with the
defense of any action, suit or proceeding by reason of his or her being or
having been such director or officer, including liabilities incurred under the
Securities Act of 1933, as amended, except in relation to matters as to which
such director or officer shall be finally adjudged in such action, suit or
proceeding to have knowingly violated the criminal law or to be liable for
willful misconduct in the performance of his or her duty to the Company; and
that such indemnification shall be in addition to, and not exclusive of, any
other rights to which those indemnified may be entitled under any by-law,
agreement, vote of stockholders, or otherwise.

In the Underwriting Agreement and the Distribution Agreement, the
Underwriters and agents will agree to indemnify the Company, its directors,
officers and controlling persons against certain civil liabilities that may
arise under the Securities Act of 1933 in connection with this offering.

The Company also has policies of insurance which insure officers and
directors against certain liabilities and expenses incurred by them in such
capacities.

II-1
<PAGE>

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------
<C> <S> <C>
1.1 --Form of Underwriting Agreement
for the New Bonds.............. Filed herewith.
1.2 --Form of Distribution Agreement
for the Medium-Term Notes...... Exh. 1-B to Registration
Statement No. 33-48325, 6/2/92.
4.1 --Form of the New Bonds......... Included in Exhibit No. 4.4.
4.2 --Form of the Medium-Term Notes. Included in Exhibit No. 4.5.
4.3 --Mortgage and Deed of Trust,
dated July 1, 1936, of the
Company to The Riggs National
Bank of Washington, D.C., as
Trustee, securing First
Mortgage Bonds of the Company, Exh. B-4 to First Amendment,
and Supplemental Indenture 6/19/36, to Registration
dated 7/1/36................... Statement No. 2-2232.
--Supplemental Indentures, to
the aforesaid Mortgage and Deed
of Trust, dated--
December 1, 1939 and December
10, 1939....................... Exhs. A & B to Form 8-K, 1/3/40.
August 1, 1940.................. Exh. A to Form 8-K, 9/25/40.
July 15, 1942 and August 10, Exh. B-1 to Amendment No. 2,
1942......................... 8/24/42, and B-3 to Post-
Effective Amendment, 8/31/42, to
Registration Statement No.
2-5032.
August 1, 1942.................. Exh. B-4 to Form 8-A, 10/8/42.
October 15, 1942................ Exh. A to Form 8-K, 12/7/42.
October 15, 1947................ Exh. A to Form 8-K, 12/8/47.
January 1, 1948................. Exh. 7-B to Post-Effective
Amendment No. 2, 1/28/48, to
Registration Statement No.
2-7349.
December 31, 1948............... Exh. A-2 to Form 10-K, 4/13/49.
May 1, 1949..................... Exh. 7-B to Post-Effective
Amendment No. 1, 5/10/49, to
Registration Statement No.
2-7948.
December 31, 1949............... Exh. (a)-1 to Form 8-K, 2/8/50.
May 1, 1950..................... Exh. 7-B to Amendment No. 2,
5/8/50, to Registration
Statement No. 2-8430.
February 15, 1951............... Exh. (a) to Form 8-K, 3/9/51.
March 1, 1952................... Exh. 4-C to Post-Effective
Amendment No. 1, 3/12/52, to
Registration Statement No.
2-9435.
February 16, 1953............... Exh. (a)-1 to Form 8-K, 3/5/53.
May 15, 1953.................... Exh. 4-C to Post-Effective
Amendment No. 1, 5/26/53, to
Registration Statement No.
2-10246.
March 15, 1954 and March 15, Exh. 4-B to Registration
1955........................... Statement No. 2-11627, 5/2/55.
May 16, 1955.................... Exh. A to Form 8-K, 7/6/55.
March 15, 1956.................. Exh. C to Form 10-K, 4/4/56.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------
<C> <S> <C>
4.3 cont. June 1, 1956................... Exh. A to Form 8-K, 7/2/56.
April 1, 1957.................. Exh. 4-B to Registration
Statement No. 2-13884, 2/5/58.
May 1, 1958.................... Exh. 2-B to Registration
Statement No. 2-14518, 11/10/58.
December 1, 1958............... Exh. A to Form 8-K, 1/2/59.
May 1, 1959.................... Exh. 4-B to Amendment No. 1,
5/13/59, to Registration
Statement No. 2-15027.
November 16, 1959.............. Exh. A to Form 8-K, 1/4/60.
May 2, 1960.................... Exh. 2-B to Registration
Statement No. 2-17286, 11/9/60.
December 1, 1960 and April 3,
1961.......................... Exh. A-1 to Form 10-K, 4/24/61.
May 1, 1962.................... Exh. 2-B to Registration
Statement No. 2-21037, 1/25/63.
February 15, 1963.............. Exh. A to Form 8-K, 3/4/63.
May 1, 1963.................... Exh. 4-B to Registration
Statement No. 2-21961, 12/19/63.
April 23, 1964................. Exh. 2-B to Registration
Statement No. 2-22344, 4/24/64.
May 15, 1964................... Exh. A to Form 8-K, 6/2/64.
May 3, 1965.................... Exh. 2-B to Registration
Statement No. 2-24655, 8/16/66.
April 1, 1966.................. Exh. A to Form 10-K, 4/21/66.
June 1, 1966................... Exh. 1 to Form 10-K, 4/11/67.
April 28, 1967................. Exh. 2-B to Post-Effective
Amendment No. 1 to Registration
Statement No. 2-26356, 5/3/67.
May 1, 1967.................... Exh. A to Form 8-K, 6/1/67.
July 3, 1967................... Exh. 2-B to Registration
Statement No. 2-28080, 1/25/68.
February 15, 1968.............. Exh. II-I to Form 8-K, 3/7/68.
May 1, 1968.................... Exh. 2-B to Registration
Statement No. 2-31896, 2/28/69.
March 15, 1969................. Exh. A-2 to Form 8-K, 4/8/69.
June 16, 1969.................. Exh. 2-B to Registration
Statement No. 2-36094, 1/27/70.
February 15, 1970.............. Exh. A-2 to Form 8-K, 3/9/70.
May 15, 1970................... Exh. 2-B to Registration
Statement No. 2-38038, 7/27/70.
August 15, 1970................ Exh. 2-D to Registration
Statement No. 2-38038, 7/27/70.
September 1, 1971.............. Exh. 2-C to Registration
Statement No. 2-45591, 9/1/72.
September 15, 1972............. Exh. 2-E to Registration
Statement No. 2-45591, 9/1/72.
April 1, 1973.................. Exh. A to Form 8-K, 5/9/73.
January 2, 1974................ Exh. 2-D to Registration
Statement No. 2-49803, 12/5/73.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------
<C> <S> <C>
4.3 cont. August 15, 1974................ Exhs. 2-G and 2-H to Amendment
No. 1 to Registration Statement
No. 2-51698, 8/14/74.
June 15, 1977.................. Exh. 4-A to Form 10-K, 3/19/81.
July 1, 1979................... Exh. 4-B to Form 10-K, 3/19/81.
June 16, 1981.................. Exh. 4-A to Form 10-K, 3/19/82.
June 17, 1981.................. Exh. 2 to Amendment No. 1,
6/18/81, to Form 8-A.
December 1, 1981............... Exh. 4-C to Form 10-K, 3/19/82.
August 1, 1982................. Exh. 4-C to Amendment No. 1 to
Registration Statement
No. 2-78731, 8/17/82.
October 1, 1982................ Exh. 4 to Form 8-K, 11/8/82.
April 15, 1983................. Exh. 4 to Form 10-K, 3/23/84.
November 1, 1985............... Exh. 2-B to Form 8-A, 11/1/85.
March 1, 1986.................. Exh. 4 to Form 10-K, 3/28/86.
November 1, 1986............... Exh. 2-B to Form 8-A, 11/5/86.
March 1, 1987.................. Exh. 2-B to Form 8-A, 3/27/87.
September 16, 1987............. Exh. 4-B to Registration
Statement No. 33-18229,
10/30/87.
May 1, 1989.................... Exh. 4-C to Registration
Statement No. 33-29382, 6/16/89.
August 1, 1989................. Exh. 4 to Form 10-K, 3/28/90.
April 5, 1990.................. Exh. 4-C to Registration
Statement No. 33-36875, 9/24/90.
May 21, 1991................... Exh. 4 to Form 10-K, 3/27/92.
May 7, 1992.................... Exh. 4-C to Registration
Statement No. 33-48325, 6/2/92.
September 1, 1992.............. Exh. 4 to Form 10-K, 3/26/93.
November 1, 1992............... Exh. 4 to Form 10-K, 3/26/93.
March 1, 1993.................. Exh. 4 to Form 10-K, 3/26/93.
March 2, 1993.................. Exh. 4 to Form 10-K, 3/26/93.
July 1, 1993................... Exh. 4.4 to Registration
Statement No. 33-49973, 8/11/93.
August 20, 1993................ Exh. 4.4 to Registration
Statement No. 33-50377, 9/23/93.
September 29, 1993............. Exh. 4 to Form 10-K, 3/25/94.
September 30, 1993............. Exh. 4 to Form 10-K, 3/25/94.
October 1, 1993................ Exh. 4 to Form 10-K, 3/25/94.
February 10, 1994.............. Exh. 4 to Form 10-K, 3/25/94.
February 11, 1994.............. Exh. 4 to Form 10-K, 3/25/94.
March 10, 1995................. Filed herewith.
4.4 --Form of Supplemental
Indenture between the
Registrant and The Riggs
National Bank of Washington,
D.C., Trustee, with respect to
the New Bonds................. Filed herewith.
4.5 --Form of Indenture between the
Registrant and The Bank of New
York, Trustee, with respect to Exh. 4 to Form 8-K, 6/21/90.
the Medium-Term Notes.........
5 --Opinion of William T.
Torgerson..................... Filed herewith.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------
<C> <S> <C>
12 --Computation of Ratios........... Exh. 12 to Form 10-Q, 7/28/95.
15 --Letter re Unaudited Financial
Information...................... Filed herewith.
23.1 --Consent of Price Waterhouse LLP. Filed herewith.
23.2 --Consent of William T. Torgerson. Contained in Exhibit 5.
23.3 --Consent of Covington & Burling.. Filed herewith.
24 --Power of Attorney............... Filed herewith.
25.1 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act of
1939 of The Riggs National Bank
of Washington, D.C., with respect
to the New Bonds................. Filed herewith.
25.2 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act of
1939 of The Bank of New York,
with respect to the Medium-Term Exh. 26-B to Registration
Notes............................ Statement No. 33-48325, 6/2/92.
</TABLE>
- --------
* The exhibits referred to in this column by specific designations and date
have heretofore been filed with the Securities and Exchange Commission under
such designations and are hereby incorporated herein by reference. The Forms
8-A, 8-K and 10-K referred to above were filed by the Company under the
Commission's File No. 1-1072 and the Registration Statements referred to are
registration statements of the Company.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by these paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934

II-5
<PAGE>

(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the By-Laws of the registrant or
Virginia or District of Columbia Law, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted against the registrant by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

II-6
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
WHO IS DULY AUTHORIZED TO SIGN, IN THE CITY OF WASHINGTON, DISTRICT OF
COLUMBIA, ON THE 28TH DAY OF JULY, 1995.

Potomac Electric Power Company
(Registrant)

Edward F. Mitchell*
By __________________________________
(EDWARD F. MITCHELL, CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE
OFFICER)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.

(i) Principal Executive Officers:

Edward F. Mitchell* Chairman of the
- ------------------------------------- Board and Chief
(EDWARD F. MITCHELL) Executive Officer

John M. Derrick, Jr.* President and
- ------------------------------------- Director
(JOHN M. DERRICK, JR.)

(ii) Principal Financial Officer:

H. L. Davis* Vice Chairman and
- ------------------------------------- Chief Financial July 28, 1995
(H. LOWELL DAVIS) Officer and
Director

(iii) Principal Accounting Officer:

D. R. Wraase* Senior Vice
- ------------------------------------- President, Finance
(DENNIS R. WRAASE) and Accounting

(iv) Directors:

Roger R. Blunt, Sr.* Director
- -------------------------------------
(ROGER R. BLUNT, SR.)

II-7
<PAGE>

A. James Clark* Director
- -------------------------------------
(A. JAMES CLARK)

Richard E. Marriott* Director
- -------------------------------------
(RICHARD E. MARRIOTT)

David O. Maxwell* Director
- -------------------------------------
(DAVID O. MAXWELL)

Floretta D. McKenzie* Director
- -------------------------------------
(FLORETTA D. MCKENZIE)

Ann D. McLaughlin* Director
- ------------------------------------- July 28, 1995
(ANN D. MCLAUGHLIN)

Peter F. O'Malley* Director
- -------------------------------------
(PETER F. O'MALLEY)

Louis A. Simpson* Director
- -------------------------------------
(LOUIS A. SIMPSON)

A. Thomas Young* Director
- -------------------------------------
(A. THOMAS YOUNG)

Peyton G. Middleton, Jr.
*By: ________________________________
(PEYTON G. MIDDLETON, JR.,
ATTORNEY-IN-FACT)

II-8
<PAGE>

POTOMAC ELECTRIC POWER COMPANY

First Mortgage Bonds

UNDERWRITING AGREEMENT

To the Representatives named in
Schedule I hereto of the Underwriters
named in Schedule II hereto

Dear Sirs:

The undersigned Potomac Electric Power Company (the "Company") hereby
confirms its agreement with the several underwriters named in Schedule II
hereto (the "Underwriters") as set forth below to sell its First Mortgage
Bonds of the designation, with the terms and in the amount, specified in
Schedule I hereto (the "Bonds"). If the firm or firms listed in Schedule I
hereto (the "Representatives") are the same as the firm or firms listed in
Schedule II hereto, then the terms "Underwriters" and "Representatives," as
used herein, shall each be deemed to refer to such firm or firms.

SECTION I. Description of Bonds. The Company has authorized by
appropriate corporate action and proposes to issue and sell the Bonds, to be
issued under and secured by its Mortgage and Deed of Trust dated July 1, 1936
to The Riggs National Bank of Washington, D. C., as Trustee (the "Trustee"),
and the indentures supplemental thereto including the Supplemental Indenture
relating to the Bonds (herein collectively called the "Indenture"). Certain
of the terms and provisions relating to the Bonds and the Indenture are
summarized in the Registration Statement and Prospectus hereinafter referred
to.

SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:

(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") two registration statements on Form S-3 (No.
33-50377 and No. 33- ), including prospectuses, for the registration of
the Bonds under the Securities Act of 1933, as amended (the "1933 Act"), and
the qualification of the Indenture under the Trust Indenture Act of 1939 (the
"1939 Act"), which registration statements have been declared effective by the
Commission and which Indenture has been qualified under the 1939 Act. Such
registration statements, as amended to the date of this Agreement, including
the documents incorporated by reference but excluding the Form T-1 Statement
of Eligibility and Qualification of the Trustee, and the prospectus contained
in the registration statement on Form S-3 (No. 33- ) as supplemented
either by a prospectus supplement, dated the date hereof, relating to the
terms and offering of the Bonds to be filed pursuant to Rule 424 ("Rule 424")
of the rules and regulations of the Commission under the 1933 Act (the "1933
Act Regulations") and/or by a term sheet or abbreviated term sheet, if any,

sent or given in reliance upon Rule 434 of the 1933 Act Regulations and to be
filed pursuant to Rule 424 (including, in each case, the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
1933 Act) are hereinafter called the "Registration Statement" and the
"Prospectus," respectively; any reference herein to the terms "amend," or
"amendment" with respect to the Registration Statement or the Prospectus shall
be deemed to include any document incorporated by reference therein after the
date hereof and prior to the termination of the offering of the Bonds by the
Underwriters; provided, however, that any prospectus supplement, term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule 424 under
the 1933 Act with respect to an offering of first mortgage bonds other than
the Bonds shall not be deemed to be a supplement to, or a part of, the
Prospectus. If any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Bonds (whether
or not such revised prospectus is required to be filed by the Company pursuant
to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer
to such revised prospectus from and after the time it is first provided to the
Underwriters for such use.

(b) At the time the Registration Statement became effective, the
Registration Statement, the prospectus included therein and the Indenture
fully complied, and at the Closing Date, as hereinafter defined, the
Registration Statement and the Prospectus, as they may be amended or
supplemented, and the Indenture will fully comply, in all material respects
with the applicable provisions of the 1933 Act, the 1933 Act Regulations, and
the 1939 Act; on said dates the Registration Statement did not, and the
Registration Statement, as it may be amended or supplemented, will not,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; when the Registration Statement became effective, the
prospectus included therein did not, and at the Closing Date and on the date
it is filed with, or transmitted for filing to, the Commission pursuant to
Rule 424 the Prospectus, as it may be amended or supplemented, will not,
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
foregoing representations and warranties in this subparagraph (b) shall not
apply to statements or omissions made in reliance upon and in conformity with
information furnished herein or in writing to the Company by the
Representatives or by or on behalf of any Underwriter through the
Representatives expressly for use in the Registration Statement or the
Prospectus.

(c) The documents incorporated by reference in the Registration
Statement and the Prospectus pursuant to Item 12 of Form S-3 under the 1933
Act, when they were filed with the Commission, complied in all material
respects with the applicable requirements of the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
regulations of the Commission thereunder, and any documents so filed and

incorporated by reference subsequent to the date hereof will, when they are
filed with the Commission, comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder; and none of such documents included or includes or will include
any untrue statement of a material fact or omitted or omits or will omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(d) The financial statements incorporated by reference in the
Registration Statement and the Prospectus present fairly the financial
condition and operations of the Company and its consolidated subsidiaries at
the respective dates or for the respective periods to which they apply; such
financial statements have been prepared in each case in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as set forth therein; and the supporting schedules
incorporated by reference in the Registration Statement and the Prospectus
present fairly the information required to be stated therein and Price
Waterhouse LLP ("Price Waterhouse"), who have examined certain of the
financial statements, are independent accountants as required by the 1933 Act,
and the rules and regulations of the Commission.

(e) Except as reflected in, or contemplated by, the Registration
Statement and the Prospectus, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
prior to the Closing Date, (i) there has not been any material, adverse change
in the business, property or financial condition of the Company and its
subsidiaries considered as one enterprise and (ii) there have been no
transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with respect
to the Company and its subsidiaries considered as one enterprise. The Company
has no material contingent obligation which is not disclosed in or
contemplated by the Registration Statement and the Prospectus.

(f) The sale by the Company to the Underwriters, severally, of
the Bonds for the consideration herein specified and upon the terms and
conditions herein contained will not result in a breach of any of the terms
or provisions of or constitute a default under the Company's Charter or By-
Laws, each as amended, or any indenture or other agreement or instrument which
the Company has assumed or to which it is now a party or any applicable law,
administrative regulation or administrative court decree.

(g) There are no contracts or documents of the Company or any of
its subsidiaries which are required to be filed as exhibits to the
Registration Statement by the 1933 Act or by the 1933 Act Regulations which
have not been so filed.

SECTION 3. Sale of the Bonds. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each of the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase from the Company,
at the purchase price set forth in Schedule I hereto, the respective principal
amounts of Bonds set forth opposite the name of such Underwriter in Schedule
II hereto.

SECTION 4. Time and Place of Closing. Payment for the Bonds shall be
made at the place, date and time specified in Schedule I hereto (or such other
place, date and time as the Representatives and the Company may agree upon),
against delivery of the Bonds, at the office of Bankers Trust Company, 4
Albany Street, New York, N.Y., to the Representatives for the respective
accounts of the several Underwriters. The hour and date of such delivery and
payment are herein called the "Closing Date." Payment for the Bonds shall be
made to the Company or its order by certified or official check or checks,
payable in New York Clearing House funds. Certificates for the Bonds shall be
delivered to the Representatives for the respective accounts of the several
Underwriters in such names and denominations as the Representatives shall
specify not later than the beginning of business on the third full business
day before the Closing Date. For the purpose of expediting the checking of
the certificates by the Representatives, the Company agrees to make the
certificates for the Bonds available to the Representatives not later than
1:00 p.m., New York Time, on the last full business day prior to the Closing
Date at said office of Bankers Trust Company.

SECTION 5. Covenants of the Company. The Company agrees that:

(a) As soon as possible after the execution and delivery of this
Agreement, the Company will file the Prospectus with the Commission pursuant
to Rule 424 setting forth, among other things, the necessary information with
respect to the terms of offering of the Bonds.

(b) The Company will give the Representatives notice of its
intention to file any amendment to the Registration Statement or any amendment
or supplement to the Prospectus, will furnish the Representatives and counsel
for the Underwriters copies of any such amendment or supplement a reasonable
time in advance of filing, and will not file any such amendment or supplement
to which the Representatives or counsel for the Underwriters shall reasonably
object prior to such filing.

(c) The Company will promptly deliver to the Representatives one
fully executed copy of the registration statement as originally filed with the
Commission and of each amendment or supplement thereto, heretofore or
hereafter made, including any post-effective amendment (in each case including
all exhibits filed therewith not previously furnished to the Representatives)
and signed copies of each consent and certificate included therein or filed as
an exhibit thereto. The Company will also send to the Representatives as soon
as practicable after the date of this Agreement and thereafter from time to
time not later than nine months after the date of this Agreement, as many
copies of the Prospectus (excluding documents incorporated by reference under

Item 12 of Form S-3) as the Representatives may reasonably request for the
purposes contemplated by the 1933 Act, the 1934 Act and the rules and
regulations of the Commission thereunder.

(d) The Company will pay or cause to be paid all expenses in
connection with (i) the preparation and filing by it of the Registration
Statement and Prospectus and the preparation and delivery of this Agreement,
(ii) the preparation, rating, issue and delivery of the Bonds to be sold by it
as provided herein, (iii) the printing and delivery to the Underwriters in
reasonable quantities of copies of the Registration Statement, each
preliminary prospectus and the Prospectus, (iv) all filing fees and fees and
disbursements not to exceed $5,000 of Winthrop, Stimson, Putnam & Roberts
incurred in connection with the qualification of the Bonds under securities
laws and the determination of the legality of the Bonds in accordance with the
provisions of Section 5(i), and (v) the printing and delivery to the
Underwriters of copies of the Blue Sky Survey and the Legality Memorandum; and
will pay all taxes, if any (but not including any transfer taxes), on the
issue of said Bonds; provided, however, that the Underwriters shall pay all of
their own costs and expenses, including the fees and expenses of their counsel
(subject however to the provisions of this subparagraph requiring the payment
by the Company of certain fees and expenses, not to exceed $5,000), any
transfer taxes on the Bonds which they may sell.

(e) If, during the period when delivery of the Prospectus is
required under the 1933 Act, any event relating to or affecting the Company,
or of which the Company shall be advised in writing by the Representatives,
shall occur which, in the Company's opinion, should be set forth in an
amendment to the Prospectus, including an appropriate filing pursuant to
Section 13(a) or (c) or Section 14 of the 1934 Act, in order to make the
Prospectus not misleading in the light of the circumstances when it is
delivered to a purchaser, or if it is necessary to amend the Prospectus to
comply with the 1933 Act, the Company will forthwith at its expense prepare
and file with the Commission (in form and substance satisfactory to counsel
for the Underwriters) and furnish to the Representatives a reasonable number
of copies of such amendment or amendments to the Prospectus, including any
filing pursuant to Section 13(a) or (c) or Section 14 of the 1934 Act, which
will amend the Prospectus so that as amended it will comply with the 1933 Act
and will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading. In case any of the several Underwriters is required to
deliver a Prospectus after the expiration of nine months after the date of
this Agreement, the Company, upon such Underwriter's request, will furnish to
such Underwriter, at the expense of such Underwriter, a reasonable quantity
of an amended prospectus, or amendments to the Prospectus, complying with
Section 10(a) of the 1933 Act.

(f) The Company will advise the Representatives promptly
(confirming such advice in writing) (i) of the filing of the Prospectus
pursuant to Rule 424 and of any amendment to the Prospectus or Registration
Statement, (ii) of the receipt of any comments from the Commission, (iii) of
any official request made by the Commission for amendments to the Registration
Statement or Prospectus or for additional information with respect thereto or
(iv) of official notice of institution of proceedings for, or the entry of, a
stop order suspending the effectiveness of the Registration Statement. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if such a stop order should be entered by the Commission, will make
every reasonable effort to obtain the lifting or removal thereof as soon as
possible.

(g) For a period of five years, the Company will (i) furnish to
the Representatives as soon as practicable after the close of each fiscal year
a consolidated balance sheet of the Company as of the close of such fiscal
year, in reasonable detail, together with consolidated statements of earnings
and of cash flows, in reasonable detail, of the Company, for such fiscal year,
such consolidated balance sheet, statements of earnings and of cash flows, to
be accompanied by an opinion thereon rendered by independent accountants, who
may be the regular auditors for the Company; (ii) upon request, will furnish
to the Representatives as soon as practicable after the close of each of the
first three quarters of each fiscal year an interim earnings statement of the
Company for the twelve months ended with the close of such quarter, which need
not be audited, similar to that furnished pursuant to clause (i) of this
subparagraph; and (iii) will furnish to the Representatives copies of all such
financial statements as it shall file with the Commission or any governmental
agency substituted therefor, and from time to time, copies of any reports or
other communications which it shall send to stockholders generally.

(h) The Company will make generally available to its security
holders, as soon as reasonably practicable, but in any event not later than 16
months after the end of the fiscal quarter in which the filing of the
Prospectus pursuant to Rule 424 occurs, an earnings statement (in form
complying with the provisions of Section 11(a) of the 1933 Act and the 1933
Act Regulations, which need not be certified by independent public
accountants) covering a period of twelve months beginning not later than the
first day of the Company's fiscal quarter next following the filing of the
Prospectus pursuant to Rule 424.

(i) The Company will use its best efforts to qualify the Bonds
for offer and sale under the applicable securities and legal investment laws
of such jurisdictions as the Representatives may designate, and will file and
make such statements or reports as are or may be reasonably required by the
laws of such jurisdictions; provided, however, that the Company shall not be
required to qualify as a foreign corporation or dealer in securities, or to
file any general consents to service of process under the laws of any

jurisdiction. The fees and disbursements of Winthrop, Stimson, Putnam &
Roberts, who are acting as counsel for the Underwriters for the purposes of
this Agreement, shall be paid by the Underwriters (subject however to
provisions of subparagraph (d) hereof requiring payment by the Company of
counsel fees and disbursements not to exceed $5,000), provided, however, that
if this Agreement is terminated in accordance with the provisions of Section
6, 7 or 9, the Company shall reimburse the Underwriters for the amount of such
fees and disbursements. The Company shall not be required to pay any amount
for any expenses of the Underwriters except as provided in this Section 5.
The Company shall not in any event be liable to the Underwriters for damages
on account of the loss of anticipated profits.

(j) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13(a) or (c) or
Section 14 of the 1934 Act subsequent to the time of execution of this
Agreement.

(k) Between the date hereof and the Closing Date, the Company
will not, without prior written consent of the Representatives, offer or sell,
or enter into any agreement to sell, any additional First Mortgage Bonds of
the Company.

(l) The Company will use the net proceeds received from the sale
of the Bonds in the manner specified in the Prospectus under "Use of
Proceeds".

SECTION 6. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase and pay for the Bonds shall be
subject to the accuracy of the representations and warranties on the part of
the Company, to the substantial accuracy of the statements of Company officers
made pursuant to the provisions hereof, to the performance by the Company of
its obligations to be performed hereunder prior to the Closing Date, and to
the following further conditions:

(a) That, at the Closing Date, the Representatives shall receive
the signed opinions of the following counsel, substantially in the respective
forms attached hereto: Winthrop, Stimson, Putnam & Roberts, counsel for the
Underwriters, and Covington & Burling and William T. Torgerson, Esq., counsel
for the Company.

(b) That no amendment to the Registration Statement or
Prospectus, filed subsequent to the execution of this Agreement, shall be
unsatisfactory in substance to the Representatives or unsatisfactory in form
to counsel for the Underwriters.

(c) That, at or prior to 6:00 p.m., New York Time, on the date
hereof or at such later time and date as the Representatives may have from
time to time consented to in writing or by telephone, confirmed in writing,
all orders of the Public Service Commission of the District of Columbia
necessary to permit the issue and sale of the Bonds shall be in effect; that
at or prior to the Closing Date the certificate of such Public Service

Commission permitting the issue of the Bonds shall have been recorded on the
books of the Company; that prior to the Closing Date no stop order with
respect to the effectiveness of the Registration Statement shall have been
issued under the 1933 Act by the Commission and that at the Closing Date no
proceedings therefor shall be pending or threatened; and that at the Closing
Date the Prospectus shall not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, other than any statement contained in, or any
matter omitted from, the Registration Statement or the Prospectus in reliance
upon, and in conformity with, information furnished to the Company in writing
by the Representatives or by or on behalf of any of the several Underwriters
through the Representatives expressly for use in the Registration Statement or
the Prospectus.

(d) That, subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus and prior to
the Closing Date, no material and adverse change in the condition of the
Company and its subsidiaries, taken as a whole, financial or otherwise, shall
have taken place (other than as referred to in or contemplated by the
Registration Statement and Prospectus) and that the Company shall, at the
Closing Date, deliver to the Representatives, a signed certificate of its
President or a Vice President and its Treasurer or an Assistant Treasurer to
the effect that (i) there has been no material adverse change, (ii) the
representations and warranties in Section 2 are true and correct with the same
force and effect as though expressly made at and as of the Closing Date, (iii)
the Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Date, and (iv)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been initiated or
threatened by the Commission.

(e) That at the Closing Date the Representatives shall have
received a letter from Price Waterhouse in form and substance satisfactory to
the Representatives, dated the Closing Date, confirming that they are
independent accountants within the meaning of the 1933 Act, the 1934 Act and
published rules and regulations thereunder and to the effect that (1) in their
opinion the audited consolidated financial statements included in the
Company's Annual Report to the Commission on Form 10-K, incorporated by
reference in the Registration Statement (the "Form 10-K"), comply as to form
in all material respects with the applicable accounting requirements of the
1933 Act, the 1934 Act and the published rules and regulations of the
Commission issued thereunder with respect to Form 10-K and registration
statements on Form S-3, and (2) on the basis of a reading of the unaudited
consolidated financial data included in the Company's Quarterly Reports to the
Commission on Form 10-Q, if any (the "Forms 10-Q"), incorporated by reference
in the Registration Statement, and on the basis of the following procedures
(but not on the basis of an audit in accordance with generally accepted
auditing standards) to be performed by Price Waterhouse: (A) a reading of the

minutes of the Board of Directors of the Company and the Executive Committee
thereof as set forth in the minute books to a specified date not more than
three business days prior to the date of such letter, (B) a reading of the
latest available unaudited interim consolidated financial data (if any), and
(C) inquiries of certain officials of the Company who have responsibility for
financial and accounting matters, nothing has come to their attention which in
their judgment would indicate that (a) the unaudited consolidated financial
data included in the Forms 10-Q (if any) do not comply as to form in all
material respects with the applicable accounting requirements of the 1934 Act
and the published rules and regulations of the Commission thereunder, or that
any material modifications should be made to such unaudited consolidated
financial data for such unaudited consolidated financial data to be in
conformity with generally accepted accounting principles; (b) the unaudited
amounts of operating revenue, net income, earnings applicable for common stock
and earnings per share of common stock and unaudited amounts for property and
plant -- net, long-term debt, preferred and preference stock and common equity
outstanding, as included in the Registration Statement, were not determined on
a basis substantially consistent with that of the corresponding amounts in the
audited consolidated statements of earnings and consolidated balance sheets
incorporated by reference in the Registration Statement; (c) the ratios of
earnings to fixed charges, actual and (if any) pro forma, as set forth in the
Registration Statement were not arithmetically correct; (d) at the date of the
latest available unaudited interim financial data there was any change in the
common stock outstanding or long-term debt of the Company or any decrease in
the common equity of the Company (before giving effect to dividends declared
on common stock) as compared with amounts shown in the most recent
consolidated balance sheet incorporated by reference in the Registration
Statement; or for the period from the date of such consolidated balance sheet
to the date of the latest available unaudited interim consolidated financial
data there were any decreases, as compared with the corresponding period in
the preceding year, in operating revenue or in net income or earnings per
share; or (e) at a specified date not more than three business days prior to
the date of such letter there was any change in the common stock outstanding
or long-term debt of the Company, in each case as compared with amounts shown
in the most recent consolidated balance sheet incorporated by reference in the
Registration Statement; except in all instances for (i) changes or decreases
which the Registration Statement discloses have occurred or may occur or (ii)
changes or decreases not in excess of $500,000 of (iii) changes occasioned by
the issuance of common stock pursuant to the Company's Shareholder Dividend
Reinvestment Plan, Savings Plan for Exempt Employees, Savings Plan for
Bargaining Unit Employees and Savings Plan for Non-Bargaining Unit, Non-Exempt
Employees, or Long-Term Incentive Plan or upon the conversion of the Company's
Serial Preferred Stock, $2.44 Convertible Series of 1966, or the 7%
Convertible Debentures and the 5% Convertible Debentures. The letter of Price
Waterhouse also shall be to the effect that they have carried out certain
specified procedures, not constituting an audit, with respect to certain

amounts, percentages and financial information which are derived from the
general accounting records of the Company, which appear in the Registration
Statement and Prospectus and which are specified by the Representatives, and
have compared such amounts, percentages and financial information with the
accounting records of the Company and have found them to be in agreement.

(f) That the Company shall have performed such of its obligations
under this Agreement as are to be performed by the terms hereof at or before
the Closing Date.

(g) At the Closing Date counsel for the Underwriters shall have
been furnished with such certificates, documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Bonds as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations and warranties,
or the fulfillment of any of the conditions herein contained; and all
proceedings taken by the Company in connection with the issuance and sale of
the Bonds as herein contemplated shall be satisfactory in form and substance
to the Representatives and counsel for the Underwriters.

If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representatives by notice to the Company at any time at or prior to the
Closing Date and such termination shall be without liability of any party to
any other party except as provided in Section 5 and Section 8.

SECTION 7. Conditions of Company's Obligations. The obligations of the
Company with respect to the issue, sale and delivery of the Bonds shall be
subject to the following conditions:

(a) That, at or before 6:00 p.m., New York Time, on the date
hereof, or such later time and day as the Company may have from time to time
consented to in writing or by telegram, confirmed in writing, all orders of
the Public Service Commission of the District of Columbia necessary to permit
the issue, sale and delivery of the Bonds shall be in effect; and that, prior
to the Closing Date, no stop order with respect to the effectiveness of the
Registration Statement shall have been issued under the 1933 Act by the
Commission and that at the Closing Date no proceedings therefor shall be
pending or threatened.

(b) That no order of the Public Service Commission of the
District of Columbia relating to the issue or sale of the Bonds or to the
application of the proceeds thereof, which may be entered after the execution
of this Agreement and prior to the Closing Date, shall contain any conditions
which are not acceptable to the Company.

In case any of the conditions specified above in this Section shall not
have been fulfilled, this Agreement may be terminated by the Company, upon
notice thereof to the Representatives, at any time prior to Closing Date, and
such termination shall be without liability of any party to any other party

except as provided in Section 5 and Section 8.

SECTION 8. Indemnification. (a) The Company agrees to indemnify and
hold harmless the several Underwriters and each person who controls any of the
several Underwriters within the meaning of Section 15 of the 1933 Act against
any and all losses, claims, damages or liabilities, as incurred, joint or
several, to which they or any of them may become subject under the 1933 Act or
under any other statute or common law, and to reimburse each such Underwriter
and each such controlling person for any legal or other expenses (including,
to the extent hereinafter provided, reasonable counsel fees) incurred by them
in connection with investigating any such losses, claims, damages or
liabilities or in connection with defending or settling (if settled with the
written consent of the Company) any actions, insofar as such losses, claims,
damages, liabilities, expenses or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
the registration statement as originally filed or as subsequently amended or
in the Registration Statement or any amendment thereto, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of any
untrue statement or alleged untrue statement of a material fact contained in
the preliminary prospectus or the prospectus as originally filed or as
subsequently amended or the Prospectus, as amended or supplemented if there
shall have been any amendment or supplement thereto, or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnity agreement contained in
this Section shall not apply to any such losses, claims, damages, liabilities,
expenses or actions arising out of, or based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with
information furnished herein or in writing to the Company by the
Representatives or by or on behalf of any of the several Underwriters through
the Representatives expressly for use in the [registration statement as
originally filed or as subsequently amended or in the preliminary prospectus
as originally filed or as subsequently amended or in the] Registration
Statement or the Prospectus or any amendment or supplement to either thereof;
and provided, further, that the indemnity agreement contained in this Section
shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any such losses, claims, damages,
liabilities, expenses or actions arising from the sale of Bonds to any person
if such Underwriter failed to send or give a copy of the Prospectus (as it may
have been amended) (excluding documents incorporated by reference) to such
person with or prior to the written confirmation of the sale involved. The
indemnity agreement of the Company contained in this Section and the
representations and warranties of the Company contained in Section 2 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, or any such controlling
person, and shall survive the delivery of the Bonds. The Underwriters agree
to notify the Company promptly of the commencement of any litigation or
proceedings against them or any of them or against any such controlling person
in connection with the sale of Bonds.

(b) Each Underwriter agrees to indemnify and hold harmless the Company,
its officers and directors, and each person who controls any thereof within
the meaning of Section 15 of the 1933 Act against any and all losses, claims,

damages or liabilities, as incurred, joint or several, to which they or any of
them may become subject under the 1933 Act or under any other statute or
common law, and to reimburse each of them for any legal or other expenses
(including, to the extent hereinafter provided, reasonable counsel fees)
incurred by them in connection with investigating any such losses, claims,
damages or liabilities, or in connection with defending or settling (if
settled with the Underwriters' written consent) any actions, insofar as such
losses, claims, damages, liabilities, expenses or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement as originally filed or as subsequently
amended or in the Registration Statement or any amendment thereto, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the preliminary prospectus or the prospectus as originally
filed or as subsequently amended or the Prospectus, as amended or supplemented
if there shall have been any amendment or supplement thereto, or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished herein or in writing to the
Company by the Representatives or by or on behalf of the several Underwriters
through the Representatives expressly for use in the [registration statement
as originally filed or as subsequently amended or in the preliminary
prospectus as originally filed or as subsequently amended or in the]
Registration Statement or the Prospectus or any amendment or supplement to
either thereof. The indemnity agreement contained in this Section shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Company, or any such controlling person, and shall
survive the receipt of the proceeds of the sale of the Bonds. The Company
agrees promptly to notify the Representatives of the commencement of any
litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of Bonds. The foregoing indemnity
agreement is in addition to any further liability which any Underwriter may
otherwise have to the Company or any of its directors, officers or controlling
persons.

(c) The Company and each of the several Underwriters agree that, upon
the receipt of notice of the commencement of any action against it, its
officers and directors, or any person controlling it as aforesaid in respect
of which indemnity may be sought on account of any indemnity agreement
contained herein, it will promptly give written notice of the commencement
thereof to the party or parties against whom indemnity shall be sought
hereunder. The omission so to notify such indemnifying party or parties of
any such action shall relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party on account of any
indemnity agreement contained in (a) or (b) above, but shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party otherwise than on account of such indemnity agreement.
In case such notice of any such action shall be so given, such indemnifying
party shall be entitled to participate at its own expense in the defense or,
if it so elects, to assume (in conjunction with any other indemnifying
parties) the defense of such action, in which event such defense shall be
conducted by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties who shall be
defendant or defendants in such action, and such defendant or defendants shall

bear the fees and expenses of any additional counsel retained by them; but if
the indemnifying party shall elect not to assume the defense of such action,
such indemnifying party will reimburse such indemnified party or parties for
the reasonable fees and expenses of any counsel retained by them. In the
event that the parties to any such action (including impleaded parties)
include both the indemnified party or parties and the indemnifying party and
any of the indemnified parties shall have been advised by counsel chosen by it
and reasonably satisfactory to the Company that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party
or parties and will reimburse the indemnified party or parties as aforesaid
for the reasonable fees and expenses of any counsel retained by such
indemnified party or parties, it being understood that the indemnifying party
shall not, in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for all such indemnified parties,
which firm shall, in connection with indemnification provided for in (a)
above, be designated in writing by the Representatives, and, in connection
with indemnification provided for in (b) above, be designated in writing by
the Company.

(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 8
is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, liabilities,
claims, damages and expenses of the nature contemplated in said indemnity
agreement in such proportion as is equitable and as shall reflect both the
relative benefits received by the Company on the one hand and the Underwriter
or Underwriters, as the case may be, on the other hand from the offering of
the Bonds, and the relative fault, if any, of the Company on the one hand and
of the Underwriter or Underwriters, as the case may be, on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriter or Underwriters, as the case may be, on the
other hand in connection with the offering of the Bonds shall be deemed to be
in the same proportion as the total net proceeds from the offering of such
Bonds (before deducting expenses) received by the Company bear to the total
commissions and underwriting discounts received by the Underwriter or
Underwriters, as the case may be. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand
or the Underwriter or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Subsection (d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, liabilities, claims, damages and
expenses referred to above shall be deemed to include any legal or other

expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.

SECTION 9. Termination. This Agreement may be terminated any time
prior to the Closing Date by the Representatives by giving notice thereof to
the Company, if at or prior to such time (i) there shall have occurred any
general suspension of trading in securities on the New York Stock Exchange or
there shall have been established by the New York Stock Exchange or by the
Commission or by any federal or state agency or by the decision of any court
any limitation on prices for such trading, or (ii) if a banking moratorium has
been declared by any Federal, New York, District of Columbia or Virginia
authority, or (iii) there shall have occurred any new outbreak or escalation
of hostilities or other national or international calamity or crisis, the
effect of which on the financial markets of the United States shall be such as
to make it impracticable for the Underwriters to enforce contracts for the
sale of the Bonds, or (iv) the Company shall have sustained a substantial loss
by fire, flood, accident or other calamity which renders it impracticable to
consummate the sale of the Bonds and the delivery of the Bonds by the several
Underwriters at the initial public offering price. Any termination hereof
pursuant to this Section 9 shall be without liability of any party to any
other party except as otherwise provided in Section 5 and Section 8.

SECTION 10. Default. If one or more of the Underwriters shall fail on
the Closing Date to purchase the Bonds which it or they are obligated to
purchase hereunder (the "Defaulted Bonds"), then the remaining Underwriters
(the "Non-Defaulting Underwriters") shall have the right, within 24 hours
after such date, to make arrangements for one or more of the Non-Defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Bonds in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, during such 24 hours such arrangements
shall not have been completed for the purchase of all of the Defaulted Bonds,
then:

(a) If the principal amount of the Defaulted Bonds does not
exceed 10% of the principal amount of the Bonds, the Non-Defaulting
Underwriters shall be obligated to purchase the total number of such Defaulted
Bonds in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all Non-Defaulting
Underwriters.

(b) If the principal amount of the Defaulted Bonds exceeds 10% of
the principal amount of the Bonds, this Agreement shall terminate without any
liability on the part of the Company or any Non-Defaulting Underwriter.

Nothing in this Section 10 and no action taken pursuant to this Section
10 shall relieve any defaulting party from liability in respect of its
default.

In the event of a default by one or more Underwriters as set forth in
this Section 10 which does not result in a termination of this Agreement,
either the Non-Defaulting Underwriters or the Company shall have the right to
postpone the Closing Date for a period of not exceeding 7 days in order that
any required changes in the Registration Statement or the Prospectus or in any
other documents or arrangements may be effected.

SECTION 11. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Bonds to the Underwriters.

SECTION 12. Miscellaneous. This Agreement shall inure to the benefit
of the several Underwriters and the Company and with respect to the provisions
of Section 8, the officers and directors and each controlling person referred
to in Section 8, and their respective successors. Nothing in this Agreement
is intended or shall be construed to give to any other person, firm or
corporation, other than the Underwriters and the Company and their respective
successors and the controlling persons and officers and directors referred to
in Section 8 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors" as used in this Agreement shall not
include any purchaser, as such purchaser, of any Bonds from the Underwriters.

In all dealings hereunder, the Representatives shall act on behalf of
the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by the Representatives (or by any one of the Representatives
authorized by the agreement among the Underwriters relating to the Bonds to
act on behalf of all the Underwriters).

SECTION 13. Notices. All communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representatives at the address set forth in Schedule I hereto,
and notices to the Company shall be directed to it at 1900 Pennsylvania
Avenue, N. W., Washington, D. C. 20068, Attention of Ellen Sheriff Rogers,
Associate General Counsel, Assistant Secretary and Assistant Treasurer.

SECTION 14. Governing Law. This Agreement shall be governed by the
laws of the State of New York.

SECTION 15. Counterparts. This Agreement may be simultaneously
executed in counterparts, each of which when so executed shall be deemed to be
an original. Such counterparts shall together constitute one and the same
instrument.

If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed duplicate
hereof, whereupon it will become a binding agreement between the Company and
the several Underwriters in accordance with its terms.

Very truly yours,

POTOMAC ELECTRIC POWER COMPANY

The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.

By____________________________

SCHEDULE I

Underwriting Agreement dated

Registration Statements No. 33-50377 and No. 33-

Representative and Address:

Bonds:

Designation: First Mortgage Bonds, % Series
due

Principal Amount: $

Supplemental Indenture dated as of

Date of Maturity:

Interest Rate: % per annum, payable
_________ and __________ of
each year, commencing
_________

Purchase Price: % of the principal
amount thereof, plus accrued
interest, if any, from
________________ to the date
of payment and delivery

Public Offering Price: % of the principal amount thereof, plus
accrued interest, if any, from ________________
to the date of payment and delivery

Closing Date and Location:

<PAGE>

SCHEDULE II

Principal
Amount
Name of Underwriter of Bonds

Total $

<PAGE>

[LETTERHEAD OF WINTHROP, STIMSON, PUTNAM & ROBERTS]

Ladies and Gentlemen:

We have acted as counsel for you in connection with your purchase from
Potomac Electric Power Company (the "Company") of $
principal amount of its First Mortgage Bonds, % Series due (the
"Bonds") pursuant to the Underwriting Agreement, dated , 19 ,
between you and the Company (the Underwriting Agreement"). The Bonds have
been issued under the Mortgage and Deed of Trust, dated July 1, 1936,
between the Company and The Riggs National Bank of Washington, D. C., as
Trustee (the "Trustee"), as heretofore supplemented and amended, including
a Supplemental Indenture dated as of , 19 (said Mortgage and Deed of
Trust as so supplemented and amended being hereinafter referred to
collectively as the "Indenture").

We are members of the New York Bar and do not hold ourselves out as
experts on the laws of the District of Columbia or the State of Maryland or
the Commonwealths of Pennsylvania or Virginia. We understand that you are
relying and, in rendering this opinion, we have, with your consent, relied
upon the opinion of even date herewith addressed to you by William T.
Torgerson, Esq., Senior Vice President and General Counsel of the Company,
with respect to legal matters regarding the corporate authority of the
Company and other matters covered in such opinion relating to the laws of
the District of Columbia or the State of Maryland or the Commonwealths of
Pennsylvania or Virginia. We do not pass upon the organization of the
Company or the lien of the Indenture. As to such matters, it is our
understanding that you are relying on the above-mentioned opinion. We have
reviewed such opinion and believe it is satisfactory and that you and we
are justified in relying thereon.

We have examined the documents described in the list of closing papers
as having been delivered to you at the closing and such other documents and
have satisfied ourselves as to such other matters as we have deemed
necessary in order to enable us to express this opinion. We have not
examined the Bonds, except for a specimen thereof, and we have relied upon
a certificate of the Trustee as to the execution and authentication
thereof. As to various questions of fact material to this opinion, we have
relied upon representations of the Company and statements in the
Registration Statements and the Prospectus hereinafter mentioned. In such
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us and the genuineness and
conformity to original documents of documents submitted to us as certified

Page 2

or photostatic copies. As used herein, the term "Registration Statements"
means the Company's registration statement on Form S-3 (No. 33-50377) (the
"First Registration Statement") and the Company's registration statement on
Form S-3 (No. 33- ) (the "Second Registration Statement") and the term
"Prospectus" has the same meaning as the same word in the Underwriting
Agreement.

Based on the foregoing, we are of the opinion that:

1. The Bonds have been duly and validly authorized by all
necessary corporate action, have been duly and validly issued in accordance
with the provisions of the Indenture, and constitute legal, valid and
binding obligations of the Company, enforceable in accordance with their
terms, except as may be limited by bankruptcy, insolvency, reorganization
or other laws affecting the enforcement of mortgagees' and other creditors'
rights and by general principles of equity, and the Bonds are entitled to
the benefits and security afforded by the Indenture.

2. The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.

3. The Indenture has been qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act"), has been duly and validly
authorized, executed and delivered by the Company and is a legal, valid and
binding instrument, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization or other laws of general
application relating to the enforcement of mortgagees' and other creditors'
rights and by general principles of equity.

4. The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"), and to the best of our
knowledge, no stop order suspending the effectiveness of either of the
Registration Statements has been issued and no proceedings for that purpose
are pending or threatened under Section 8(d) of the 1933 Act; each of the
Registration Statements, at the time it became effective, and the
Prospectus, at the time it was filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 424(b) under the 1933 Act
(except as to the financial statements and other financial or statistical
data constituting a part thereof or incorporated by reference therein, upon
which we express no opinion), complied as to form in all material respects
with the applicable requirements of the 1933 Act and the 1939 Act and the
applicable instructions, rules and regulations of the Commission
thereunder, except that we express no opinion on the Forms T-1 filed as
exhibits thereto. The documents or portions thereof filed with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and incorporated by reference in the Registration Statement and
the Prospectus pursuant to Item 12 of Form S-3 (except as to the financial
statements and other financial or statistical data constituting a part
thereof or incorporated by reference therein, upon which we express no
opinion), at the time they were filed with the Commission, complied as to
form in all material respects with the applicable requirements of the 1934
Act and the applicable instructions, rules and regulations of the
Commission thereunder.

Page 3

5. The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and Prospectus fairly describes
the provisions thereof required to be described by the registration
statement form, except that we express no opinion as to the statements
contained under "Description of Bonds and Mortgage - Security."

6. The approval of the Public Service Commission of the District
of Columbia which is required for the valid authorization, issuance and
sale of the Bonds by the Company in accordance with the Underwriting
Agreement, has been obtained; to the best of our knowledge, such approval
is in full force and effect; no approval by the State Corporation
Commission of the Commonwealth of Virginia is necessary for the valid
authorization, issuance and sale of the Bonds by the Company in accordance
with the Underwriting Agreement; and we do not know of any other approvals
of any governmental body required in that connection (other than in
connection or in compliance with the provisions of the securities or "blue
sky" laws of any jurisdiction, as to which we express no opinion herein.)

All legal proceedings and legal opinions rendered in connection with
the issuance and sale of the Bonds, including the opinion of William T.
Torgerson, Esq. of even date herewith, are satisfactory in form to us.

In passing upon the forms of the Registration Statements and the form
of the Prospectus, we necessarily assume the correctness and completeness
of the statements made and information included therein by the Company and
take no responsibility therefor, except insofar as such statements relate
to us and as set forth in paragraph 5 above. In connection with the
Company's preparation of the Registration Statements and the Prospectus, we
have had conferences with certain of its officers and representatives, with
counsel for the Company, with Price Waterhouse LLP, the Company's
independent public accountants, and with your representatives. We did not
participate in the preparation of the documents incorporated by reference
in the Registration Statements and the Prospectus. Our examination of the
Registration Statements and the Prospectus, and our discussions in the
above-mentioned conferences, did not disclose to us any information that
gives us reason to believe that neither the First Registration Statement,
at the time the First Registration Statement became effective, nor the
Second Registration Statement, at the time the Company filed its Annual
Report on Form 10-K for the year ended December 31, 1994, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, at the time it was filed with the
Commission pursuant to Rule 424 under the 1933 Act or at the date hereof,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. We do not express any opinion or belief as to the financial
statements or other financial or statistical data constituting a part of,
or incorporated by reference in, the Registration Statements or the
Prospectus.

Page 4

This opinion is given to you solely for your use in connection with
the Underwriting Agreement and the transactions contemplated thereunder and
may not be relied upon by any other person or for any other purpose.

Very truly yours,

<PAGE>

[LETTERHEAD OF COVINGTON & BURLING]

Ladies and Gentlemen:

We have acted as special counsel to Potomac Electric Power Company
(the "Company") in connection with the issuance and sale by the Company of
$ principal amount of First Mortgage Bonds, % Series due (the
"Bonds"), which are being issued under the Mortgage and Deed of Trust dated
July 1, 1936 between the Company and The Riggs National Bank of Washington,
D. C., as Trustee (the "Trustee"), as heretofore supplemented and amended,
and as now further supplemented by a Supplemental Indenture dated as of
, 19 (the "Supplemental Indenture"; said Mortgage and Deed of
Trust as so further supplemented and amended being hereinafter referred to
as the "Indenture"), and which are being purchased by the Underwriters
named in the Underwriting Agreement dated , 19 between the
Underwriters and the Company with respect to the Bonds (the "Underwriting
Agreement"). As used herein, the term "Registration Statements" means the
registration statements of the Company on Form S-3, with file numbers 33-
50377 and 33- . All other terms used herein which are not defined
herein but which are defined, either directly or by cross-reference, in the
Underwriting Agreement are used herein with the respective meanings
assigned to such terms therein.

As counsel for the Company, we have examined originals (or copies
certified or otherwise identified to our satisfaction) of such instruments,
certificates and documents and have reviewed such questions of law as we
have deemed necessary or appropriate for the purpose of the opinion
rendered below. In such examination, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as
originals, the conformity to the original documents of all documents
submitted to us as copies and the conformity of the Bonds to the specimen
thereof attached as Exhibit A to the certificate of the Trustee of even
date herewith regarding the due authentication and delivery of the Bonds.
As to any facts material to our opinion we have, when relevant facts were
not independently established, relied upon the aforesaid certificates.

Based on the foregoing, and subject to the following limitations and
qualifications, we are of the opinion that:

1. The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the District of

Page 2

Columbia and under the laws of the Commonwealth of Virginia, and has the
corporate power and authority to execute the Underwriting Agreement and the
Indenture and to issue and sell the Bonds.

2. The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.

3. The Supplemental Indenture has been duly and validly
authorized by all necessary corporate action, has been duly and validly
executed and delivered by the Company, and, as amended by the Supplemental
Indenture, the Indenture constitutes a valid and legally binding instrument
of the Company enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights or by general principles of equity; the
Indenture has been qualified under the Trust Indenture Act of 1939, as
amended (the "1939 Act").

4. The Bonds have been duly and validly authorized by all
necessary corporate action, have been duly and validly issued in accordance
with the provisions of the Indenture, and constitute the valid and legally
binding obligations of the Company enforceable in accordance with their
terms, except as limited by bankruptcy, insolvency, reorganization or other
laws affecting enforcement of creditors' rights or by general principles of
equity, and are entitled to the benefit and security afforded by the
Indenture.

5. The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"), and to the best of our
knowledge no stop order suspending the effectiveness of either of the
Registration Statements has been issued and no proceedings for that purpose
are pending or threatened under Section 8(d) of the 1933 Act. Each of the
Registration Statements, at the time it became effective, and the
Prospectus, at the time it was filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 424 under the 1933 Act
(except for the financial statements and other financial and statistical
data and constituting a part thereof, as to which we express no opinion),
complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1939 Act, and the applicable rules and
regulations of the Commission thereunder, except that we express no opinion
on the Forms T-1 filed as exhibits thereto. The documents or portions
thereof filed with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and incorporated by reference
in the Registration Statements and the Prospectus, at the times they
were filed with the Commission, complied as to form in all material
respects with the 1934 Act, and the rules and regulations of the
Commission thereunder.

Page 3

issuance and sale of the Bonds by the Company in accordance with the
Underwriting Agreement; and we do not know of any other approvals, consents
or orders of any governmental body that are legally required as a condition
to the valid authorization and issuance of the Bonds (other than in
connection or in compliance with the provisions of the securities or "blue
sky" laws of any jurisdiction, as to which we express no opinion).

7. The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and the Prospectus fairly
describes the provisions thereof required to be described by the
registration statement form.

8. The Indenture constitutes a valid first lien or charge, to
the extent that it purports to be such, upon the interest held by the
Company in its property covered by the Indenture, subject only to such
exceptions, defects, qualifications and other matters as may be permitted
by the Indenture and to such other matters as do not materially affect the
security for the Bonds; and the Supplemental Indenture has been recorded
and filed in the only counties in which any real property subject to the
lien of the Indenture is located, and all requisite steps have been taken
to perfect the security interest of the Indenture in personal property of
the Company.

With respect to the opinion set forth in paragraph 8, we have relied
on the opinion to you of William T. Torgerson, Esq., General Counsel of the
Company, dated the date hereof.

In passing upon the forms of the Registration Statements and the form
of the Prospectus, we necessarily assume the correctness and completeness
of the statements made and information included therein by the Company and
take no responsibility therefor, except insofar as such statements relate
to us and as set forth in paragraph 7 above. In connection with the
Company's preparation of the Registration Statements and the Prospectus, we
had discussions with certain of its officers and representatives. Our
examination of the Registration Statements and the Prospectus, and our
discussions did not disclose to us any information which gives us reason to
believe that, at the time the respective Registration Statements became
effective, they contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, at
the time it was filed with the Commission pursuant to Rule 424 or at the
date hereof, contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. We do not
express any opinion or belief as to the financial statements and other
financial and statistical data constituting a part of the Registration
Statements or the Prospectus.

Very truly yours,

Covington & Burling

<PAGE>

[LETTERHEAD OF POTOMAC ELECTRIC POWER COMPANY]

Ladies and Gentlemen:

This opinion is being delivered to you in connection with the issuance
and sale by Potomac Electric Power Company (the "Company") of $
aggregate principal amount of its First Mortgage Bonds, % Series due
(the "Bonds"), which are being issued under the Mortgage and Deed of Trust
dated July 1, 1936 between the Company and The Riggs National Bank of
Washington, D. C., as Trustee (the "Trustee"), as heretofore supplemented
and amended, and as now further supplemented by a Supplemental Indenture
dated as of , 19 (said Supplemental Indenture being hereinafter
referred to as the "Supplemental Indenture" and said Mortgage and Deed of
Trust as so further supplemented and amended being hereinafter referred to
as the "Indenture") and which are being purchased by you pursuant to the
Underwriting Agreement dated , 19 between you and the Company
with respect to the Bonds (the "Underwriting Agreement"). As used herein,
the term "Registration Statements" means the registration statements of the
Company on Form S-3 filed with the Securities and Exchange Commission, with
file numbers 33-50377 and 33- . Terms used in this opinion letter
which are not defined herein but which are defined, either directly or by
cross-reference, in the Underwriting Agreement are used herein with the
respective meanings assigned to such terms therein.

As counsel for the Company, I have examined such corporate records,
certificates and other documents and such questions of law as I have
considered necessary or appropriate for the purpose of this opinion. I
have not examined the Bonds, except for the specimen thereof attached as
Exhibit A to the certificate of the Trustee of even date herewith as to due
authentication and delivery of the Bonds, have assumed that the Bonds
conform in all respects to such specimen, and have relied on such
certificate as to the due authentication and delivery of the Bonds. On the
basis of my examinations as aforesaid, I advise you that, in my opinion:

(1) The Company has been duly incorporated and is now validly
existing as a corporation in good standing under the laws of the District
of Columbia; is also now validly existing and in good standing as a
domestic corporation of the Commonwealth of Virginia; has charter power to

Page 2

carry on the business in which it is now engaged as set forth in the
Prospectus; is legally qualified to carry on in the State of Maryland the
business in which it is now engaged in said State; and is legally qualified
to carry on business within the Commonwealth of Pennsylvania, limited,
however, to its participation in the construction, ownership and operation
of the Conemaugh generating station and certain related transmission lines.

(2) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.

(3) The Indenture has been duly and validly authorized, executed
and delivered and is a valid and legally binding instrument enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, or other laws of general application relating
to the enforcement of creditors' rights and by general principles of
equity.

(4) The Bonds have been duly and validly authorized by all
necessary corporate action, have been duly and validly issued in accordance
with the provisions of the Indenture, and constitute the valid and legally
binding obligations of the Company enforceable in accordance with their
terms, except as the same may be limited as set forth in paragraph (3)
above, and are entitled to the benefit and security afforded by the
Indenture.

(5) The Registration Statements are effective under the
Securities Act of 1933, as amended (the "1933 Act"); no stop order
suspending the effectiveness of either Registration Statement has been
issued and to the best of my knowledge no proceedings for that purpose are
pending or threatened under Section 8(d) of the 1933 Act; the approval of
the Public Service Commission of the District of Columbia which is required
for the valid authorization, issuance and sale of the Bonds by the Company
in accordance with the Underwriting Agreement has been obtained and is in
full force and effect; no approval by the State Corporation Commission of
Virginia is necessary for the valid authorization, issuance and sale of the
Bonds by the Company in accordance with the Underwriting Agreement; and I
do not know of any other approvals of any governmental body required in
that connection (other than in connection or in compliance with the
securities or "blue sky" laws of any jurisdiction, as to which I express no
opinion herein). No approval, consent or order of the Maryland Public
Service Commission or any other regulatory authority of the State of
Maryland is required for the valid authorization, issuance and sale of the
Bonds by the Company in accordance with the Underwriting Agreement (other
than any applicable requirements of the Maryland Securities Law, as to
which I am not required to express an opinion).

Page 3

(6) The summary of the terms of the Indenture and the Bonds
contained in the Registration Statements and Prospectus fairly describes
the provisions thereof required to be described by the registration form.

(7) The Indenture constitutes a valid first lien or charge, to
the extent that it purports to be such, upon the interest held by the
Company in its property covered by the Indenture, subject only to such
exceptions, defects, qualifications and other matters as may be permitted
by the Indenture and to such other matters as in my opinion do not
materially affect the security for the Bonds; the Mortgage and Deed of
Trust dated July 1, 1936, and the supplements and amendments thereto other
than the Supplemental Indenture have been duly recorded and filed for
record in the only counties in which any real property subject to the lien
of the Indenture is located, and the Supplemental Indenture has also been
so recorded and filed, and all requisite steps have been taken to perfect
the security interest of the Indenture in personal property of the Company.

(8) The Company holds valid franchises, permits and other rights
adequate for the business of the Company in the territory which it serves,
and such franchises, permits and other rights contain no unduly burdensome
restrictions.

(9) There are no material pending legal proceedings (other than
ordinary routine litigation incidental to the business or as disclosed in
the Prospectus) to which the Company is a party or of which any of its
property is the subject.

(10) The Company has good and valid title in and to all of the
real property reflected in its most recent audited balance sheet,
incorporated by reference in the Registration Statements (except real
property disposed of in the ordinary course of business since that date),
free and clear of all liens, charges and encumbrances against the same,
except for the lien of the Indenture and for such liens, charges,
encumbrances, defects, qualifications and other matters affecting title,
possession or use as may be permitted by the Indenture.

I also advise you that, in my opinion, each Registration Statement and
the prospectus contained therein, as of the effective date of such
Registration Statement, appeared on its face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, and to the
extent applicable, the Securities Exchange Act of 1934, as amended, and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder and that the Supplemental Indenture appears on its face to be
appropriately responsive in all material respects to the requirements of
the 1939 Act and the applicable rules and regulations of the Securities and
Exchange Commission thereunder. I believe, moreover, that the statements
made in the Registration Statements and the Prospectus in the section
thereof entitled "Description of Bonds and Mortgage," fairly present the

Page 4

information respecting the same required to be set forth therein. Except
as specifically noted in the preceding sentence, I am not passing upon and
do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statements and Prospectus
and make no representations that I have independently verified the
accuracy, completeness or fairness of such statements, except insofar as
such statements relate to me. However, based on my examination of the
Registration Statements and Prospectus and of the documents specifically
referred to in the section thereof entitled "Description of Bonds and
Mortgage," on my general familiarity with the affairs of the Company and on
my participation in conferences with officials and other representatives
of, and other counsel for, the Company, with Price Waterhouse LLP, the
independent accountants of the Company, and with your representatives and
your counsel, I do not believe that Registration Statement (No. 33-50377),
at the time that the Company's most recent Annual Report on Form 10-K was
filed with the Commission under the 1934 Act, and Registration Statement
(No. 33- ), at the time of its effectiveness, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus at the time it was filed with, or
transmitted for filing to, the Commission pursuant to Rule 424 or at the
date hereof contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. I am expressing no opinion or belief, however, as to
the financial statements or other financial data constituting a part of the
Registration Statements or the Prospectus.

I have assumed, with your approval, but not independently verified,
that the signatures on all documents examined by me are genuine.

Very truly yours,

William T. Torgerson

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

POTOMAC ELECTRIC POWER COMPANY

1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C.

THE RIGGS NATIONAL BANK
OF WASHINGTON, D.C.

800-17TH STREET, N.W., WASHINGTON, D.C.
AS TRUSTEE

------------------

Supplemental Indenture

DATED AS OF MARCH 10, 1995

------------------

SUPPLEMENTAL TO MORTGAGE AND DEED OF TRUST

DATED JULY 1, 1936

------------------

FIRST MORTGAGE BONDS, 5 3/4% SERIES DUE 2010

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

POTOMAC ELECTRIC POWER COMPANY
SUPPLEMENTAL INDENTURE DATED AS OF MARCH 10, 1995

TABLE OF CONTENTS*

------------------

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Parties.................................................................. 1
Recitals................................................................. 1

PART I

Definitions

Facilities............................................................... 6
Loan Agreement........................................................... 6
Pollution Control Bond Indenture......................................... 7
Pollution Control Bonds.................................................. 7
Pollution Control Bond Trustee........................................... 7

PART II

Description of Bonds of 2010 Series

Section 1. General description of Bonds of 2010 Series.................. 7
Section 2. Denominations of Bonds....................................... 8
Section 3. Form of Bond................................................. 8
Form of Trustee's Certificate................................ 16

PART III

Issue of Bonds

Section 1. Limitation as to principal amount............................ 17
Section 2. Issue of $16,000,000 principal amount of Bonds of 2010 Se-
ries........................................................ 17

PART IV

Redemption

Section 1. Bonds of 2010 Series are not redeemable prior to maturity.... 18
Section 2. Bonds of 2010 Series redeemable in certain events............ 18
Section 3. Bonds of 2010 Series subject to mandatory redemption in cer-
tain events................................................. 18
Section 4. Notice of redemption......................................... 19
</TABLE>
- ---------
* The Table of Contents is not part of the Supplemental Indenture and should
not be considered as such. It is included herein only for purposes of
convenient reference.
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART V

Amendment of Indenture to Permit Qualification under Trust Indenture Act
of 1939................................................................ 19

PART VI

Amendment of Original Indenture.......................................... 20

PART VII

Additional Particular Covenants of the Company

Section 1. Company not to withdraw money pursuant to Section 2 of Arti-
cle VIII in excess of an amount equal to principal amount
of issued refundable Bonds................................. 20
Section 2. No property additions made prior to December 31, 1946 to be
used for any purpose under the Indenture................... 20

PART VIII

The Trustee

Acceptance of trusts by the Trustee...................................... 21
Trustee not responsible for validity of the Supplemental Indenture....... 21

PART IX

Miscellaneous Provisions

Payments due on non-business days........................................ 21
Credits on First Mortgage Bonds.......................................... 21
Execution of Supplemental Indenture in counterparts...................... 22
Appointment of attorneys-in-fact by parties.............................. 22
Testimonium.............................................................. 22
Execution................................................................ 23
Company's Acknowledgments................................................ 24
Trustee's Acknowledgments................................................ 26
</TABLE>

ii
<PAGE>

SUPPLEMENTAL INDENTURE, dated as of the tenth day of March, nineteen hundred
and ninety-five (1995), made by and between Potomac Electric Power Company, a
corporation organized and existing under the laws of the District of Columbia
and a domestic corporation of the Commonwealth of Virginia (hereinafter some-
times called the "Company"), party of the first part, and The Riggs National
Bank of Washington, D.C., a national banking association organized and exist-
ing under the laws of the United States of America (hereinafter sometimes
called the "Trustee"), as Trustee under the Mortgage and Deed of Trust dated
July 1, 1936, hereinafter mentioned, party of the second part;

Whereas, The Company has heretofore executed and delivered its Mortgage and
Deed of Trust, dated July 1, 1936 (hereinafter sometimes referred to as the
"Original Indenture"), to the Trustee, to secure an issue of First Mortgage
Bonds of the Company, issuable in series; and

Whereas, pursuant to the terms and provisions of the Original Indenture, in-
dentures supplemental thereto dated as of July 1, 1936, December 1, 1939, Au-
gust 1, 1940, August 1, 1942, January 1, 1948, May 1, 1949, May 1, 1950, March
1, 1952, May 15, 1953, May 16, 1955, June 1, 1956, December 1, 1958, November
16, 1959, December 1, 1960, February 15, 1963, May 15, 1964, April 1, 1966,
May 1, 1967, February 15, 1968, March 15, 1969, February 15, 1970, August 15,
1970, September 15, 1972, April 1, 1973, January 2, 1974, August 15, 1974, Au-
gust 15, 1974, June 15, 1977, July 1, 1979, June 16, 1981, June 17, 1981, De-
cember 1, 1981, August 1, 1982, October 1, 1982, April 15, 1983, November 1,
1985, March 1, 1986, November 1, 1986, March 1, 1987, September 16, 1987, May
1, 1989, August 1, 1989, April 5, 1990, May 21, 1991, May 7, 1992, September
1, 1992, November 1, 1992, March 1, 1993, March 2, 1993, July 1, 1993, August
20, 1993, September 29, 1993, September 30, 1993, October 1, 1993, February
10, 1994 and February 11, 1994 have been heretofore entered into between the
Company and the Trustee to provide, respectively, for the creation of the
first through the fifty-eighth series of Bonds thereunder and, in the case of
the supplemental indentures dated January 1, 1948, March 1, 1952, May 15,
1953, May 16, 1955, June 1, 1956, September 15, 1972, July 1, 1979, June 17,
1981, November 1, 1985, September 16, 1987, May 1, 1989, May 21, 1991, May 7,
1992, July 1, 1993 and one of the
<PAGE>

supplemental indentures dated August 15, 1974, to convey additional property;
and

Whereas, $20,000,000 principal amount of Bonds of the 3 1/4% Series due 1966
(the first series), $5,000,000 principal amount of Bonds of the 3 1/4% Series
due 1974 (the second series), $10,000,000 principal amount of Bonds of the 3
1/4% Series due 1975 (the third series), $5,000,000 principal amount of Bonds
of the 3 1/4% Series due 1977 (the fourth series), $15,000,000 principal
amount of Bonds of the 3% Series due 1983 (the fifth series), $10,000,000
principal amount of Bonds of the 2 7/8% Series due 1984 (the sixth series),
$30,000,000 principal amount of Bonds of the 2 3/4% Series due 1985 (the sev-
enth series), $15,000,000 principal amount of Bonds of the 3 1/4% Series due
1987 (the eighth series), $10,000,000 principal amount of Bonds of the 3 7/8%
Series due 1988 (the ninth series), $10,000,000 principal amount of Bonds of
the 3 3/8% Series due 1990 (the tenth series), $10,000,000 principal amount of
Bonds of the 3 5/8% Series due 1991 (the eleventh series), $25,000,000 princi-
pal amount of Bonds of the 4 5/8% Series due 1993 (the twelfth series),
$15,000,000 principal amount of Bonds of the 5 1/4% Series due 1994 (the thir-
teenth series), $45,000,000 principal amount of Bonds of the 7 3/4% Series due
2004 (the twentieth series), $35,000,000 principal amount of Bonds of the
8.85% Series due 2005 (the twenty-first series), $70,000,000 principal amount
of Bonds of the 9 1/2% Series due August 15, 2005 (the twenty-second series).
$50,000,000 principal amount of Bonds of the 7 3/4% Series due 2007 (the twen-
ty-third series), $9,000,000 principal amount of Bonds of the 5 5/8% Series
due 1997 (the twenty-fourth series), $100,000,000 principal amount of Bonds of
the 8 3/8% Series due 2009 (the twenty-fifth series), $50,000,000 principal
amount of Bonds of the 10 1/4% Series due 1981 (the twenty-sixth series),
$50,000,000 principal amount of Bonds of the 10 3/4% Series due 2004 (the
twenty-seventh series), $38,300,000 principal amount of Bonds of the 6 1/8%
Series due 2007 (the twenty-eighth series), $15,000,000 principal amount of
Bonds of the 6 1/2% Series due 2004 (the twenty-ninth series), $20,000,000
principal amount of Bonds of the 6 1/2% Series due 2007 (the thirtieth se-
ries), $7,500,000 principal amount of Bonds of the 6 5/8% Series due 2009 (the
thirty-first series), $30,000,000 principal amount of Bonds of the Floating
Rate Series due 2010 (the thirty-second series), $50,000,000 principal amount
of Bonds of the 14 1/2% Series due 1991 (the thirty-third series), $60,000,000
principal amount of

<PAGE>

Bonds of the 14 1/4% Series due 1992 (the thirty-fifth series), $50,000,000
principal amount of Bonds of the 11 7/8% Series due 1989 (the thirty-sixth se-
ries), $37,000,000 principal amount of Bonds of the 8 3/4% Series due 2010
(the thirty-seventh series), $75,000,000 principal amount of Bonds of the 11
1/4% Series due 2015 (the thirty-eighth series), $75,000,000 principal amount
of Bonds of the 9 1/4% Series due 2016 (the thirty-ninth series), $75,000,000
principal amount of Bonds of the 8 3/4% Series due 2016 (the fortieth series),
$75,000,000 principal amount of Bonds of the 8 1/4% Series due 2017 (the for-
ty-first series), $75,000,000 principal amount of Bonds of the 9% Series due
1990 (the forty-second series), $75,000,000 principal amount of Bonds of the 9
3/4% Series due 2019 (the forty-third series) and $15,200,000 principal amount
of Bonds of the 8 5/8% Series due 2019 (the forty-fourth series) have been
heretofore redeemed and retired and there are now issued and outstanding under
the Original Indenture and under the supplemental indentures referred to
above: $40,000,000 principal amount of Bonds of the 5% Series due 1995 (the
fourteenth series); $50,000,000 principal amount of Bonds of the 4 3/8% Series
due 1998 (the fifteenth series); $45,000,000 principal amount of Bonds of the
4 1/2% Series due 1999 (the sixteenth series); $15,000,000 principal amount of
Bonds of the 5 1/8% Series due 2001 (the seventeenth series); $35,000,000
principal amount of Bonds of the 5 7/8% Series due 2002 (the eighteenth se-
ries); $40,000,000 principal amount of Bonds of the 6 5/8% Series due 2003
(the nineteenth series); $16,000,000 principal amount of Bonds of the 5 5/8%
Series due 1997 (the twenty-fourth series); $50,000,000 principal amount of
Bonds of the Adjustable Rate Series due 2001 (the thirty-fourth series);
$59,800,000 principal amount of Bonds of the 8 5/8% Series due 2019 (the for-
ty-fourth series); $100,000,000 principal amount of Bonds of the 9% Series due
2000 (the forty-fifth series); $100,000,000 principal amount of Bonds of the
9% Series due 2021 (the forty-sixth series); $75,000,000 principal amount of
Bonds of the 8 1/2% Series due 2027 (the forty-seventh series); $30,000,000
principal amount of Bonds of the 6% Series due 2022 (the forty-eighth series);
$37,000,000 principal amount of Bonds of the 6 3/8% Series due 2023 (the for-
ty-ninth series); $78,000,000 principal amount of Bonds of the 6 1/2% Series
due 2008 (the fiftieth series); $40,000,000 principal amount of Bonds of the 7
1/2% Series due 2028 (the fifty-first series); $100,000,000 principal amount
of Bonds of the 7 1/4% Series due 2023 (the fifty-second series); $100,000,000
principal amount of Bonds of the 6 7/8% Series due 2023 (the fifty-third se-
ries);

<PAGE>

$50,000,000 principal amount of Bonds of the 5 5/8% Series due 2003 (the fif-
ty-fourth series); $50,000,000 principal amount of Bonds of the 5 7/8% Series
due 2008 (the fifty-fifth series); $75,000,000 principal amount of Bonds of
the 6 7/8% Series due 2024 (the fifty-sixth series); $42,500,000 principal
amount of Bonds of the 5 3/8% Series due 2024 (the fifty-seventh series); and
$38,300,000 principal amount of Bonds of the 5 3/8% Series due 2024 (the fif-
ty-eighth series); and

Whereas, for the purpose of conforming the Original Indenture to the stan-
dards prescribed by the Trust Indenture Act of 1939 or otherwise modifying
certain of the provisions of the Original Indenture, indentures supplemental
thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1,
1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October
1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986,
March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990,
May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993,
March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September
30, 1993, October 1, 1993, February 10, 1994 and February 11, 1994 have been
heretofore entered into between the Company and the Trustee, and for the pur-
pose of conveying additional property, indentures supplemental thereto dated
July 15, 1942, October 15, 1947, December 31, 1948, December 31, 1949, Febru-
ary 15, 1951, February 16, 1953, March 15, 1954, March 15, 1955, March 15,
1956, April 1, 1957, May 1, 1958, May 1, 1959, May 2, 1960, April 3, 1961, May
1, 1962, May 1, 1963, April 23, 1964, May 3, 1965, June 1, 1966, April 28,
1967, July 3, 1967, May 1, 1968, June 16, 1969, May 15, 1970, September 1,
1971, June 17, 1981, November 1, 1985, September 16, 1987, May 1, 1989, May
21, 1991, May 7, 1992 and July 1, 1993 have been heretofore entered into be-
tween the Company and the Trustee, and for the purpose of better securing and
protecting the Bonds then or thereafter issued and confirming the lien of the
Original Indenture, an indenture dated October 15, 1942 supplemental thereto
has been heretofore entered into between the Company and the Trustee; the
Original Indenture as heretofore amended and supplemented being hereinafter
referred to as the "Original Indenture as amended"; and

Whereas, the Company proposes to enter into a Loan Agreement (hereinafter de-
fined) with Prince George's County, Maryland, a political

<PAGE>

subdivision of the State of Maryland (hereinafter called the "County"), to re-
finance a portion of the cost of the acquisition of the Facilities (hereinaf-
ter defined) at the Company's Chalk Point Generating Station in Maryland
(hereinafter called the "Plant"); and

Whereas, the County proposes to issue its Pollution Control Bonds (hereinaf-
ter defined) in the principal amount of $16,000,000; and

Whereas, the Company is entitled to have authenticated and delivered addi-
tional Bonds on the basis of the net bondable value of property additions,
upon compliance with the provisions of Section 4 of Article III of the Origi-
nal Indenture as amended; and

Whereas, the Company has determined to issue to the Pollution Control Bond
Trustee (hereinafter defined), as assignee of the County, pursuant to and as
security for the Loan Agreement a fifty-ninth series of Bonds under the Origi-
nal Indenture as amended in the principal amount of $16,000,000, to be known
as First Mortgage Bonds, 5 3/4% Series due 2010 (hereinafter called "Bonds of
2010 Series"); and

Whereas, the Original Indenture as amended provides that certain terms and
provisions, as determined by the Board of Directors of the Company, of the
Bonds of any particular series may be expressed in and provided by the execu-
tion of an appropriate supplemental indenture; and

Whereas, the Original Indenture as amended provides that the Company and the
Trustee may enter into indentures supplemental thereto to add to the covenants
and agreements of the Company contained therein other covenants and agreements
thereafter to be observed; and to surrender any right or power reserved to or
conferred upon the Company in the Original Indenture as amended; and

Whereas, the Company, in the exercise of the powers and authority conferred
upon and reserved to it under the provisions of the Original Indenture as
amended and pursuant to appropriate resolutions of its Board of Directors, has
duly resolved and determined to make, execute and deliver to the Trustee a
Supplemental Indenture in the form hereof for the purposes herein provided;
and

Whereas, all conditions and requirements necessary to make this Supplemental
Indenture a valid, binding and legal instrument have been

<PAGE>

done, performed and fulfilled, and the execution and delivery hereof have been
in all respects duly authorized;

Now, Therefore, This Indenture Witnesseth:

That Potomac Electric Power Company, in consideration of the premises and of
One Dollar to it duly paid by the Trustee at or before the ensealing and de-
livery of these presents, and for other valuable considerations, the receipt
whereof is hereby acknowledged, hereby covenants, declares and agrees with the
Trustee and its successors in the trust under the Original Indenture as amend-
ed, for the benefit of those who hold the Bonds, or any of them, issued or to
be issued hereunder or under the Original Indenture as amended, as follows:

PART I.

Definitions.

The terms defined in this Part I shall, for all purposes of this Supplemental
Indenture, have the meanings herein specified, unless the context otherwise
requires:

Facilities:

The term "Facilities" shall mean the pollution control project at the Plant,
described in Exhibit A to the Loan Agreement, and related improvements and any
substitutions therefor, being acquired by the Company and financed under the
Loan Agreement for operation by it as pollution control facilities.

The term "acquisition," when used with regard to the Facilities, shall in-
clude, without limitation, the construction, installation and equipping of the
Facilities.

Loan Agreement:

The term "Loan Agreement" shall mean the Loan Agreement dated as of March 15,
1995, entered into between the County and the Company, and any and all modifi-
cations, alterations, amendments and supplements thereto.

<PAGE>

Pollution Control Bond Indenture:

The term "Pollution Control Bond Indenture" shall mean the Indenture of
Trust, dated as of March 15, 1995, between the County and the Pollution Con-
trol Bond Trustee, pursuant to which the Pollution Control Bonds are issued,
and any indenture supplemental thereto.

Pollution Control Bonds:

The term "Pollution Control Bonds" shall mean the Pollution Control Revenue
Refunding Bonds (Potomac Electric Project) of the County authenticated and de-
livered pursuant to the Pollution Control Bond Indenture. The term "Pollution
Control Bonds, 1995 Series" shall mean the series of Pollution Control Revenue
Refunding Bonds in the aggregate principal amount of $16,000,000 delivered
initially.

Pollution Control Bond Trustee:

The term "Pollution Control Bond Trustee" shall mean NationsBank, N.A., a na-
tional banking association duly organized and existing under the laws of the
United States of America, or its successors, as Trustee under the Pollution
Control Bond Indenture.

PART II.

Description of Bonds of 2010 Series.

Section 1. The fifty-ninth series of Bonds to be executed, authenticated and
delivered under and secured by the Original Indenture as amended shall be
Bonds of 2010 Series. The Bonds of 2010 Series shall, subject to the provi-
sions of Section 1 of Article II of the Original Indenture as amended, be des-
ignated as "First Mortgage Bonds, 5 3/4% Series due 2010" of the Company. The
Bonds of 2010 Series shall be executed, authenticated and delivered in accor-
dance with the provisions of, and shall in all respects be subject to, all of
the terms, conditions and covenants of the Original Indenture as amended, ex-
cept in so far as the terms and provisions of the Original Indenture as
amended are amended or modified by this Supplemental Indenture.

<PAGE>

The Bonds of 2010 Series shall mature March 15, 2010 and shall bear interest
at the rate of five and three-quarters percent (5 3/4%) per annum, payable
semiannually on the fifteenth day of March and the fifteenth day of September
in each year (each such March 15 and September 15 being hereinafter called an
"interest payment date"). The Bonds of 2010 Series shall be payable as to
principal and interest in lawful money of the United States of America in im-
mediately available funds, and shall be payable (the interest as well as the
principal thereof) at the address of the registered owner of such Bonds of
2010 Series appearing on the transfer register of the Company.

Every Bond of 2010 Series shall be dated as of the date of its authentication
and delivery, or if that is an interest payment date, the next day, and shall
bear interest from the interest payment date next preceding its date or the
date of delivery of the initial Bonds of 2010 Series, whichever is later.

Section 2. The Bonds of 2010 Series shall be registered Bonds without coupons
of denominations of any multiple of $5,000, numbered consecutively upwards
from R1.

Section 3. The Bonds of 2010 Series, and the Trustee's certificate to be en-
dorsed on the Bonds of 2010 Series, shall be substantially in the following
forms, respectively:

[Form Of Bond]

This Bond is not transferable except as provided in the Pollution Control
Bond Indenture, as defined herein.

POTOMAC ELECTRIC POWER COMPANY
(A District of Columbia and Virginia corporation)
First Mortgage Bond, 5 3/4% Series Due 2010

No. R- $

Potomac Electric Power Company, a corporation organized and existing under
the laws of the District of Columbia and a domestic corporation of the Common-
wealth of Virginia (hereinafter called the "Com-

<PAGE>

pany", which term shall include any successor corporation as defined in the
Amended Indenture hereinafter referred to), for value received, hereby prom-
ises to pay to or registered assigns, the sum of dollars, on
the fifteenth day of March, 2010, or on such other date as may be required
herein, in lawful money of the United States of America in immediately avail-
able funds, and to pay interest thereon in like money from the later of March
15, 1995 or the interest payment date (March 15 or September 15) next preced-
ing the date of this Bond, or if the Company shall default in the payment of
interest due on such interest payment date, then from the next preceding in-
terest payment date to which interest has been paid or March 15, 1995, which-
ever is later, at the rate of five and three-quarters percent (5 3/4%) per an-
num, payable semiannually, on the fifteenth day of March and the fifteenth day
of September in each year until maturity, or, if this Bond shall be duly
called for redemption, until the redemption date, or, if the Company shall de-
fault in the payment of the principal hereof, until the Company's obligation
with respect to the payment of such principal shall be discharged as provided
in the Amended Indenture. Both principal of, and interest on, this Bond are
payable at the address of the registered owner hereof appearing on the trans-
fer register of the Company. To the extent permitted by law, the Company shall
pay interest on any overdue installment of interest hereunder at the rate of
five and three-quarters percent (5 3/4%) per annum, or at such lesser maximum
rate of interest as is permitted by law at any such time.

This Bond is one of a duly authorized issue of Bonds of the Company (herein-
after called the "Bonds") in unlimited aggregate principal amount of the se-
ries hereinafter specified, all issued and to be issued under and equally se-
cured (except in so far as any purchase or sinking fund or analogous provi-
sions for any particular series of Bonds, established by any indenture supple-
mental to the Amended Indenture hereinafter mentioned, may afford additional
security for such Bonds) by a Mortgage and Deed of Trust, dated July 1, 1936,
executed by the Company to The Riggs National Bank of Washington, D.C. (herein
called the "Trustee"), as trustee, as amended by indentures supplemental
thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1,
1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October
1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, Novem-

<PAGE>

ber 1, 1986, March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989,
April 5, 1990, May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992,
March 1, 1993, March 2, 1993, July 1, 1993, August 20, 1993, September 29,
1993, September 30, 1993, October 1, 1993, February 10, 1994 and February 11,
1994 (said mortgage and deed of trust, as so amended, being herein called the
"Amended Indenture") and all indentures supplemental thereto, to which Amended
Indenture and supplemental indentures reference is hereby made for a descrip-
tion of the properties mortgaged and pledged, the nature and extent of the se-
curity, the rights of the owners of the Bonds and of the Trustee in respect
thereto, and the terms and conditions upon which the Bonds are, and are to be,
secured. To the extent permitted by, and as provided in, the Amended Inden-
ture, modifications or alterations of the Amended Indenture, or of any inden-
ture supplemental thereto, and of the rights and obligations of the Company
and of the holders of the Bonds may be made with the consent of the Company by
an affirmative vote of not less than 80% in amount of the Bonds entitled to
vote then outstanding, at a meeting of Bondholders called and held as provided
in the Amended Indenture, and by an affirmative vote of not less than 80% in
amount of the Bonds of any series entitled to vote then outstanding and af-
fected by such modification or alteration, in case one or more but less than
all of the series of Bonds then outstanding under the Amended Indenture are so
affected; provided, however, that no such modification or alteration shall be
made which will affect the terms of payment of the principal of, or interest
on, this Bond, which are unconditional, or which reduces the percentage of
Bonds the affirmative vote of which is required for the making of such modifi-
cations or alterations. The Company is proposing an amendment to the Amended
Indenture which would replace "80%" with "60%" in the preceding sentence,
which amendment will become effective upon the consent or agreement thereto of
the holders of all the outstanding Bonds. The holder of this Bond will be
deemed to have approved such amendment. The Bonds may be issued in series, for
various principal sums, may mature at different times, may bear interest at
different rates and may otherwise vary as in the Amended Indenture provided.

This Bond is one of a series designated as the "First Mortgage Bonds, 5 3/4%
Series due 2010" (herein called the "Bonds of 5 3/4% Series due

<PAGE>

2010") of the Company, limited in aggregate principal amount to $16,000,000
issued under and secured by the Amended Indenture and all indentures supple-
mental thereto and described in the indenture (herein called the "Supplemental
Indenture of March 10, 1995") dated as of March 10, 1995, between the Company
and the Trustee, supplemental to the Amended Indenture. Unless otherwise de-
fined herein, the terms used herein shall have the same meanings as in the
Supplemental Indenture of March 10, 1995.

The Bonds of 5 3/4% Series due 2010 shall not be called for redemption by the
Company prior to maturity except as provided herein and in the Supplemental
Indenture of March 10, 1995. The Bonds of 5 3/4% Series due 2010 are subject
to redemption in whole, but not in part, at any time, at the option of the
Company upon payment of a redemption price equal to 100% of the principal
amount thereof plus accrued interest to the redemption date, without premium,
upon the occurrence of any of the following events:

(a) damage or destruction to the Company's Chalk Point Generating Station
in Maryland (the "Plant") or the pollution control project at the Plant (the
"Facilities") to such extent that in the opinion of both the Company's board
of directors (expressed in a resolution) and an architect or engineer ac-
ceptable to NationsBank, N.A., (the "Pollution Control Bond Trustee"), as
trustee under the Indenture of Trust, dated as of March 15, 1995 (the "Pol-
lution Control Bond Indenture") between Prince George's County, Maryland
(the "County") and the Pollution Control Bond Trustee, both opinions filed
with the County and the Pollution Control Bond Trustee, (1) the Plant or the
Facilities, as the case may be, cannot be reasonably repaired, rebuilt or
restored within a period of six months to its condition immediately preced-
ing such damage or destruction, or (2) the Company is thereby prevented from
carrying on its normal operations at the Plant for a period of six months;
or

(b) loss of title to or use of a substantial part of the Plant or the Fa-
cilities as a result of the exercise of the power of eminent domain which,
in the opinion of both the Company's board of directors (expressed in a res-
olution) and an architect or engineer acceptable to the Pollution Control
Bond Trustee, both opinions filed with the County and the Pollution Control
Bond Trustee, results or is likely to result in the Company thereby being
prevented from carrying on its normal operations therein for a period of six
months; or

<PAGE>

(c) a change in the Constitution of the State of Maryland or the Constitu-
tion of the United States of America or legislative or administrative action
(whether local, state or Federal) or a final decree, judgment or order of
any court or administrative body (whether local, state or Federal) which
causes the Loan Agreement, dated as of March 15, 1995, between the Company
and the County (the "Loan Agreement"), to become void or unenforceable or
impossible of performance in accordance with the intent and purpose of the
parties as expressed therein or unreasonable burdens or excessive liabili-
ties to be imposed upon the County or the Company with respect to the Plant
or the Facilities or the operation thereof, including but not limited to the
imposition of Federal, state or other ad valorem property, income or other
taxes other than ad valorem taxes presently levied upon privately owned
property used for the same general purpose as the Facilities; or

(d) changes in the economic availability of raw materials, operating sup-
plies, energy sources or supplies, or facilities necessary for the operation
of the Facilities for the purposes of pollution control "facilities" as de-
fined in the Maryland Economic Development Revenue Bond Act, or necessary
for the operation of the Plant, occur or such technological or other changes
which the Company cannot reasonably overcome or control and which in the
reasonable judgment of the Company's board of directors (expressed in a res-
olution) render the Facilities or the Plant uneconomic or obsolete for such
purposes; or

(e) any court or administrative body shall enter a judgment, order or de-
cree, or shall take administrative action, requiring the Company to cease
all or any substantial part of its operation serviced by the Facilities to
the extent the Company is or will be prevented from carrying on its normal
operations at the Plant for a period of six months;

provided, however, that to exercise such option to redeem the Company shall,
file the required resolutions and opinions or a certificate, as the case may
be, within nine months after the event permitting its exercise, giving notice
to the County and the Pollution Control Bond Trustee, and shall specify a date
not less than 45 nor more than 90 days thereafter for redemption.

The Bonds of 5 3/4% Series due 2010 are subject to mandatory redemption at
any time as a whole or, as hereinafter provided, in part at 100% of the prin-
cipal amount thereof plus accrued interest to the redemption date, without
premium, in the event that the Pollution Control Bond Trustee shall (a) de-
liver a notification to the Trustee and the Company

<PAGE>

that it has been finally determined by the Internal Revenue Service or a court
of competent jurisdiction that, as a result of a failure by the Company to ob-
serve any covenant or agreement in the Loan Agreement or contravening any rep-
resentation contained in the Loan Agreement, the interest payable on the Pol-
lution Control Bonds, 1995 Series issued pursuant to the Pollution Control
Bond Indenture is includable for Federal income tax purposes in the gross in-
come of any holder of a Pollution Control Bond, 1995 Series, other than a
holder who is a "substantial user" of the Facilities or a "related person," as
provided in Section 147(a) of the Internal Revenue Code of 1986, as amended,
or any applicable predecessor statutory provisions and (b) in conjunction
therewith, make a demand for such redemption. No such determination will be
considered final for the purpose of any mandatory redemption pursuant to this
paragraph unless the Company shall have been given written notice as provided
in the Pollution Control Bond Indenture and, if it shall have so desired, been
afforded the opportunity to contest the same, either directly or in the name
of any holder of a Pollution Control Bond, 1995 Series, and until conclusion
of any appellate review with respect thereto, if sought. Any such redemption
shall be on any date within 120 days from the time of such final determina-
tion. Upon the finality of such determination, the Bonds of 5 3/4% Series due
2010 shall be redeemed in whole unless, as a result of an opinion rendered by
Bond Counsel (as defined in the Pollution Control Bond Indenture) pursuant to
Section 2.05(b) of the Pollution Control Bond Indenture, the Pollution Control
Bonds shall be redeemed only in part, in which event an equal principal amount
of Bonds of 5 3/4% Series due 2010 shall also be redeemed. If such redemption
shall occur in accordance with the terms hereof, then such failure by the Com-
pany to observe such covenant, agreement or representation in the Loan Agree-
ment shall not in and of itself constitute an Event of Default under the Pol-
lution Control Bond Indenture, the Bonds of 5 3/4% Series due 2010, the
Amended Indenture or the Supplemental Indenture of March 10, 1995.

The Bonds of 5 3/4% Series due 2010 are also subject to mandatory redemption
at any time, as a whole, at 100% of the principal amount thereof plus accrued
interest to the redemption date, without premium in the event the Trustee
shall receive a written demand (hereinafter called "Default Redemption De-
mand") from the Pollution Control Bond

<PAGE>

Trustee for redemption stating that the principal of all Pollution Control
Bonds, 1995 Series then outstanding under the Pollution Control Bond Indenture
has been declared to be immediately due and payable pursuant to the provisions
of Section 9.01 thereof. The Trustee shall within 10 days of receiving the De-
fault Redemption Demand mail a copy to the Company stamped or otherwise marked
to show the date of receipt by the Trustee. The Company shall fix a redemption
date and shall mail the Trustee notice of such selection at least 15 days
prior to the date so selected. Such redemption date may be any day not more
than 60 days after the receipt of the Default Redemption Demand by the Trust-
ee. If the Trustee does not receive notice of such selection by the Company
within 45 days after the Default Redemption Demand was received by the Trust-
ee, then the redemption date shall be the 60th day after such receipt. The
Trustee shall mail notice of the redemption date (hereinafter called the "De-
fault Redemption Notice") to the Pollution Control Bond Trustee not more than
10 nor less than 5 days prior to the date fixed for redemption. The Trustee
shall not mail any Default Redemption Notice (and no such redemption shall be
made) if the Trustee receives a written cancellation of the Default Redemption
Demand from the Pollution Control Bond Trustee prior to the mailing of the De-
fault Redemption Notice. Notwithstanding any other provision contained in this
Bond, or the Amended Indenture, the holder of this Bond by the acceptance of
such Bond hereby waives any longer notice of redemption.

In case an event of default, as defined in the Amended Indenture, shall oc-
cur, the principal of all the Bonds at any such time outstanding under the
Amended Indenture may be declared or may become due and payable, upon the con-
ditions and in the manner and with the effect provided in the Amended Inden-
ture. The Amended Indenture provides that such declaration may in certain
events be waived by the holders of a majority in principal amount of the Bonds
entitled to vote then outstanding.

Subject to the restriction on transfer appearing hereon, this Bond is trans-
ferable by the registered owner hereof, in person or by duly authorized attor-
ney, on the books of the Company to be kept for that purpose at the agency of
the Company in the City of Washington, D.C., upon

<PAGE>

surrender and cancellation of this Bond and on presentation of a duly executed
written instrument of transfer, and thereupon a new Bond or Bonds of the same
series, of the same aggregate principal amount and in authorized denominations
will be issued to the transferee in exchange therefor; and this Bond, with or
without others of the same series, may in like manner be exchanged for one or
more new Bonds of the same series of other authorized denominations but of the
same aggregate principal amount; all subject to the terms and conditions set
forth in the Amended Indenture.

No recourse shall be had for the payment of the principal of, or the interest
on, this Bond, or for any claim based hereon or otherwise in respect hereof or
of the Amended Indenture or any indenture supplemental thereto, against any
incorporator, or against any stockholder, director or officer, past, present
or future, of the Company or of any predecessor or successor corporation, ei-
ther directly or through the Company or any such predecessor or successor cor-
poration, whether for amounts unpaid on stock subscriptions or by virtue of
any constitution, statute or rule of law, or by the enforcement of any assess-
ment or penalty or otherwise, all such liability, whether at common law, in
equity, by any constitution, statute or otherwise, of incorporators, stock-
holders, directors or officers being released by every owner hereof by the ac-
ceptance of this Bond and as part of the consideration for the issue hereof,
and being likewise released by the terms of the Amended Indenture.

This Bond shall not be entitled to any benefit under the Amended Indenture or
any indenture supplemental thereto, or become valid or obligatory for any pur-
pose, until The Riggs National Bank of Washington, D.C., the Trustee under the
Amended Indenture, or a successor trustee thereto under the Amended Indenture,
shall have signed the form of certificate endorsed hereon.

<PAGE>

In Witness Whereof, Potomac Electric Power Company has caused this Bond to be
signed in its name by the signature (or a facsimile thereof) of its President
or a Vice President, and its corporate seal (or a facsimile thereof) to be
hereto affixed and attested by the facsimile signature of its Secretary or an
Assistant Secretary.

Dated,

Potomac Electric Power Company

By ............................................
Vice President

Attest:

...................................
Secretary

[form of trustee's certificate]

This Bond is one of the Bonds, of the series designated therein, described in
the within-mentioned Amended Indenture and the Supplemental Indenture of March
10, 1995.

The Riggs National Bank of Washington, D.C.
Trustee

By ............................................
Authorized Officer

<PAGE>

PART III.

Issue of Bonds.

Section 1. Except for Bonds of 2010 Series issued pursuant to Section 13 of
Article II of the Original Indenture as amended, the principal amount of Bonds
of 2010 Series which may be authenticated and delivered hereunder is limited
to the aggregate principal amount of Sixteen Million Dollars ($16,000,000).

Section 2. Bonds of 2010 Series in the aggregate principal amount of Sixteen
Million Dollars ($16,000,000), may at any time subsequent to the execution
hereof be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered (either before or after the record-
ing hereof) to or upon the order of the Company evidenced by a writing or
writings, signed by its President or one of its Vice Presidents and its Trea-
surer or one of its Assistant Treasurers, at such time or times as may be re-
quested by the Company subsequent to the receipt by the Trustee of

(1) the certified resolution and the officers' certificate required by Sec-
tion 3(a) and Section 3(b) of Article III of the Original Indenture as
amended;

(2) the opinion of counsel required by Section 3(c) of Article III of the
Original Indenture as amended;

(3) cash, if any, in the amount required to be deposited by Section 3(d) of
Article III of the Original Indenture as amended, which shall be held and
applied by the Trustee as provided in said Section 3(d);

(4) the certificates, instruments, opinions of counsel, prior lien bonds
and cash, if any, required by Section 4 of Article III of the Original In-
denture as amended, except that, as required by Part VII of this Supplemen-
tal Indenture, property additions purchased, constructed or otherwise ac-
quired on or before December 31, 1946 shall not be made the basis for the
authentication and delivery of Bonds of 2010 Series; and

(5) the certificates and opinions required by Article XVIII of the Original
Indenture as amended.

<PAGE>

PART IV.

Redemption.

Section 1. The Bonds of 2010 Series shall not be redeemable by the Company
prior to maturity.

Section 2. Notwithstanding the provision of Section 1 of this Part IV, in the
event of (a) damage or destruction of the Company's Plant or the Facilities,
(b) condemnation of the Company's Plant or the Facilities, (c) constitutional,
legislative, judicial or administrative action voiding the Loan Agreement or
imposing unreasonable burdens or excessive liabilities on the Company, includ-
ing the imposition of certain taxes, (d) changes in the economic or technolog-
ical status of the Plant or the Facilities rendering the Plant obsolete or un-
economic or (e) court or administrative action requiring the Company to cease
all or any substantial part of its operations serviced by the Facilities for a
period of six months, all as provided in the form of Bond contained in Section
3 of Part II hereof, the Bonds of 2010 Series shall, in accordance with the
provisions of Article V of the Original Indenture as amended, be redeemable,
as a whole at any time prior to maturity, in the manner and upon the condi-
tions provided in said form of Bond, upon payment of a redemption price equal
to 100% of the principal amount thereof together with accrued interest to the
redemption date, without premium.

Section 3. Notwithstanding the provision of Section 1 of this Part IV, in the
event the Trustee shall receive from the Pollution Control Bond Trustee either

(a) a notification that the Bonds are subject to mandatory redemption, pur-
suant to Section 2.05(b) of the Pollution Control Bond Indenture; or

(b) a Default Redemption Demand (as defined in the form of Bond contained
in Section 3 of Part II hereof);

the Bonds of 2010 Series shall be subject to mandatory redemption, as a whole
at any time prior to maturity, or, in the case of clause (a) above, in part at
any time, in each case in the manner and upon the conditions provided in said
form of Bond, at 100% of the principal amount thereof together with accrued
interest to the redemption date, without premium.

<PAGE>

Section 4. In accordance with the provisions of Article V of the Original In-
denture as amended, notice of redemption (other than in a redemption in the
event of a Default Redemption Demand) shall be delivered at least forty-five
days and not more than sixty days prior to the date of redemption, to the reg-
istered owner of the Bonds of 2010 Series at its address as the same shall ap-
pear on the transfer register of the Company; provided, however, that such
prior notice shall be deemed to have been duly given with respect to all or
any part of the Bonds whenever the Company shall have complied with all of its
obligations, as set forth in Article VII of the Pollution Control Bond Inden-
ture, with respect to redemption of all or such part of the Pollution Control
Bonds.

PART V.

Amendment of Indenture to Permit Qualification
Under Trust Indenture Act of 1939.

The Company and the Trustee, from time to time and at any time, without any
vote or consent of the holders of the Bonds of 2010 Series, may enter into
such indentures supplemental to the Original Indenture as amended as may or
shall by them be deemed necessary or desirable to add to or modify or amend
any of the provisions of the Original Indenture so as to permit the qualifica-
tion of the Original Indenture as amended under the Trust Indenture Act of
1939.

Except to the extent specifically provided herein, no provision of this Sup-
plemental Indenture is intended to modify, and the parties hereto do hereby
adopt and confirm, the provisions of Section 318(c) of the Trust Indenture Act
of 1939 which amend and supersede provisions of the Original Indenture, as
supplemented, in effect prior to November 15, 1990.

<PAGE>

PART VI.

Amendment of Original Indenture.

Notwithstanding any other provisions of the Original Indenture as amended,
the holders of the Bonds of 2010 Series, by their holding of such Bonds, are
deemed to have approved the following amendment to the Original Indenture as
amended and to have authorized the Trustee to take any action necessary to ev-
idence or effectuate such approval:

Sections 5 and 6 of Article XV of the Original Indenture as amended are
hereby amended by changing the words and figures "eighty percent. (80%)" to
the words and figures "sixty percent. (60%)" wherever in such Sections such
words and figures occur.

PART VII.

Additional Particular Covenants of the Company.

The Company hereby covenants, warrants and agrees that so long as any Bonds
of 2010 Series are outstanding:

Section 1. The Company will not withdraw, pursuant to the provisions of Sec-
tion 2 of Article VIII of the Original Indenture as amended, any moneys held
by the Trustee as part of the trust estate in excess of an amount equal to the
aggregate principal amount of such of the refundable Bonds as were theretofore
issued by the Company; and that upon any such withdrawal by the Company re-
fundable Bonds equal in aggregate principal amount to the amount so withdrawn
shall be deemed to have been made the basis for such withdrawal.

Section 2. Property additions purchased, constructed or otherwise acquired on
or before December 31, 1946 shall not be made the basis for the authentication
and delivery of Bonds, or the withdrawal of cash, or the reduction of the
amount of cash required to be paid to the Trustee under any provision of the
Indenture.

<PAGE>

PART VIII.

The Trustee.

The Trustee hereby accepts the trusts hereby declared and provided and agrees
to perform the same upon the terms and conditions in the Original Indenture as
amended set forth and upon the following terms and conditions:

The Trustee shall not be responsible in any manner whatsoever for or in re-
spect of the validity or sufficiency of this Supplemental Indenture or the due
execution hereof by the Company or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely. In general, each
and every term and condition contained in Article XIII of the Original Inden-
ture as amended shall apply to this Supplemental Indenture with the same force
and effect as if the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate to make the same
conform to this Supplemental Indenture.

PART IX.
Miscellaneous Provisions.

If any payment of principal of, or installment of interest on, the Bonds of
2010 Series shall be due and payable on any day which is not a business day,
such payment shall become due and payable on the next succeeding business day,
a "business day" being any Monday, Tuesday, Wednesday, Thursday, or Friday
other than any such day that is a legal holiday or a day on which commercial
banking institutions in the State of Maryland are authorized or obligated to
close.

As provided in the Pollution Control Bond Indenture, any amounts of money
held in the Bond Fund provided in the Pollution Control Bond Indenture and
available for such purpose, which are at the request of the Company applied to
the payment of the principal of, premium, if any, and interest on the Pollu-
tion Control Bonds on any payment or redemption date, shall be applied as a
credit on amounts otherwise due under the Bonds of 2010 Series and shall pro
tanto discharge the Company's obligations to pay such amounts otherwise due;
provided that the

<PAGE>

amount of such credit shall be established by an officer's certificate (as de-
fined in the Original Indenture as amended), concurred in by the Pollution
Control Bond Trustee, which shall be delivered prior to the application of any
such credit.

This Supplemental Indenture may be simultaneously executed in any number of
counterparts, each of which when so executed shall be deemed to be an origi-
nal; but such counterparts shall together constitute but one and the same in-
strument.

Potomac Electric Power Company hereby constitutes and appoints Dennis R.
Wraase, one of its Senior Vice Presidents, to be its true and lawful attorney-
in-fact, for it and in its name to appear before any officer authorized by law
to take and certify acknowledgments of deeds to be recorded in the District of
Columbia, in the State of Maryland, in the Commonwealth of Virginia, and in
the Commonwealth of Pennsylvania and to acknowledge and deliver these presents
as the act and deed of said Potomac Electric Power Company.

The Riggs National Bank of Washington, D.C., hereby constitutes and appoints
James B. Lynn, one of its Vice Presidents, to be its true and lawful attorney-
in-fact, for it and in its name to appear before any officer authorized by law
to take and certify acknowledgements of deeds to be recorded in the District
of Columbia, in the State of Maryland, in the Commonwealth of Virginia, and in
the Commonwealth of Pennsylvania and to acknowledge and deliver these presents
as the act and deed of said The Riggs National Bank of Washington, D.C.

In Witness Whereof, said Potomac Electric Power Company has caused this Sup-
plemental Indenture to be executed on its behalf by its President or one of
its Vice Presidents and its corporate seal to be hereto affixed and said seal
and this Supplemental Indenture to be attested by its Secretary or one of its
Assistant Secretaries; and said The Riggs National Bank of Washington, D.C.,
in evidence of its acceptance of the trust hereby created, has caused this
Supplemental Indenture to be executed on its behalf by its President or one of
its Vice Presidents, and its corporate seal to be hereto affixed and said seal
and this Supplemental

<PAGE>

Indenture to be attested by one of its Corporate Trust Officers, all as of the
10th day of March, One thousand nine hundred and ninety-five.

Potomac Electric Power Company

(Corporate Seal)

By .........................................
DENNIS R. WRAASE,
Senior Vice President

Attested:
...................................
MARY T. HOWARD,
Assistant Secretary

Signed, sealed and delivered by Potomac Electric Power Company in the
presence of:

...................................

...................................
As Witnesses

The Riggs National Bank of Washington, D.C.

(Corporate Seal)

By .........................................
JAMES B. LYNN,
Vice President

Attested:
...................................
Senior Corporate Trust Officer

Signed, sealed and delivered by The Riggs National Bank of Washington, D.C.
in the presence of:

...................................

...................................
As Witnesses

<PAGE>

City of Washington, +++
District of Columbia, ++ ss.:
+++

I, , a Notary Public in and for the District of Columbia, United
States of America, whose commission as such will expire , do hereby certify
that Dennis R. Wraase and Mary T. Howard, whose names as Senior Vice President
and Assistant Secretary, respectively, of Potomac Electric Power Company, a
corporation, are signed to the foregoing and hereto attached deed, bearing
date as of the 10th day of March, 1995, personally appeared this day before me
in my District aforesaid and acknowledged themselves to be, respectively, a
Senior Vice President and an Assistant Secretary of Potomac Electric Power
Company, and that they as such, being authorized so to do, executed the said
deed by signing the name of Potomac Electric Power Company by Dennis R.
Wraase, as Senior Vice President, and attested by Mary T. Howard, as Assistant
Secretary, and acknowledged the same before me in my District aforesaid and
acknowledged the foregoing instrument to be the act and deed of Potomac Elec-
tric Power Company.

Given under my hand and official seal this day of March, 1995.

(Notarial Seal)

............................................
Notary Public
District of Columbia

<PAGE>

City of Washington, +++
District of Columbia, ++ ss.:
+++

I, , a Notary Public in and for the District of Columbia, United
States of America, do hereby certify that Dennis R. Wraase, a Senior Vice
President of Potomac Electric Power Company, a corporation, one of the parties
to the foregoing instrument bearing date as of the 10th day of March, 1995,
and hereto annexed, this day personally appeared before me in the City of
Washington, the said Dennis R. Wraase being personally well known to me as the
person who executed the said instrument as a Senior Vice President of and on
behalf of said Potomac Electric Power Company and known to me to be the attor-
ney-in-fact duly appointed therein to acknowledge and deliver said instrument
on behalf of said corporation, and, as such attorney-in-fact, he acknowledged
said instrument to be the act and deed of said Potomac Electric Power Company,
and delivered the same as such. I further certify that the said Dennis R.
Wraase, being by me duly sworn, did depose and say that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal and was so affixed by order of the Board of Directors of said corpora-
tion; and that he signed his name thereto by like order. My commission expires

Given under my hand and official seal this day of March, 1995.

(Notarial Seal)

............................................
Notary Public
District of Columbia

<PAGE>

City of Washington, +++
District of Columbia, ++ ss.:
+++

I, , a Notary Public in and for the District of Columbia, United
States of America, do hereby certify that James B. Lynn and O. Clinton Jones,
III, whose names as Vice President and Senior Corporate Trust Officer, respec-
tively, of The Riggs National Bank of Washington, D.C., a corporation, are
signed to the foregoing and hereto attached deed, bearing date as of the 10th
day of March, 1995, personally appeared before me this day in my District
aforesaid and acknowledged themselves to be, respectively, a Vice President
and a Senior Corporate Trust Officer of The Riggs National Bank of Washington,
D.C., and that they as such, being authorized so to do, executed the said deed
by signing the name of The Riggs National Bank of Washington, D.C. by James B.
Lynn as Vice President, and attested by O. Clinton Jones, III, as Senior Cor-
porate Trust Officer, and acknowledged the same before me in my District
aforesaid and acknowledged the foregoing instrument to be the act and deed of
The Riggs National Bank of Washington, D.C., as therein set forth.

Given under my hand and notarial seal this day of March, 1995.

(Notarial Seal)

............................................
Notary Public
District of Columbia

My Commission Expires

<PAGE>

City of Washington, +++
District of Columbia, ++ ss.:
+++

James B. Lynn, of full age, being sworn according to law, on his oath deposes
and says that he is a Vice President of The Riggs National Bank of Washington,
D.C., the Trustee named in the foregoing Supplemental Indenture, dated as of
the 10th day of March, 1995, that he is the agent of said Trustee for the pur-
pose of perfecting such Supplemental Indenture and that the consideration in
the Original Indenture referred to therein and in all indentures supplemental
to said Original Indenture, including the foregoing Supplemental Indenture, is
true and bona fide as therein set forth.

............................................
James B. Lynn

Subscribed and sworn to before me
this day of March, 1995.

...................................
Notary Public
District of Columbia

My Commission Expires

(Notarial Seal)

<PAGE>

City of Washington, +++
District of Columbia, ++ ss.:
+++

I, , a Notary Public in and for the District of Columbia, United States
of America, do hereby certify that James B. Lynn a Vice President of The Riggs
National Bank of Washington, D.C., a corporation, one of the parties to the
foregoing instrument bearing date as of the 10th day of March, 1995, and
hereto annexed, this day personally appeared before me in the City of Washing-
ton, the said James B. Lynn, being personally well known to me as the person
who executed the said instrument as a Vice President of and on behalf of said
The Riggs National Bank of Washington, D.C., and known to me to be the attor-
ney-in-fact duly appointed therein to acknowledge and deliver said instrument
on behalf of said corporation, and, as such attorney-in-fact, he acknowledged
said instrument to be the act and deed of said The Riggs National Bank of
Washington, D.C., and delivered the same as such. I further certify that the
said James B. Lynn, being by me duly sworn, did depose and say that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal and was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.

Given under my hand and official seal this day of March, 1995.

(Notarial Seal)

............................................
Notary Public
District of Columbia

My Commission Expires

<PAGE>

CERTIFICATE OF RESIDENCE

The Riggs National Bank of Washington, D.C., Mortgagee and Trustee within
named, hereby certifies that its precise residence is 800-17th Street, N.W.,
Washington, D.C. 20006.

The Riggs National Bank
of Washington, D.C.

By..........................................
James B. Lynn,
Vice President

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

POTOMAC ELECTRIC POWER COMPANY

1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C.

THE RIGGS NATIONAL BANK
OF WASHINGTON, D.C.

800-17TH STREET, N.W., WASHINGTON, D.C.
AS TRUSTEE

------------------

Supplemental Indenture

DATED AS OF , 1995

------------------

SUPPLEMENTAL TO MORTGAGE AND DEED OF TRUST

DATED JULY 1, 1936

------------------

FIRST MORTGAGE BONDS, % SERIES DUE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

POTOMAC ELECTRIC POWER COMPANY

SUPPLEMENTAL INDENTURE DATED AS OF , 1995

TABLE OF CONTENTS*

------------------

<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
Parties.................................................................. 1
Recitals................................................................. 1

PART I

Description of Bonds

Section 1. General description of Bonds of Series.................... 6
Section 2. Form of face of Bond of Series............................ 7
Form of Trustee's certificate................................ 9
Text appearing on reverse side of Bond of Series.......... 10
Section 3. Denominations of Bonds of Series.......................... 13
Section 4. Execution and form of temporary Bonds........................ 13

PART II

Issue of Bonds

Section 1. Limitation as to principal amount............................ 13
Section 2. Issue of Bonds............................................... 14

PART III

Redemption

Section 1. Bonds of Series redeemable ............................... 14
Section 2. Notice of Redemption, etc. .................................. 15

PART IV

Additional Particular Covenants of the Company

Section 1. Company not to withdraw moneys pursuant to Section 2 of
Article VIII in excess of an amount equal to principal
amount of issued refundable bonds........................... 15
Section 2. No property additions made on or prior to December 31, 1946
to be used for any purpose under the Indenture.............. 15
</TABLE>
- ---------
* The Table of Contents is not part of the Supplemental Indenture and should
not be considered as such. It is included herein only for purposes of
convenient reference.
<PAGE>

PART V

<TABLE>
<CAPTION>
PAGE
<S> <C>
Amendment of Indenture to Permit Qualification Under Trust Indenture Act
of 1939................................................................. 16

PART VI

Amendment of Original Indenture........................................... 16

PART VII

The Trustee

Acceptance of trusts by the Trustee....................................... 16
Trustee not responsible for validity of the Supplemental Indenture........ 17

PART VIII

Miscellaneous Provisions

Execution of Supplemental Indenture in counterparts....................... 17
Appointment of attorneys-in-fact by parties............................... 17
Testimonium............................................................... 17
Execution................................................................. 18
Company's Acknowledgments................................................. 19
Trustee's Acknowledgments................................................. 21
</TABLE>

ii
<PAGE>

SUPPLEMENTAL INDENTURE, dated as of the day of , nineteen hundred and
ninety-five (1995), made by and between Potomac Electric Power Company, a cor-
poration organized and existing under the laws of the District of Columbia and
a domestic corporation of the Commonwealth of Virginia (hereinafter sometimes
called the "Company"), party of the first part, and The Riggs National Bank of
Washington, D.C., a national banking association organized and existing under
the laws of the United States of America (hereinafter sometimes called the
"Trustee"), as Trustee under the Mortgage and Deed of Trust dated July 1,
1936, hereinafter mentioned, party of the second part;

Whereas, pursuant to the terms and provisions of the Original Indenture, in-
dentures supplemental thereto dated as of July 1, 1936, December 1, 1939, Au-
gust 1, 1940, August 1, 1942, January 1, 1948, May 1, 1949, May 1, 1950, March
1, 1952, May 15, 1953, May 16, 1955, June 1, 1956, December 1, 1958, November
16, 1959, December 1, 1960, February 15, 1963, May 15, 1964, April 1, 1966,
May 1, 1967, February 15, 1968, March 15, 1969, February 15, 1970, August 15,
1970, September 15, 1972, April 1, 1973, January 2, 1974, August 15, 1974, Au-
gust 15, 1974, June 15, 1977, July 1, 1979, June 16, 1981, June 17, 1981, De-
cember 1, 1981, August 1, 1982, October 1, 1982, April 15, 1983, November 1,
1985, March 1, 1986, November 1, 1986, March 1, 1987, September 16, 1987, May
1, 1989, August 1, 1989, April 5, 1990, May 21, 1991, May 7, 1992, September
1, 1992, November 1, 1992, March 1, 1993, March 2, 1993, July 1, 1993, August
20, 1993, September 29, 1993, September 30, 1993, October 1, 1993, February
10, 1994, February 11, 1994 and March 10, 1995 have been heretofore entered
into between the Company and the Trustee to provide, respectively, for the
creation of the first through the fifty-ninth series of Bonds thereunder and,
in the case of the supplemental indentures dated January 1, 1948, March 1,
1952, May 15, 1953, May 16, 1955, June 1, 1956, September 15, 1972, July 1,
1979, June 17, 1981, November 1, 1985, September 16, 1987, May 1, 1989, May
21, 1991, May 7, 1992, July 1, 1993 and one of the supplemental indentures
dated August 15, 1974, to convey additional property; and
<PAGE>

Whereas, $20,000,000 principal amount of Bonds of the 3 1/4% Series due 1966
(the first series), $5,000,000 principal amount of Bonds of the 3 1/4% Series
due 1974 (the second series), $10,000,000 principal amount of Bonds of the 3
1/4% Series due 1975 (the third series), $5,000,000 principal amount of Bonds
of the 3 1/4% Series due 1977 (the fourth series), $15,000,000 principal amount
of Bonds of the 3% Series due 1983 (the fifth series), $10,000,000 principal
amount of Bonds of the 2 7/8% Series due 1984 (the sixth series), $30,000,000
principal amount of Bonds of the 2 3/4% Series due 1985 (the seventh series),
$15,000,000 principal amount of Bonds of the 3 1/4% Series due 1987 (the eighth
series), $10,000,000 principal amount of Bonds of the 3 7/8% Series due 1988
(the ninth series), $10,000,000 principal amount of Bonds of the 3 3/8% Series
due 1990 (the tenth series), $10,000,000 principal amount of Bonds of the 3
5/8% Series due 1991 (the eleventh series), $25,000,000 principal amount of
Bonds of the 4 5/8% Series due 1993 (the twelfth series), $15,000,000 principal
amount of Bonds of the 5 1/4% Series due 1994 (the thirteenth series),
$45,000,000 principal amount of Bonds of the 7 3/4% Series due 2004 (the twen-
tieth series), $35,000,000 principal amount of Bonds of the 8.85% Series due
2005 (the twenty-first series), $70,000,000 principal amount of Bonds of the 9
1/2% Series due August 15, 2005 (the twenty-second series), $50,000,000 princi-
pal amount of Bonds of the 7 3/4% Series due 2007 (the twenty-third series),
$25,000,000 principal amount of Bonds of the 5 5/8% Series due 1997 (the twen-
ty-fourth series), $100,000,000 principal amount of Bonds of the 8 3/8% Series
due 2009 (the twenty-fifth series), $50,000,000 principal amount of Bonds of
the 10 1/4% Series due 1981 (the twenty-sixth series), $50,000,000 principal
amount of Bonds of the 10 3/4% Series due 2004 (the twenty-seventh series),
$38,300,000 principal amount of Bonds of the 6 1/8% Series due 2007 (the twen-
ty-eighth series), $15,000,000 principal amount of Bonds of the 6 1/2% Series
due 2004 (the twenty-ninth series), $20,000,000 principal amount of Bonds of
the 6 1/2% Series due 2007 (the thirtieth series), $7,500,000 principal amount
of Bonds of the 6 5/8% Series due 2009 (the thirty-first series), $30,000,000
principal amount of Bonds of the Floating Rate Series due 2010 (the thirty-sec-
ond series), $50,000,000 principal amount of Bonds of the 14 1/2% Series due
1991 (the thirty-third series), $60,000,000 principal amount of Bonds of the 14
1/4% Series due 1992 (the thirty-fifth series), $50,000,000 principal amount of
Bonds of the 11 7/8% Series due 1989 (the thirty-sixth series), $37,000,000

2
<PAGE>

principal amount of Bonds of the 8 3/4% Series due 2010 (the thirty-seventh se-
ries), $75,000,000 principal amount of Bonds of the 11 1/4% Series due 2015
(the thirty-eighth series), $75,000,000 principal amount of Bonds of the 9 1/4%
Series due 2016 (the thirty-ninth series), $75,000,000 principal amount of
Bonds of the 8 3/4% Series due 2016 (the fortieth series), $75,000,000 princi-
pal amount of Bonds of the 8 1/4% Series due 2017 (the forty-first series),
$75,000,000 principal amount of Bonds of the 9% Series due 1990 (the forty-sec-
ond series) and $75,000,000 principal amount of Bonds of the 9 3/4% Series due
2019 (the forty-third series), have been heretofore redeemed and retired and
there are now issued and outstanding under the Original Indenture and under the
supplemental indentures referred to above: $40,000,000 principal amount of
Bonds of the 5% Series due 1995 (the fourteenth series); $50,000,000 principal
amount of Bonds of the 4 3/8% Series due 1998 (the fifteenth series);
$45,000,000 principal amount of Bonds of the 4 1/2% Series due 1999 (the six-
teenth series); $15,000,000 principal amount of Bonds of the 5 1/8% Series due
2001 (the seventeenth series); $35,000,000 principal amount of Bonds of the 5
7/8% Series due 2002 (the eighteenth series); $40,000,000 principal amount of
Bonds of the 6 5/8% Series due 2003 (the nineteenth series); $50,000,000 prin-
cipal amount of Bonds of the Adjustable Rate Series due 2001 (the thirty-fourth
series); $59,800,000 principal amount of Bonds of the 8 5/8% Series due 2019
(the forty-fourth series); $100,000,000 principal amount of Bonds of the 9% Se-
ries due 2000 (the forty-fifth series); $100,000,000 principal amount of Bonds
of the 9% Series due 2021 (the forty-sixth series); $75,000,000 principal
amount of Bonds of the 8 1/2% Series due 2027 (the forty-seventh series);
$30,000,000 principal amount of Bonds of the 6% Series due 2022 (the forty-
eighth series); $37,000,000 principal amount of Bonds of the 6 3/8% Series due
2023 (the forty-ninth series); $78,000,000 principal amount of Bonds of the 6
1/2% Series due 2008 (the fiftieth series); $40,000,000 principal amount of
Bonds of the 7 1/2% Series due 2028 (the fifty-first series); $100,000,000
principal amount of Bonds of the 7 1/4% Series due 2023 (the fifty-second se-
ries); $100,000,000 principal amount of Bonds of the 6 7/8% Series due 2023
(the fifty-third series); $50,000,000 principal amount of Bonds of the 5 5/8%
Series due 2003 (the fifty-fourth series); $50,000,000 principal amount of
Bonds of the 5 7/8% Series due 2008 (the fifty-fifth series); $75,000,000 prin-
cipal amount of Bonds of the 6 7/8% Series due 2024 (the fifty-sixth series);
$42,500,000 principal amount of

3
<PAGE>

Bonds of the 5 3/8% Series due 2024 (the fifty-seventh series); $38,300,000
principal amount of Bonds of the 5 3/8% Series due 2024 (the fifty-eighth se-
ries); and $16,000,000 principal amount of Bonds of the 5 3/4% Series due 2010
(the fifty-ninth series); and

Whereas, for the purpose of conforming the Original Indenture to the stan-
dards prescribed by the Trust Indenture Act of 1939 or otherwise modifying
certain of the provisions of the Original Indenture, indentures supplemental
thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1,
1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October
1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986,
March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990,
May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993,
March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September
30, 1993, October 1, 1993, February 10, 1994, February 11, 1994 and March 10,
1995 have been heretofore entered into between the Company and the Trustee,
and for the purpose of conveying additional property, indentures supplemental
thereto dated July 15, 1942, October 15, 1947, December 31, 1948, December 31,
1949, February 15, 1951, February 16, 1953, March 15, 1954, March 15, 1955,
March 15, 1956, April 1, 1957, May 1, 1958, May 1, 1959, May 2, 1960, April 3,
1961, May 1, 1962, May 1, 1963, April 23, 1964, May 3, 1965, June 1, 1966,
April 28, 1967, July 3, 1967, May 1, 1968, June 16, 1969, May 15, 1970, Sep-
tember 1, 1971, June 17, 1981, November 1, 1985, September 16, 1987, May 1,
1989, May 21, 1991, May 7, 1992 and July 1, 1993 have been heretofore entered
into between the Company and the Trustee, and for the purpose of better secur-
ing and protecting the Bonds then or thereafter issued and confirming the lien
of the Original Indenture, an indenture dated October 15, 1942 supplemental
thereto has been heretofore entered into between the Company and the Trustee;
the Original Indenture as heretofore amended and supplemented being hereinaf-
ter referred to as the "Original Indenture as amended"; and

4
<PAGE>

Whereas, the Company has determined to issue a sixtieth series of Bonds under
the Original Indenture as amended in the principal amount of $ , to be
known as First Mortgage Bonds, % Series due (hereinafter called "Bonds of
Series"); and

Whereas, all conditions and requirements necessary to make this Supplemental
Indenture a valid, binding and legal instrument have been done, performed and
fulfilled, and the execution and delivery hereof have been in all respects
duly authorized;

Now, Therefore, This Indenture Witnesseth:

That Potomac Electric Power Company, in consideration of the premises and of
One Dollar to it duly paid by the Trustee at or before the ensealing and de-
livery of these presents, and for other valuable considerations, the receipt
whereof is hereby acknowledged, hereby covenants, declares and agrees with the
Trustee and its successors in the trust under the Original Indenture as amend-
ed, for the benefit of those who hold the Bonds and coupons, or any of them,
issued or to be issued hereunder or under the Original Indenture as amended,
as follows:

5
<PAGE>

PART I.

Description of Bonds.

Section 1. The Bonds of Series shall, subject to the provisions of Section
1 of Article II of the Original Indenture as amended, be designated as "First
Mortgage Bonds, % Series due " of the Company. The Bonds of Series shall
be executed, authenticated and delivered in accordance with the provisions of,
and shall in all respects be subject to, all of the terms, conditions and cov-
enants of the Original Indenture as amended, except in so far as the terms and
provisions of the Original Indenture as amended are amended or modified by
this Supplemental Indenture.

The Bonds of Series shall mature , and shall bear interest at the rate
of per cent ( %) per annum, payable semiannually, commencing , on the
fifteenth day of and the fifteenth day of in each year (each such 15
and 15 being hereinafter called an "interest payment date"). The Bonds of
Series shall be payable as to principal and interest in lawful money of the
United States of America, and shall be payable (as well the interest as the
principal thereof) at the Agency of the Company in the City of Washington,
D.C., or at the Agency of the Company in the Borough of Manhattan, The City of
New York.

The interest so payable on any interest payment date shall be paid to the
persons in whose names the Bonds of Series are registered at the close of
business on the last business day (hereinafter called the "record date") which
is more than ten days prior to such interest payment date, a "business day"
being any day that is not a day on which banks in the City of Washington,
D.C., are authorized by law to close; except that if the Company shall default
in the payment of any interest due on such interest payment date, such de-
faulted interest shall be paid to the persons in whose names the Bonds of
Series are registered on the date of payment of such defaulted interest, or in
accordance with the regulations of any securities exchange on which the Bonds
of Series are listed.

Except as provided hereinafter, every Bond of Series shall be dated as of
the date of its authentication and delivery, or if that is an

6
<PAGE>

interest payment date, the next day, and shall bear interest from the interest
payment date next preceding its date or the date of delivery of the initial
Bonds of Series, whichever is later. Notwithstanding Section 6 of Article
II of the Original Indenture, any Bond of Series authenticated and deliv-
ered by the Trustee after the close of business on the record date with re-
spect to any interest payment date and prior to such interest payment date
shall be dated as of the date next following such interest payment date and
shall bear interest from such interest payment date; except that if the Com-
pany shall default in the payment of any interest due on such interest payment
date, such Bond shall bear interest from the next preceding interest payment
date or the date of delivery of the initial Bonds of Series, whichever is
later.

Section 2. The Bonds of Series, and the Trustee's certificate to be en-
dorsed on the Bonds of Series, shall be substantially in the following
forms, respectively:

[form of face of bond of series]

POTOMAC ELECTRIC POWER COMPANY
(A District of Columbia and Virginia corporation)

First Mortgage Bond, % Series Due

No. $

Potomac Electric Power Company, a corporation organized and existing under
the laws of the District of Columbia and a domestic cor- poration of the Com-
monwealth of Virginia (hereinafter called the "Company", which term shall in-
clude any successor corporation as defined in the Amended Indenture hereinaf-
ter referred to), for value received, hereby promises to pay to
................... or registered assigns, the sum of .................. dol-
lars, on the fifteenth day of , in lawful money of the United States of
America, and to pay interest thereon in like money from the later of the date
of delivery of the initial Bonds of Series or the interest payment date
15 or 15 next preceding the date of this Bond, or if the Company shall de-
fault in the payment of interest due on such interest payment date, then from
the

7
<PAGE>

next preceding interest payment date or the date of delivery of the initial
Bonds of Series, whichever is later, at the rate of percent ( %)
per annum, payable semiannually, commencing , 1996, on the fifteenth day
of and in each year until maturity, or, if the Company shall default
in the payment of the principal hereof, until the Company's obligation with
respect to the payment of such principal shall be discharged as provided in
the Amended Indenture. The interest so payable on any 15 or 15 will,
subject to certain exceptions provided in the indenture dated as of sup-
plemental to the Amended Indenture, be paid to the person in whose name this
Bond is registered at the close of business on the last business day which is
more than ten days prior to such 15 or 15. Both principal of, and in-
terest on, this Bond are payable at the agency of the Company in the City of
Washington, D.C., or, at the option of the holder, at the agency of the Com-
pany in the Borough of Manhattan, The City of New York.

Reference is made to the further provisions of this Bond set forth on the re-
verse hereof, and such further provisions shall for all purposes have the same
effect as though fully set forth at this place.

This Bond shall not be entitled to any benefit under the Amended Indenture or
any indenture supplemental thereto, or become valid or
obligatory for any purpose, until The Riggs National Bank of Washington, D.C.,
the Trustee under the Amended Indenture, or a successor trustee thereto under
the Amended Indenture, shall have signed the form of certificate endorsed
hereon.

8
<PAGE>

Dated,

Potomac Electric Power Company

By......................................
Vice President
Attest:

...................................
Secretary

9
<PAGE>

[FORM OF TRUSTEE'S CERTIFICATE]

This Bond is one of the Bonds, of the series designated therein, described in
the within-mentioned Amended Indenture and the Supplemental Indenture dated as
of .

The Riggs National Bank of Washington, D.C.
Trustee.

By..........................................
Authorized Officer

[TEXT APPEARING ON REVERSE SIDE OF BOND OF SERIES]

This Bond is one of a duly authorized issue of Bonds of the Company (herein-
after called the "Bonds") in unlimited aggregate principal amount, of the se-
ries hereinafter specified, all issued and to be issued under and equally se-
cured (except in so far as any purchase or sinking fund or analogous provi-
sions for any particular series of Bonds, established by any indenture supple-
mental to the Amended Indenture hereinafter mentioned, may afford additional
security for such Bonds) by a mortgage and deed of trust, dated July 1, 1936,
executed by the Company to The Riggs National Bank of Washington, D.C. (herein
called the "Trustee"), as trustee, as amended by indentures supplemental
thereto dated December 10, 1939, August 10, 1942, October 15, 1942, April 1,
1966, June 16, 1981, June 17, 1981, December 1, 1981, August 1, 1982, October
1, 1982, April 15, 1983, November 1, 1985, March 1, 1986, November 1, 1986,
March 1, 1987, September 16, 1987, May 1, 1989, August 1, 1989, April 5, 1990,
May 21, 1991, May 7, 1992, September 1, 1992, November 1, 1992, March 1, 1993,
March 2, 1993, July 1, 1993, August 20, 1993, September 29, 1993, September
30, 1993, October 1, 1993, February 10, 1994, February 11, 1994 and March 10,
1995 (said mortgage and deed of trust, as so amended, being herein called the
"Amended Indenture") and all indentures supplemental thereto, to which Amended
Indenture and supplemental indentures reference is hereby made for a descrip-
tion of the properties mortgaged and pledged, the nature and extent of the se-
curity, the rights of the owners of the Bonds and of the Trustee in respect
thereto, and the

10
<PAGE>

terms and conditions upon which the Bonds are, and are to be, secured. To the
extent permitted by, and as provided in, the Amended Indenture, modifications
or alterations of the Amended Indenture, or of any indenture supplemental
thereto, and of the rights and obligations of the Company and of the holders
of the Bonds may be made with the consent of the Company by an affirmative
vote of not less than 80% in amount of the Bonds entitled to vote then out-
standing, at a meeting of Bondholders called and held as provided in the
Amended Indenture, and by an affirmative vote of not less than 80% in amount
of the Bonds of any series entitled to vote then outstanding and affected by
such modification or alteration, in case one or more but less than all of the
series of Bonds then outstanding under the Amended Indenture are so affected;
provided, however, that no such modification or alteration shall be made which
will affect the terms of payment of the principal of, or interest on, this
Bond, which are unconditional, or which reduces the percentage of Bonds the
affirmative vote of which is required for the making of such modifications or
alterations. The Company is proposing an amendment to the Amended Indenture
which would replace "80%" with "60%" in the preceding sentence, which amend-
ment will become effective upon the consent or agreement thereto of the hold-
ers of all the outstanding Bonds. The holder of this Bond will be deemed to
have approved such amendment. The Bonds may be issued in series, for various
principal sums, may mature at different times, may bear interest at different
rates and may otherwise vary as in the Amended Indenture provided.

This Bond is one of a series designated as the "First Mortgage Bonds, % Se-
ries due " (herein called the "Bonds of Series") of the Company, issued
under and secured by the Amended Indenture and all indentures supplemental
thereto and described in the indenture (herein called the "New Supplemental
Indenture"), dated as of , between the Company and the Trustee, supple-
mental to the Amended Indenture.

The Bonds of Series are subject to redemption, at any time or from time to
time after and prior to maturity, at the option of the Company, either
as a whole or in part by lot, upon payment of the redemption prices applicable
to the respective period set forth below, together, in each case, with accrued
interest to the redemption

11
<PAGE>

date, all subject to the conditions and as more fully set forth in the Amended
Indenture and the New Supplemental Indenture:

<TABLE>
<CAPTION>
REDEMPTION PRICE
IF REDEEMED EXPRESSED AS
DURING THE PERCENTAGE OF
12 MONTH PERIOD THE PRINCIPAL
ENDING AMOUNT OF BONDS
--------------- ----------------
<S> <C>
............... %
...............
...............
...............
...............
...............
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION PRICE
IF REDEEMED EXPRESSED AS
DURING THE PERCENTAGE OF
12 MONTH PERIOD THE PRINCIPAL
ENDING AMOUNT OF BONDS
--------------- ----------------
<S> <C>
...................... %
......................
......................
......................
and thereafter....... 100.00
</TABLE>

Notice of any redemption shall be sent by the Company through the mails,
postage prepaid, at least thirty days and not more than sixty days prior to
the redemption date, to the registered owners of any of the Bonds to be re-
deemed, at their addresses as the same shall appear on the transfer register
of the Company, all subject to the conditions and as more fully set forth in
the Amended Indenture and New Supplemental Indenture. Any notice so mailed
shall be conclusively presumed to have been duly given, whether or not the
owner receives it.

This Bond is transferable by the registered owner hereof, in person or by
duly authorized attorney, on the books of the Company to be kept for that pur-
pose at the agency of the Company in the City of Washington, D.C., or at the
agency of the Company in the Borough of Manhattan, The City of New York, upon
surrender and cancellation of this Bond and on presentation of a duly executed
written instrument of transfer, and thereupon a new Bond or Bonds of the same
series, of the same aggregate principal amount and in authorized denominations
will be issued to the transferee or transferees in exchange therefor; and this
Bond, with or without others of the same series, may in like manner be ex-
changed

12
<PAGE>

for one or more new Bonds of the same series of other authorized denominations
but of the same aggregate principal amount; all subject to the terms and con-
ditions set forth in the Amended Indenture.

Section 3. The Bonds of Series shall be registered Bonds without coupons
in denominations of any multiple of $1,000, numbered consecutively upwards
from R1.

Section 4. Until Bonds of Series in definitive form are ready for deliv-
ery, the Company may execute, and upon its request in writing the Trustee
shall authenticate and deliver, in lieu thereof, Bonds for such series in tem-
porary form, as provided in Section 9 of Article II of the Original Indenture
as amended.

PART II.

Issue of Bonds.

Section 1. Except for Bonds of Series issued pursuant to Section 13 of Ar-
ticle II of the Original Indenture as amended, the principal amount of Bonds
of Series which may be authenticated and delivered hereunder is limited to
$ aggregate principal amount.

13
<PAGE>

Section 2. Bonds of Series in the aggregate principal amount permitted in
Section 1 of this Part II, may at any time subsequent to the execution hereof
be executed by the Company and delivered to the Trustee and shall be authenti-
cated by the Trustee and delivered (either before or after the recording here-
of) to or upon the order of the Company evidenced by a writing or writings,
signed by its President or one of its Vice Presidents and its Treasurer or one
of its Assistant Treasurers, at such time or times as may be requested by the
Company subsequent to the receipt by the Trustee of

(1) the certified resolution and the officers' certificate required by Sec-
tion 3(a) and Section 3(b) of Article III of the Original Indenture as
amended;

(2) the opinion of counsel required by Section 3(c) of Article III of the
Original Indenture as amended;

(4) the certificates, instruments, opinions of counsel, prior lien bonds
and cash, if any, required by Section 4 of Article III of the Original In-
denture as amended, except that, as required by Part IV of this Supplemental
Indenture, property additions purchased, constructed or otherwise acquired
on or before December 31, 1946 shall not be made the basis for the authenti-
cation and delivery of Bonds of Series; and

(5) the certificates and opinions required by Article XVIII of the Original
Indenture as amended.

PART III.

Redemption.

Section 1. The Bonds of Series are not redeemable up to and including
. The Bonds of Series shall, in accordance with the provisions of Ar-
ticle V of the Original Indenture as amended, be redeemable, at any time or
from time to time after and prior to maturity, at the option of the
Board of Directors of the

14
<PAGE>

Company, either as a whole or in part by lot, upon payment of the redemption
prices applicable to the respective periods set forth in the form of Bond of
Series contained in Section 2 of Part I hereof, together, in each case,
with accrued interest to the redemption date.

Section 2. In accordance with the provisions of Article V of the Original In-
denture as amended, notice of any redemption shall be sent by the Company
through the mails, postage prepaid, at least thirty days and not more than
sixty days prior to the date of redemption, to the registered owners of any of
the Bonds to be redeemed at their addresses as the same shall appear on the
transfer register of the Company. Any notice so mailed shall be conclusively
presumed to have been duly given, whether or not the owner receives it.

All Bonds delivered to or redeemed by the Trustee pursuant to the provisions
of this Part III shall forthwith be cancelled.

PART IV.

Additional Particular Covenants of the Company.

The Company hereby covenants, warrants and agrees that so long as any Bonds
of Series are outstanding:

15
<PAGE>

PART V.

Amendment of Indenture to Permit Qualification
Under Trust Indenture Act of 1939.

The Company and the Trustee, from time to time and at any time, without any
vote or consent of the holders of the Bonds of Series, may enter into such
indentures supplemental to the Original Indenture as may or shall by them be
deemed necessary or desirable to add to or modify or amend any of the provi-
sions of the Original Indenture so as to permit the qualification of the Orig-
inal Indenture under the Trust Indenture Act of 1939.

PART VI.

Amendment of Original Indenture.

Notwithstanding any other provisions of the Original Indenture as amended,
the holders of the Bonds of Series, by their holding of such Bonds, are
deemed to have approved the following amendment to the Original Indenture as
amended and to have authorized the Trustee to take any action necessary to ev-
idence or effectuate such approval:

PART VII.

The Trustee.

The Trustee hereby accepts the trusts hereby declared and provided and agrees
to perform the same upon the terms and conditions in the

16
<PAGE>

Original Indenture as amended set forth and upon the following terms and con-
ditions:

PART VIII.

Miscellaneous Provisions.

The Riggs National Bank of Washington, D.C., hereby constitutes and appoints
James B. Lynn, one of its Vice Presidents, to be its true and lawful attorney-
in-fact, for it and in its name to appear before any officer authorized by law
to take and certify acknowledgments of deeds to be recorded in the District of
Columbia, in the State of Maryland, in the Commonwealth of Virginia, and in
the Commonwealth of Pennsylvania and to acknowledge and deliver these presents
as the act and deed of said The Riggs National Bank of Washington, D.C.

17
<PAGE>

In Witness Whereof, said Potomac Electric Power Company has caused this Sup-
plemental Indenture to be executed on its behalf by its President or one of
its Vice Presidents and its corporate seal to be hereto affixed and said seal
and this Supplemental Indenture to be attested by its Secretary or one of its
Assistant Secretaries; and said The Riggs National Bank of Washington, D.C.,
in evidence of its acceptance of the trust hereby created, has caused this
Supplemental Indenture to be executed on its behalf by its President or one of
its Senior Vice Presidents, and its corporate seal to be hereto affixed and
said seal and this Supplemental Indenture to be attested by one of its Corpo-
rate Trust Officers, all as of the day of , One thousand nine hundred and
ninety-five.

Potomac Electric Power Company
(Corporate Seal)
By.........................................
DENNIS R. WRAASE,
Senior Vice President
Attested:

...................................
ELLEN SHERIFF ROGERS,
Assistant Secretary
Signed, sealed and delivered by
Potomac Electric Power Company in
the presence of:

...................................

...................................
As Witnesses
The Riggs National Bank of Washington, D.C.
(Corporate Seal)
By..........................................
JAMES B. LYNN,
Vice President
Attested:

...................................
O. CLINTON JONES, III,
Senior Corporate Trust Officer
Signed, sealed and delivered by The
Riggs National Bank of Washington,
D.C. in the presence of:

...................................

...................................
As Witnesses

18
<PAGE>

City of Washington, )
District of Columbia, ) ss.:

I, , a Notary Public in and for the District of Columbia, United States
of America, whose commission as such will expire , do hereby certify
that Dennis R. Wraase and Ellen Sheriff Rogers, whose names as Senior Vice
President and Assistant Secretary, respectively, of Potomac Electric Power
Company, a corporation, are signed to the foregoing and hereto attached deed,
bearing date as of the day of , personally appeared this day before me
in my District aforesaid and acknowledged themselves to be, respectively, a
Senior Vice President and an Assistant Secretary of Potomac Electric Power
Company, and that they as such, being authorized so to do, executed the said
deed by signing the name of Potomac Electric Power Company by Dennis R.
Wraase, as Senior Vice President, and attested by Ellen Sheriff Rogers, as As-
sistant Secretary, and acknowledged the same before me in my District afore-
said and acknowledged the foregoing instrument to be the act and deed of Poto-
mac Electric Power Company.

Given under my hand and official seal this day of .

(Notarial Seal)

............................................
Notary Public
District of Columbia

19
<PAGE>

City of Washington, )
District of Columbia, ) ss.:

I, , a Notary Public in and for the District of Columbia, United States
of America, do hereby certify that Dennis R. Wraase, a Senior Vice President
of Potomac Electric Power Company, a corporation, one of the parties to the
foregoing instrument bearing date as of the day of , and hereto an-
nexed, this day personally appeared before me in the City of Washington, the
said Dennis R. Wraase being personally well known to me as the person who exe-
cuted the said instrument as a Senior Vice President of and on behalf of said
Potomac Electric Power Company and known to me to be the attorney-in-fact duly
appointed therein to acknowledge and deliver said instrument on behalf of said
corporation, and, as such attorney-in-fact, he acknowledged said instrument to
be the act and deed of said Potomac Electric Power Company, and delivered the
same as such. I further certify that the said Dennis R. Wraase, being by me
duly sworn, did depose and say that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal and was so af-
fixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order. My commission expires .

Given under my hand and official seal this day of .

(Notarial Seal)

............................................
Notary Public
District of Columbia

20
<PAGE>

City of Washington, )
District of Columbia, ) ss.:

I, , a Notary Public in and for the District of Columbia, United States
of America, do hereby certify that James B. Lynn and O. Clinton Jones, III,
whose names as Vice President and Senior Corporate Trust Officer, respective-
ly, of The Riggs National Bank of Washington, D.C., a corporation, are signed
to the foregoing and hereto attached deed, bearing date as of the day of
, personally appeared before me this day in my District aforesaid and ac-
knowledged themselves to be, respectively, a Vice President and a Senior Cor-
porate Trust Officer of The Riggs National Bank of Washington, D.C., and that
they as such, being authorized so to do, executed the said deed by signing the
name of The Riggs National Bank of Washington, D.C., by James B. Lynn as Vice
President, and attested by O. Clinton Jones, III, as Senior Corporate Trust
Officer, and acknowledged the same before me in my District aforesaid and ac-
knowledged the foregoing instrument to be the act and deed of The Riggs Na-
tional Bank of Washington, D.C., as therein set forth.

Given under my hand and notarial seal this day of .

(Notarial Seal)

...............................................
Notary Public
District of Columbia

My Commission Expires .

21
<PAGE>

City of Washington, )
District of Columbia, ) ss.:

James B. Lynn, of full age, being sworn according to law, on his oath deposes
and says that he is a Vice President of The Riggs National Bank of Washington,
D.C., the Trustee named in the foregoing Supplemental Indenture, dated as of
the day of , that he is the agent of said Trustee for the purpose of
perfecting such Supplemental Indenture and that the consideration in the Orig-
inal Indenture referred to therein and in all indentures supplemental to said
Original Indenture, including the foregoing Supplemental Indenture, is true
and bona fide as therein set forth.

............................................
JAMES B. LYNN

Subscribed and sworn to before me
this day of .

...................................
Notary Public
District of Columbia

My Commission Expires .

(Notarial Seal)

22
<PAGE>

City of Washington, )
District of Columbia, ) ss.:

I, , a Notary Public in and for the District of Columbia, United States
of America, do hereby certify that James B. Lynn a Vice President of The Riggs
National Bank of Washington, D.C., a corporation, one of the parties to the
foregoing instrument bearing date as of the day of , and hereto an-
nexed, this day personally appeared before me in the City of Washington, the
said James B. Lynn, being personally well known to me as the person who exe-
cuted the said instrument as a Vice President of and on behalf of said The
Riggs National Bank of Washington, D.C., and known to me to be the attorney-
in-fact duly appointed therein to acknowledge and deliver said instrument on
behalf of said corporation, and, as such attorney-in-fact, he acknowledged
said instrument to be the act and deed of said The Riggs National Bank of
Washington, D.C., and delivered the same as such. I further certify that the
said James B. Lynn, being by me duly sworn, did depose and say that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal and was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.

Given under my hand and official seal this day of .

(Notarial Seal)

...............................................
Notary Public
District of Columbia

My Commission Expires .

23
<PAGE>

CERTIFICATE OF RESIDENCE

The Riggs National Bank of Washington, D.C., Mortgagee and Trustee within
named, hereby certifies that its precise residence is 800-17th Street, N.W.,
Washington, D.C. 20006.

The Riggs National Bank of Washington, D.C.

By..........................................
JAMES B. LYNN,
Vice President

Exhibit 5

July 28, 1995

Potomac Electric Power Company
Washington, D. C.

Dear Sirs:

Reference is made to the proposed issuance and sale, pursuant to rule
415, by Potomac Electric Power Company (the "Company") of up to $350,000,000
aggregate principal amount of its Debt Securities, which may consist of First
Mortgage Bonds (the "New Bonds") and/or its Medium-Term Notes (the "Notes");
and with respect to which the Company is today filing with the Securities and
Exchange Commission a registration statement on Form S-3 under the Securities
Act of 1933, as amended (the "1933 Act") (which registration statement, as
amended by all amendments, is hereinafter called the "Registration
Statement").

As counsel for the Company, I have examined such certificates, corporate
records and other documents and such questions of law as I have considered
necessary or appropriate for the purposes of this opinion, and, on the basis
of such examination, advise that, in my opinion:

(1) The Company has been duly incorporated and is now validly existing
as a corporation under the laws of the District of Columbia and is also now
validly existing as a domestic corporation of the Commonwealth of Virginia.

(2) The New Bonds will have been duly and validly issued and will
constitute legal, valid and binding obligations of the Company upon (a) the
due authorization by the Board of Directors or by the Executive Committee of
the Board of Directors of the Company of an appropriate indenture supplemental
to the Company's Mortgage and Deed of Trust dated July 1, 1936, providing for
the creation of the New Bonds and the due execution and delivery of such
instrument by the Company and the Trustee named therein, (b) the due
authorization, by the Board of Directors or by the Executive Committee of the
Board of Directors of the Company, of the specific terms of the New Bonds and
of their issuance and sale in the manner and upon the terms set forth in the
Registration Statement, (c) the due authorization of such issuance and sale by
the Public Service Commission of the District of Columbia, (d) the recording
upon the books of the Company of the certificate of said Public Service
Commission, (e) the Registration Statement becoming effective under the 1933

Potomac Electric Power Company
Page Two
July 28, 1995

Act, (f) the qualification under the Trust Indenture Act of 1939, as amended
(the "1939 Act"), of the Company's Mortgage and Deed of Trust dated July 1,
1936, as amended and supplemented by all indentures supplemental thereto, to
and including the above-mentioned supplemental indenture (the "Mortgage"), (g)
the execution of the New Bonds by the Company, the filing with the Trustee
under the Mortgage of the appropriate certificates, instruments and opinions
called for thereby, and the authentication of the New Bonds by the Trustee,
all in accordance with the provisions of the Mortgage, and (h) the delivery of
the New Bonds against payment therefor in accordance with such authorizations
of the Board of Directors or the Executive Committee of the Board of Directors
of the Company and of said Public Service Commission.

(3) The Notes will have been duly and validly issued and will
constitute legal, valid and binding obligations of the Company upon (a) the
due authorization, by the Board of Directors or by the Executive Committee of
the Board of Directors of the Company, of the terms of the Notes and of their
issuance and sale in the manner and upon the terms set forth in the
Registration Statement, (b) the due authorization of such issuance and sale by
the Public Service Commission of the District of Columbia, (c) the recording
upon the books of the Company of the certificate of said Public Service
Commission, (d) the Registration Statement becoming effective under the 1933
Act, (e) the qualification under the 1939 Act of an indenture governing the
issuance of the Notes (the "Indenture"), (f) the execution of the Notes by the
Company, the filing with the Trustee under the Indenture of the appropriate
certificates, instruments and opinions called for thereby, and the
authentication of the Notes by the Trustee, if required, all in accordance
with the provisions of the Indenture, and (g) the delivery of the Notes
against payment therefor in accordance with such authorizations of the Board
of Directors or the Executive Committee of the Board of Directors of the
Company and of said Public Service Commission.

I hereby consent to the filing of a copy of this opinion as an exhibit
to said Registration Statement and to the making in the said Registration
Statement of the statements with respect to me which are made under the
captions "Experts" and "Legal Opinions" in the form of First Mortgage Bond
Prospectus and under the caption "Legal Opinions" in the form of Medium-Term
Note Prospectus, which prospectuses constitute a part of said Registration
Statement.

Very truly yours,

/s/ William T. Torgerson
William T. Torgerson

Exhibit 15

July 28, 1995

Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549

Ladies and Gentlemen:

We are aware that Potomac Electric Power Company has incorporated by reference
our reports dated May 1, 1995 and July 28, 1995 (issued pursuant to the
provisions of Statement on Auditing Standards Number 71) in the Prospectuses
constituting parts of its Registration Statement on Form S-3 to be filed on or
about July 28, 1995. We are also aware of our responsibilities under the
Securities Act of 1933.

Yours very truly,

/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP

<PAGE>

EXHIBIT 23.1

CONSENT

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses
constituting parts of this Registration Statement on Form S-3 of our report
dated January 26, 1995, which appears on page 31 of the 1994 Annual Report to
shareholders of Potomac Electric Power Company, which is incorporated by
reference in Potomac Electric Power Company's Annual Report on Form 10-K for
the year ended December 31, 1994. We also consent to the incorporation by
reference of our report on the Consolidated Financial Statement Schedule,
which appears under Item 14(d) of such Annual Report on Form 10-K. We also
consent to the reference to us under the headings "Experts" in such
Prospectuses.

Price Waterhouse LLP

Washington, D.C.
July 28, 1995

Exhibit 23.3

July 28, 1995

We hereby consent to the reference to this Firm under the heading "Legal
Opinions" in the Prospectuses constituting part of the Registration Statement
on Form S-3 of Potomac Electric Power Company, as filed the date hereof,
relating to $250,000,000 of Debt Securities.

/s/Covington & Burling
COVINGTON & BURLING

P O T O M A C E L E C T R I C P O W E R C O M P A N Y

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and
officers of POTOMAC ELECTRIC POWER COMPANY (the "Company") hereby constitute
and appoint Edward F. Mitchell, H. Lowell Davis, William T. Torgerson, Dennis
R. Wraase, Anthony J. Kamerick, Peyton G. Middleton, Jr. and Ellen Sheriff
Rogers, and each of them, their true and lawful attorneys and agents with full
power and authority, in their names and on their behalf, or otherwise, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, or any of them, may deem necessary or advisable to
enable Potomac Electric Power Company to comply with the Securities Act of
1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission in respect thereof, in connection with
a Registration Statement on Form S-3 to be filed under the Act for the
registration of $350,000,000 aggregate principal amount of First Mortgage
Bonds and/or Medium-Term Notes of the Company (the "Securities"), and a
Registration Statement for the registration of up to an additional 20% of
aggregate principal amount of securities filed in accordance with Rule 462(b)
under the Act, including specifically, but without limiting the generality of
the foregoing, power and authority to sign the names of the undersigned
directors and officers in the respective capacities indicated below, to any
and all amendments to said Registration Statements and to any instruments or
documents filed as a part of or in connection with said Registration
Statements or amendments thereto; and each of the undersigned hereby ratifies
and confirms all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has subscribed, or caused to
be subscribed, these presents this 28th day of July, 1995.

Signature

/s/Edward F. Mitchell
Principal Executive Officers: EDWARD F. MITCHELL
Chairman of the Board and
Chief Executive Officer

/s/John M. Derrick, Jr.
JOHN M. DERRICK, JR.
President and Director

/s/H. Lowell Davis
Principal Financial Officer: H. LOWELL DAVIS
Vice Chairman and
Chief Financial Officer

/s/Dennis R. Wraase
Principal Accounting Officer: DENNIS R. WRAASE
Senior Vice President,
Finance and Accounting (over)

/s/Roger R. Blunt, Sr.
Director ___________________________________
ROGER R. BLUNT, SR.

/s/A. James Clark
Director ___________________________________
A. JAMES CLARK

/s/Richard E. Marriott
Director ___________________________________
RICHARD E. MARRIOTT

/s/David O. Maxwell
Director ___________________________________
DAVID O. MAXWELL

/s/Floretta D. McKenzie
Director ___________________________________
FLORETTA D. McKENZIE

/s/Ann D. McLaughlin
Director ___________________________________
ANN D. McLAUGHLIN

/s/Peter F. O'Malley
Director ___________________________________
PETER F. O'MALLEY

/s/Louis A. Simpson
Director ___________________________________
LOUIS A. SIMPSON

/s/A. Thomas Young
Director ___________________________________
A. THOMAS YOUNG

<PAGE>

EXHIBIT 25.1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM T-1
FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATIONS
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

----------------

THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

----------------

53-0133403
(I.R.S. EMPLOYER IDENTIFICATION NO.)

808-17TH STREET, N.W. 20006
WASHINGTON, D.C. (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)

----------------

POTOMAC ELECTRIC POWER COMPANY
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

----------------

DISTRICT OF COLUMBIA AND VIRGINIA 53-0127880
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

1900 PENNSYLVANIA AVENUE, N.W. 20068
WASHINGTON, D.C. (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)

FIRST MORTGAGE BONDS
(TITLE OF INDENTURE SECURITIES)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

GENERAL

1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE-

(A) IF THE TRUSTEE IS AN INSTITUTIONAL TRUSTEE, GIVE THE NAME AND ADDRESS
OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.

Comptroller of the Currency of the United States, Washington, D.C.

Federal Deposit Insurance Corporation, Washington, D.C.

(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

Yes

2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. IF THE OBLIGOR OR ANY
UNDERWRITER FOR THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.

None.

3. VOTING SECURITIES. FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF
VOTING SECURITIES OF THE TRUSTEE.

AS OF JULY 1, 1995
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
COL. A COL. B
- ------------------------------------------------------------------------------
TITLE OF CLASS AMOUNT OUTSTANDING
- ------------------------------------------------------------------------------
<S> <C>
Common capital stock, par value $2.50 per share 31,145,212 shares
- ------------------------------------------------------------------------------
</TABLE>

CONFLICTS OF INTERESTS

4. TRUSTEESHIPS UNDER OTHER INDENTURES. IF THE TRUSTEE IS A TRUSTEE UNDER
ANOTHER INDENTURE UNDER WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF
INTEREST OR PARTICIPATION IN ANY OTHER SECURITIES, OF THE OBLIGOR ARE
OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:

(A)TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.

None.

(B)A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM THAT
NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B) OF THE ACT
ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE.

Not applicable.

5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS. IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS
OF THE TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR
REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR,
IDENTIFY EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE
OF EACH SUCH CONNECTION.

None

6. VOTING SECURITIES OWNED BY THE OBLIGOR OR ITS OFFICIALS. FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE OWNED
BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND EXECUTIVE
OFFICER OF THE OBLIGOR.

AS OF JULY 1, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D.
- ------------------------------------------------------------------------------------
PERCENTAGE OF
VOTING SECURITIES
AMOUNT OWNED REPRESENTED BY AMOUNT
NAME OF OWNER TITLE OF CLASS BENEFICIALLY GIVEN IN COL. C
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
</TABLE>

2
<PAGE>

All outstanding shares of The Riggs National Bank of Washington, D.C., are
owned by Riggs National Corporation.

The aggregate number of shares of common stock of Riggs National Corporation
owned beneficially by the obligor and its directors and executive officers,
taken as a group, does not exceed 1% of the outstanding voting securities of
Riggs National Corporation.

7. VOTING SECURITIES OWNED BY UNDERWRITERS OR THEIR OFFICIALS. FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE OWNED
BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH DIRECTOR,
PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.

AS OF JULY 1, 1995
<TABLE>
- ------------------------------------------------------------------------------------
<CAPTION>
COL. A COL. B COL. C COL. D.
- ------------------------------------------------------------------------------------
PERCENTAGE OF
VOTING SECURITIES
AMOUNT OWNED REPRESENTED BY AMOUNT
NAME OF OWNER TITLE OF CLASS BENEFICIALLY GIVEN IN COL. C
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
</TABLE>

All outstanding shares of The Riggs National Bank of Washington, D.C., are
owned by Riggs National Corporation.

If any underwriter of the securities proposed to be offered advises the
trustee that the amount of voting securities of Riggs National Corporation
owned beneficially by it and by its directors, partners and executives
officers, taken as a group, exceeds one per cent of the outstanding voting
securities of Riggs National Corporation, information as to such underwriter
will be furnished by amendment prior to the proposed public offering.
Reasonable inquiry will be made of each underwriter with respect to the
information called for by this item.

8. SECURITIES OF THE OBLIGOR OWNED OR HELD. FURNISH THE FOLLOWING INFORMATION
AS TO SECURITIES OF THE OBLIGOR OWNED BENEFICIALLY OR HELD AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT BY THE TRUSTEE.

AS OF JULY 1, 1995
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
COL. A COL. B COL. C COL. D.
- ------------------------------------------------------------------------------------------------
WHETHER THE SECURITIES AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
ARE VOTING OR NONVOTING OR HELD AS COLLATERAL SECURITY FOR REPRESENTED BY AMOUNT
TITLE OF CLASS SECURITIES OBLIGATIONS IN DEFAULT BY TRUSTEE GIVEN IN COL. C
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
None
- ------------------------------------------------------------------------------------------------
</TABLE>

9. SECURITIES OF UNDERWRITERS OWNED OR HELD. IF THE TRUSTEE OWNS BENEFICIALLY
OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES
OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO
EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY OF WHICH ARE SO OWNED OR
HELD BY THE TRUSTEE.

AS OF JULY 1, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D.
- ------------------------------------------------------------------------------------------------
WHETHER THE SECURITIES AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
ARE VOTING OR NONVOTING OR HELD AS COLLATERAL SECURITY FOR REPRESENTED BY AMOUNT
TITLE OF CLASS SECURITIES OBLIGATIONS IN DEFAULT BY TRUSTEE GIVEN IN COL. C
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
None
- ------------------------------------------------------------------------------------------------
</TABLE>

3
<PAGE>

The amount of any class of securities of any underwriter for the obligor
owned beneficially or held as collateral security for obligations in default
by The Riggs National Bank of Washington, D.C., does not exceed 1% of the
outstanding securities of the class.

If upon final determination of such underwriters the foregoing statement
would be incorrect, this item will be amended.

10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. IF THE TRUSTEE OWNS
BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT
VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE (1)
OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2) IS AN
AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.

11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. IF THE TRUSTEE
OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS IN
DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE,
OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.

12. LIST OF EXHIBITS

Exhibit T1A (a) Photostatic copy of Original Articles of Association of the
Trustee dated June 27, 1896; copy of Certificate dated June 30,
1896 issued by Comptroller of Currency authorizing The Riggs
National Bank to commence the business of banking; certified
copy of New Articles of Association which became effective March
1, 1946./1/

(b) Certification of Thomas P. Kane, Acting Comptroller of the Currency, dated
June 24, 1916, that Riggs National Bank of Washington, D.C. is
authorized to have succession until the close of business June
26, 1936./1/

4
<PAGE>

(c) Photostatic copy of letter dated January 20, 1933 signed by F.G. Awalt,
Acting Comptroller of the Currency, Treasury Department, Washington, D.C.,
showing that the charter of The Riggs National Bank was extended until the
close of business June 26, 1995, by virtue of an amendment on July 1,
1922, to the second paragraph of Section 5136 of the United States Revised
Statutes, and showing further that by virtue of an Act of Congress passed
February 25, 1927, amending the second paragraph of Section 5136 of the
United States Revised Statues, The Riggs National Bank of Washington, D.C.
will continue its corporate existence until such time as it be dissolved
by the act of shareholders owning two-thirds of its stock, or until its
franchise becomes forfeited by reason of violation of law, or until
terminated by either general or special act of Congress, or until its
affairs be placed in the hands of a receiver and finally wound up by
him./1/

(d) Certified copy of a Resolution of the Board of Directors of the Bank
adopted at a special meeting held January 12, 1954, a statement of its
President dated January 12, 1954 certifying as to the adoption of said
Resolution by the Shareholders, and a certificate dated January 13, 1954
issued by the Office of the Comptroller of the Currency, Washington, D.C.,
all evidencing an amendment to Article Fifth of its Articles of
Association effective January 15, 1954, increasing its capital stock to
$6,000,000 divided into 60,000 shares, par value $100 each; and providing
also for the increase or decrease of capital stock of the Bank from time
to time and that in the event of any increase, either by the sale of
additional shares or by a declaration of a stock dividend, each
shareholder shall be entitled to his proportionate amount of such increase
in accordance with the number of shares of capital stock owned by him at
the time the increase is authorized by the Shareholders unless another
time subsequent to the date of the Shareholders meeting is specified. Also
included under the above mentioned Certification (made by the Office of
the Comptroller of the Currency) are copies of documents evidencing a
previous increase of the Bank's capital to $5,000,000./2/

(e) Certificate by the Hon. R. M. Gidney, Comptroller of the Currency recorded
in the Treasury Department, Office of the Comptroller of the Currency,
Washington, D.C. dated October 1, 1954, that the consolidation is
approved, effective at the close of business, 2:00 P.M., Friday, October
1, 1954, of The Riggs National Bank of Washington, D.C., Washington, D.C.,
and the Washington Loan and Trust Company, Washington, D.C., under the
charter and title of "The Riggs National Bank of Washington, D.C.", with
capital stock of $7,250,000./3/

(Note: Title 12, Section 34a, U.S. Code, permitting Consolidation of a
State Bank with a National Bank, provides that the consolidated institution
"shall hold and enjoy the same and all rights of property, franchise, and
interests, including appointments, designations, and nominations and all
other rights and interests as trustee, executor, administrator, registrar
of stocks and bonds, guardian of estates, assignee, receiver, committee of
estates of lunatics and in every other fiduciary capacity, in the same
manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by any such constituent institution at the time of
such consolidation.")

(f) Copy of authority dated May 24, 1955, granted by the Board of Governors of
the Federal Reserve System to The Riggs National Bank of Washington, D.C.,
to act as Trustee, Executor, Administrator, Registrar of stocks and bonds,
Guardian of estates, Assignee, Receiver and Committee of estates of
lunatics./4/

(g) Copy of the Articles of Association effective January 8, 1957, of The
Riggs National Bank of Washington, D.C. showing the amount of capital
stock to be Eight Million Dollars ($8,000,000) divided into 320,000 shares
of the par value of Twenty-Five Dollars ($25), and certified as a true and
correct copy by J. C. McCormack, Senior Vice President and Cashier of The
Riggs National Bank of Washington, D.C./5/

5
<PAGE>

(h) Photostatic copy of the Certificate of the Comptroller of the Currency
issued January 8, 1957, approving the increase in the capital stock of The
Riggs National Bank of Washington, D.C. to Eight Million Dollars
($8,000,000) effective January 8, 1957./6/

(i) Certified copy of the certificate recorded in the office of the
Comptroller of the Currency and dated November 10, 1958, certifying the
approval, effective as of the close of business November 10, 1958, of the
consolidation of The Riggs National Bank of Washington, D.C., Washington,
D.C., and The Lincoln National Bank of Washington, D.C., under the charter
and title of "The Riggs National Bank of Washington, D.C.", with capital
stock of $8,850,000./7/

(j) Photostatic copy of the Certificate of the Comptroller of the Currency
issued January 14, 1959, approving the increase in the capital stock of
The Riggs National Bank of Washington, D.C. to Nine Million Two Hundred
Ninety-Two Thousand Five Hundred Dollars ($9,292,500) effective January
15, 1959./7/

(k) Photostatic copy of the Certificate of the Comptroller of the Currency
issued October 19, 1960, approving the increase in the capital stock of
The Riggs National Bank of Washington, D.C. to Ten Million Sixty-Six
Thousand Eight Hundred Seventy-Five Dollars ($10,066,875) effective
October 20, 1960./8/

(l) Certified copy of the Resolution adopted by the Board of Directors of the
Bank at a meeting held on January 13, 1964 recommending for approval by
the shareholders at the annual meeting to be held on January 14, 1964 an
amendment to the Articles of Association of the Bank changing the par
value of the stock from Twenty-Five Dollars ($25) per share to Ten Dollars
($10) per share, and the declaration of a stock dividend of One Million
Six Thousand Six Hundred Eighty-Five Dollars ($1,006,685)./9/

(m) Certified copy of the Resolution adopted by the shareholders of the Bank
at their meeting held on January 14, 1964 approving change in the par
value of the stock from Twenty-Five Dollars ($25) to Ten Dollars ($10) per
share, and the declaration of a stock dividend of One Million Six Thousand
Six Hundred Eighty-Five Dollars ($1,006,685). subject to the approval of
the Comptroller of the Currency./1//0/

(n) Xerox copy of the Certificate of Approval of the Comptroller of the
Currency approving effective January 15, 1964 the increase in the capital
stock of The Riggs National Bank of Washington, D.C. to Eleven Million
Seventy-Three Thousand Five Hundred Sixty Dollars ($11,073,560) by the
issuance of One Million Six Thousand Six Hundred Eighty-Five Dollars
($1,006,685) par value of such stock./1//1/

(o) Xerox copy of the Certificate of Approval of the Comptroller of the
Currency approving effective January 25, 1966 the increase in the capital
stock of The Riggs National Bank of Washington, D.C. to Twelve Million One
Hundred Eighty Thousand Nine Hundred Ten Dollars ($12,180,910) by the
issuance of One Million One Hundred Seven Thousand Three Hundred Fifty
Dollars ($1,107,350) par value of such stock./1//2/

(p) Xerox copy of the Certificate of Approval of the Comptroller of the
Currency approving effective July 10, 1968 the issuance of Preferred
capital stock of The Riggs National Bank of Washington, D.C. of One
Million Five Hundred Seventy Three Thousand Two Hundred Ten Dollars
($1,573,210) par value of such stock./1//3/

(q) Xerox copy of the Certificate of Approval of the Comptroller of the
Currency approving effective August 27, 1969 the issuance of Preferred
capital stock of The Riggs National Bank of Washington, D.C. of One
Million Five Hundred Ninety Six Thousand Eight Hundred Forty Dollars
(1,596,840) par value of such stock./1//4/

6
<PAGE>

(r) Certified copy of Resolution adopted by the Shareholders of the Bank at
their meeting held on March 14, 1973 approving change in the par value of
common stock from Ten Dollars ($10) to Five Dollars ($5) per share, and
the approval of a 2 for 1 stock split as to such stock; said Resolution
also contains the Amendment to Article Fifth of the Bank's Articles of
Association increasing the authorized capital stock of all classes to Two
Million Nine Hundred Eight Thousand Two Hundred Thirty-Five (2,908,235)
shares, of which One Hundred Fifty-Three Thousand One Hundred Forty-Nine
(153,149) shares shall be $4 Cumulative Convertible Preferred Stock, par
value Ten Dollars ($10) per share and Two Million Seven Hundred Fifty-Five
Thousand Eighty-Six (2,755,086) shares shall be Common Stock, par value
Five Dollars ($5) per share. /1//5/

(s) Xerox copy of the Certificate of Approval of the Comptroller of the
Currency approving effective April 8, 1974 the increase in the common
stock of The Riggs National Bank of Washington, D.C. to Thirteen Million
Five Hundred Twenty-Seven Thousand Eight Hundred Seventy-Five Dollars
($13,527,875) by the issuance of One Million Two Hundred Twenty-Nine
Thousand Eight Hundred Five Dollars ($1,229,805) par value of such
stock./1//6/

(t) Xerox copy of a letter from the Board of Governors of the Federal Reserve
System dated March 6, 1981 to Mr. Vincent C. Burke, Jr., Chairman of the
Board of The Riggs National Bank of Washington, D.C., approving Riggs
National Corporation as a bank holding company through the acquisition of
the successor by merger to The Riggs National Bank of Washington,
D.C./1//7/

(u) Certified copy of the Resolution adopted by the Shareholders of the Bank
at their meeting held April 22, 1981 ratifying and confirming the Merger
Agreement and Plan of Reorganization dated February 19, 1981, with a copy
of said Agreement and Plan attached thereto./1//8/

(v) Copy of existing by-laws of the trustee./1//9/

Exhibit T1B Report of condition of the Trustee
- --------
/1Not/filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-7349 under the Securities Act of
1933.

/2Not/filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(1) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of American Finance System
Incorporated's Registration Statement No. 2-26542 under the Securities Act
of 1933.

/3Not/filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(2) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of American Finance System
Incorporated's Registration Statement No. 2-26542 under the Securities Act
of 1933.

/4/Not filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(3) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of American Finance System
Incorporated's Registration Statement No. 2-26542 under the Securities Act
of 1933.

/5Not/filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(4) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of American Finance System
Incorporated's Registration Statement No. 2-26542 under the Securities Act
of 1933.

7
<PAGE>

/6Not/filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(5) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of American Finance System
Incorporated's Registration Statement No. 2-26542 under the Securities Act
of 1933.

/7/Not filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Giant Food Properties, Inc.'s
Registration Statement No. 2-15129 under the Securities Act of 1933.

/8/Not filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(k) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-17286 under the Securities Act of
1933.

/9/Not filed herewith. In lieu thereof there is incorporated herein by
reference Exhibit T1A(l) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-22344 under the Securities Act of
1933.

/1/Not/filed0herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(m) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-22344 under the Securities Act of
1933.

/1/Not/filed1herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(n) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-22344 under the Securities Act of
1933.

/1/Not/filed2herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(o) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-24655 under the Securities Act of
1933.

/1/Not/filed3herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(p) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-31896 under the Securities Act of
1933.

/1/Not/filed4herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(q) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Government Employees Financial
Corporation's Registration Statement No. 2-35501 under the Securities Act
of 1933.

/1/Not/filed5herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(r) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-51698 under the Securities Act of
1933.

/1/Not/filed6herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(s) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-51698 under the Securities Act of
1933.

/1/Not/filed7herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(t) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-78731 under the Securities Act of
1933.

8
<PAGE>

/1/Not/filed8herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1A(u) to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 2-78731 under the Securities Act of
1933.

/1/Not/filed9herewith./In lieu thereof there is incorporated herein by
reference Exhibit T1B to the Form T-1 of The Riggs National Bank of
Washington, D.C. which constitutes a part of Potomac Electric Power
Company's Registration Statement No. 33-50377e under the Securities Act of
1933.

9
<PAGE>

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee,
The Riggs National Bank of Washington, D.C., a national banking association
organized and existing under the laws of the United States, has duly caused
this statement of eligibility and qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the City of Washington, District of Columbia, on
the 28th day of July 1995.

THE RIGGS NATIONAL BANK
OF WASHINGTON, D.C.

/s/ James B. Lynn
By __________________________________

James B. Lynn
Vice President and Trust
Officer

(Corporate Seal)

Attest:

/s/ O. Clinton Jones, III
_______________________________
O. Clinton Jones, III
Senior Corporate Trust Officer

10
<PAGE>

EXHIBIT T1B

THE RIGGS NATIONAL BANK

OF WASHINGTON, D.C.

BY-LAWS

EFFECTIVE FEBRUARY 5, 1985

WITH AMENDMENTS THROUGH NOVEMBER 10, 1992

B-1
<PAGE>

THE RIGGS NATIONAL BANK OF WASHINGTON, D.C.

BY-LAWS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE ONE--MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings........................................... B-4
Section 2. Special Meetings.......................................... B-4
Section 3. Organization.............................................. B-4
Section 4. Qualifications for Directors.............................. B-4
Section 5. Voting.................................................... B-4
Section 6. Quorum: Shareholder Action................................ B-4
ARTICLE TWO--DIRECTORS
Section 1. Board of Directors........................................ B-5
Section 2. Number.................................................... B-5
Section 3. Election; Term of Office.................................. B-5
Section 4. Organization Meeting...................................... B-5
Section 5. Regular Meetings.......................................... B-5
Section 6. Special Meetings.......................................... B-5
Section 7. Quorum: Board Action...................................... B-5
Section 8. Participation Other Than by Attendance.................... B-5
Section 9. Vacancies................................................. B-5
Section 10. Compensation.............................................. B-5
Section 11. Resignation; Removal...................................... B-6
Section 12. Board of Consultants...................................... B-6
ARTICLE THREE--COMMITTEES OF THE BOARD
Section 1. Appointment; Powers....................................... B-6
Section 2. Executive Committee....................................... B-6
Section 3. Term; Vacancies; Alternates............................... B-6
Section 4. Organization.............................................. B-6
ARTICLE FOUR--OFFICERS
Section 1. Chief Executive Officer................................... B-6
Section 2. Chairman of the Board..................................... B-6
Section 3. President................................................. B-7
Section 4. The Vice Chairmen......................................... B-7
Section 5. Senior Officers........................................... B-7
Section 6. Secretary of the Board; Assistant Secretaries............. B-7
Section 7. Other Officers............................................ B-7
Section 8. Tenure of Office.......................................... B-7
Section 9. Compensation.............................................. B-7
ARTICLE FIVE--STOCK, STOCK CERTIFICATES AND HOLDERS OF RECORD
Section 1. Stock Certificates........................................ B-8
Section 2. Transfer of Stock......................................... B-8
Section 3. Lost, Stolen or Destroyed Certificates.................... B-8
Section 4. Holders of Record......................................... B-8
ARTICLE SIX--SIGNING AUTHORITY
Section 1. Signing Authority......................................... B-8
Section 2. Trust Department Signing Authority........................ B-9
</TABLE>

B-2
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE SEVEN--TRUST DEPARTMENT
Section 1. Exercise of Fiduciary Powers.............................. B-10
Section 2. Trust Committee........................................... B-10
Section 3. Management................................................ B-10
Section 4. Trust Department Officers................................. B-10
Section 5. Trust and Securities and Investments...................... B-10
Section 6. Voting of Securities...................................... B-10
ARTICLE EIGHT--GENERAL PROVISIONS
Section 1. Fiscal Year............................................... B-10
Section 2. Records................................................... B-10
Section 3. Seal...................................................... B-11
Section 4. Gender and Number......................................... B-11
ARTICLE NINE--BY-LAWS
Section 1. Amendments................................................ B-11
Section 2. Inspection................................................ B-11
</TABLE>

B-3
<PAGE>

THE RIGGS NATIONAL BANK
OF WASHINGTON, D.C.
BY-LAWS

MEETINGS OF SHAREHOLDERS

Section 1. ANNUAL MEETINGS. The annual meeting of the shareholders of the
Bank for the election of Directors and the transaction of all other business
that may properly come before the meeting shall be held on the second
Wednesday of December in each year, or such other date as may be designated by
the Board of Directors. The annual meeting shall be held at such time and
place and upon such notice as the Board of Directors shall determine.

Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called for any purpose by the Board of Directors, the Chairman of the Board,
the President or any Vice Chairman of the Board, and any such special meeting
shall be held at the place, day and time and upon such notice as the Board of
Directors or such person shall determine. Special meetings of the shareholders
shall be called for any purpose upon the written request of shareholders
entitled to cast not less than ten percent of the votes which all shareholders
are entitled to cast at the particular meeting, and in such case the Secretary
of the Board shall fix the place, date and time of the meeting and shall give
due notice thereof.

Section 3. ORGANIZATION. The Chairman of the Board or, in the event of his
absence or disability, the President or, in the event of his absence of
disability, the Vice Chairman of the Board or, in the event of the absence or
disability of all Vice Chairmen of the Board, any other officer of the Bank
designated by the Board of Directors shall preside at all meetings of the
shareholders. All meetings shall be conducted in accordance with such
regulations as the Board of Directors may from time to time prescribe or as
the presiding officer may establish.

Section 4. QUALIFICATIONS FOR DIRECTORS. No person shall be eligible to be
elected or re-elected a Director if that person has reached his sixty-fifth
birthday; and, no person, who at the time he was first elected to be a
Director was a principal officer or official of the organization with which he
is affiliated on a full-time basis, will be eligible to be re-elected after he
ceases to be a principal officer or official of such organization; provided,
however, that the Chairman of the Board may waive the foregoing age or
organization requirements and permit a person not otherwise satisfying such
requirements to be eligible for election or re-election; and provided further,
that there shall be no age or organization requirements for the director
serving as Chairman of the Board.

Section 5. VOTING. Shareholders may vote at any meeting in person or by
proxy duly authorized in writing. The Board of Directors may fix a record date
for determining those shareholders entitled to vote at any such meeting.

Section 6. QUORUM: SHAREHOLDER ACTION. The presence, in person or by proxy,
of shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast shall constitute a quorum for the
transaction of business at any meeting of shareholders. Unless otherwise
provided by law, any action of the shareholders may be taken by a majority of
the votes cast at any duly convened shareholders' meeting. Any action that may
be taken by the shareholders at a duly convened meeting may also be taken
pursuant to waiver of notice thereof and upon the unanimous written consent of
all shareholders of the Bank; such consent shall set forth the action so taken
and shall be filed with the Secretary of the Board.

B-4
<PAGE>

ARTICLE TWO

DIRECTORS

Section 1. BOARD OF DIRECTORS. The Board of Directors shall manage and
administer the business and affairs of the Bank. Except as expressly limited
by law, all corporate powers of the Bank shall be vested in and may be
exercised by the Board of Directors.

Section 2. NUMBER. The Board of Directors shall consist of such number of
Directors as shall be fixed from time to time by the shareholders or by the
Board of Directors.

Section 3. ELECTION; TERM OF OFFICE. The Board of Directors shall be elected
at each annual meeting of the shareholders. Each Director shall hold office
from the time of his election and his qualification to serve as such and until
the election and qualification of his successor or until such Director's
earlier death, resignation, disqualification or removal.

Section 4. ORGANIZATION MEETING. A meeting of the Board of Directors for the
purpose of organizing the new Board, appointing the officers of the Bank for
the ensuing year and transacting other business shall be held without notice
immediately following the annual election of Directors or as soon thereafter
as is practicable at such time and place as the Secretary of the Board may
designate.

Section 5. REGULAR MEETINGS. Unless the Board otherwise directs, regular
meetings of the Board of Directors shall be held without notice at such times
and places as the Board of Directors shall determine at its Organization
Meeting each year.

Section 6. SPECIAL MEETINGS. The Chairman of the Board, the President, or
any Vice Chairman of the Board may call a special meeting of the Board of
Directors at any time. Any such officer or the Secretary of the Board shall
call a special meeting of the Board upon the written request of any three
members of the Board. A special meeting shall be held at such time and place
as may be designated by the person or persons calling the meeting. The person
or persons calling the meeting shall cause such notice of the meeting and of
its purpose to be given as he may deem appropriate, and such notice may be
given orally or in writing, in person or by telephone, mail or telegram.

Section 7. QUORUM: BOARD ACTION. A majority of the Directors then in office
shall constitute a quorum for the transaction of business at any meeting.
Unless otherwise provided by law, any action of the Board may be taken upon
the affirmative vote of a majority of the Directors present at a duly convened
meeting or upon the unanimous written consent of all Directors.

Section 8. PARTICIPATION OTHER THAN BY ATTENDANCE. To the full extent
permitted by law, any Director may participate in any regular or special
meeting of the Board of Directors or of any committee of the Board of
Directors by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting are able
to hear each other.

Section 9. VACANCIES. The Board of Directors may fill any vacancy on the
Board. Any Director so elected shall hold office until the election and
qualification of his successor or until such Director's earlier death,
resignation, disqualification or removal.

Section 10. COMPENSATION. Each Director who does not receive a salary from
the Bank shall be entitled to such compensation as the Board shall determine
for his service upon the Board of Directors and any of its committees, for his
attendance at meetings of the Board and any of its committees and for his
expenses incident thereto. Directors shall also be entitled to such
compensation as the Board shall determine for services rendered to the Bank in
any capacity other than as Directors.

B-5
<PAGE>

Section 11. RESIGNATION; REMOVAL. Any Director may resign by submitting his
resignation to the Chairman of the Board or the Secretary of the Board. Such
resignation shall become effective upon its submission or at any later time
specified. Any Director may be removed from office by action of the
shareholders or the Board taken in accordance with applicable law.

Section 12. BOARD OF CONSULTANTS. The Chairman of the Board may appoint as
members of a Board of Consulting Directors any person whose experience and
knowledge would be useful to the Bank. Members of the Board of Consultants
shall not be members of the Board of Directors and shall serve the Bank in an
advisory capacity in such manner as may be designated by the Chief Executive
Officer. Members of the Board of Consultants shall not be charged with the
responsibilities, nor shall they be subject to the liabilities, of Directors.

ARTICLE THREE

COMMITTEES OF THE BOARD

Section 1. APPOINTMENT; POWERS. The Board may appoint one or more standing
or temporary committees consisting of two or more Directors. The Board may
invest such committees with such powers and authority, subject to such
conditions, as it may see fit.

Section 2. EXECUTIVE COMMITTEE. The Board shall appoint from among its
members an Executive Committee which, so far as may be permitted by law and
except as specifically limited by the Board pursuant to Section 1 hereof,
shall have all the powers and may exercise all the authority of the Board
during the intervals between the meetings thereof, and shall have such
additional responsibility as may be delegated to it from time to time by the
Board of Directors. All acts done and powers conferred by the Executive
Committee shall be deemed to be, and may be certified as being, done or
conferred under authority of the Board.

Section 3. TERM; VACANCIES; ALTERNATES. All committee members appointed by
the Board shall serve at the pleasure of the Board. The Board may fill any
committee vacancy and may designate one or more eligible Directors as
alternate members of any committee to take the place of any absent or
disqualified member at any meeting. The Chairman of the Board may appoint a
Director who is eligible to serve on any such committee as a member pro
tempore to take the place of any absent or disqualified member or alternate
member.

Section 4. ORGANIZATION. All committees shall determine their own
organization, procedures and times and places of meetings, unless otherwise
directed by the Board and except as otherwise provided in these By-Laws.

ARTICLE FOUR

OFFICERS

Section 1. CHIEF EXECUTIVE OFFICER. The Board of Directors shall appoint one
of its members who shall either be the Chairman of the Board of the Bank, the
President, a Vice Chairman of the Board or any other senior officer of the
Bank to be the Chief Executive Officer. He shall be the Chief Executive
Officer of the Bank and shall have general executive powers concerning all the
operations and business of the Bank. The Chief Executive Officer shall have
and exercise such further powers and duties as may be conferred upon, or
assigned to, him by the Board of Directors and he may delegate to any other
officer such executive and other powers and duties as he deems advisable.

Section 2. CHAIRMAN OF THE BOARD. The Board of Directors shall appoint one
of its members to be the Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the shareholders and

B-6
<PAGE>

of the Board of Directors. He shall have general executive powers and he shall
have and exercise such further powers and duties as may be conferred upon, or
assigned to, him by the Board of Directors or the Chief Executive Officer. In
the event of the absence or disability of the Chairman of the Board, the
President shall preside at all meetings of the shareholders and of the Board
of Directors and shall exercise all other powers and authority of the Chairman
of the Board.

Section 3. PRESIDENT. The Board of Directors shall appoint one of its
members to be President. The President shall have general executive powers,
and he shall have and exercise such further powers and duties as may be
conferred upon, or assigned to, him by the Board of Directors or the Chief
Executive Officer.

Section 4. THE VICE CHAIRMEN. The Board of Directors may appoint one or more
of its members to be Vice Chairmen of the Board. Each Vice Chairman of the
Board shall have general executive powers, and he shall have and exercise such
further powers and duties as may be conferred upon, or assigned to, him by the
Board of Directors or the Chief Executive Officer.

Section 5. SENIOR OFFICERS. The Board of Directors may appoint one or more
senior officers of the Bank, any of whom may be designated as executive,
senior, group or administrative vice presidents or given any other descriptive
titles. Each senior officer shall have and exercise such powers and duties as
may be conferred upon, or assigned to, him by the Board of Directors or the
Chief Executive Officer.

Section 6. SECRETARY OF THE BOARD; ASSISTANT SECRETARIES. The Board of
Directors shall appoint a Secretary of the Board. The Secretary of the Board
shall act as secretary of all meetings of the shareholders, of the Board and
of the Executive Committee, and shall keep minutes of all such meetings. The
Secretary of the Board shall give such notice of the meetings as is required
by law or these By-Laws. The Secretary of the Board shall be the custodian of
the minute book and all other general corporate records. The Secretary of the
Board shall be the custodian of the corporate seal and shall have the power to
affix and attest the same, and he may delegate such power to one or more
officers, employees or agents of the Bank. The Secretary of the Board shall
have and exercise such further powers and duties as may be conferred upon, or
assigned to, him by the Board of Directors or the Chairman of the Board. The
Board or the Chairman of the Board may appoint one or more Assistant
Secretaries of the Board who shall assist the Secretary of the Board in the
performance of his duties. At the direction of the Secretary of the Board or
in the event of his absence or disability, an Assistant Secretary of the Board
shall perform the duties of the Secretary of the Board. Each Assistant
Secretary of the Board shall have and exercise such further powers and duties
as may be conferred upon, or assigned to, him by the Board, the Chairman of
the Board or the Secretary of the Board.

Section 7. OTHER OFFICERS. The Board of Directors, the Chief Executive
Officer or the delegate of either of them may appoint or hire such additional
officers of the Bank, who may be designated as vice presidents, assistant vice
presidents, officers, assistant officers or given any other descriptive
titles, and may hire such additional employees as it or he may deem necessary
or desirable to transact the business of the Bank. Unless the Board of
Directors should otherwise direct, the Chief Executive Officer or such
delegate may establish the conditions of employment of any of the persons
mentioned above and may fix their compensation and dismiss them. Such persons
may have such descriptive titles as may be appropriate, and they shall,
respectively, have and exercise such powers and duties as pertain to their
several offices or as may be conferred upon, or assigned to, them by the
appropriate appointing authority.

Section 8. TENURE OF OFFICE. The Chief Executive Officer, the Chairman of
the Board, the President and the Vice Chairmen of the Board shall each hold
office for the year for which the Board was elected or until their earlier
death, resignation, disqualification or removal. All other appropriate
officers and employees shall hold office at the pleasure of the appointing
authority.

Section 9. COMPENSATION. The Board of Directors may fix the compensation of
those officers appointed pursuant to Sections 1, 2, 3, 4, and 5 (excluding
officers below the rank of Executive Vice President)

B-7
<PAGE>

of this Article Four as the Board may deem appropriate, and it may award
additional compensation to any officer or employee of the Bank for any year or
years based upon the performance of that person during any such period, the
success of the operations of the Bank during any such period or any other
reason deemed appropriate. Unless the Board of Directors shall otherwise
direct, the Chief Executive Officer or his delegate shall fix the compensation
of all other officers or employees of the Bank.

ARTICLE FIVE

STOCK, STOCK CERTIFICATES AND HOLDERS OF RECORD

Section 1. STOCK CERTIFICATES. Every holder of fully paid stock of the Bank
shall be entitled to a certificate or certificates evidencing the number of
shares so held. Such certificates shall be in such form as the Board of
Directors may from time to time prescribe in accordance with law. Such
certificates shall be signed by the Chairman of the Board, the President or
any Vice Chairman of the Board and countersigned by the Secretary of the Board
or any other officer so authorized by the Board of Directors and sealed with
the seal of the Bank, and such signatures and seal may be facsimile or
otherwise as permitted by law.

Section 2. TRANSFER OF STOCK. Except as otherwise provided by law, transfer
of share certificates and of the shares of stock of the Bank represented
thereby shall be made only on the books of the Bank upon surrender to the Bank
or its agent of the certificate or certificates for such shares properly
endorsed by the shareholder, or by his assignee, agent or legal
representative, who shall furnish proper evidence of assignment, authority or
legal succession, or by the agent of one of the foregoing thereunto duly
authorized by an instrument duly executed and filed with the Bank in
accordance with regular commercial practice.

Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any shares
of the Bank shall immediately notify it of any loss, theft or destruction of
the stock certificate representing such shares. New certificates for shares of
stock may be issued to replace such certificates upon satisfactory proof of
the loss, theft or destruction and upon such other terms and conditions as the
Board of Directors, the Chief Executive Officer or any person designated by
either of them may from time to time determine.

Section 4. HOLDERS OF RECORD. The Bank shall be entitled to treat any person
in whose name shares of stock of the Bank stand on its books as the holder and
owner in fact thereof for all purposes, and it shall not be bound to recognize
any equitable or other claims to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise expressly provided by law.

ARTICLE SIX

SIGNING AUTHORITY

Section 1. SIGNING AUTHORITY. The Chairman of the Board, the President, any
Vice Chairman of the Board, any Executive Vice President, any Senior Vice
President or any Vice President of the Bank shall have full power and
authority, in the name and on behalf of the Bank, under the seal of the Bank
or otherwise, to execute, acknowledge and deliver any and all agreements,
instruments or other documents relating to property or rights of all kinds
held or owned by the Bank or to the operation of the Bank, all as may be
incidental to the operation of the Bank and subject to such limitations as the
Board of Directors or the Chief Executive Officer may impose. Any such
agreement, instrument or document may also be executed, acknowledged and
delivered in the name and on behalf of the Bank, under seal of the Bank or
otherwise, by such other officers, employees or agents of the Bank as the
Board of Directors, the Chief Executive Officer, or the delegate of either of
them may from time to time authorize. In each such case, the authority so
conferred shall be subject to such limitations as the Board of Directors, the
Chief Executive Officer or the delegate may impose. Any officer, employee or
agent authorized hereunder to execute, acknowledge and deliver any such
agreement, instrument or document is also

B-8
<PAGE>

authorized to cause the Secretary of the Board, any Assistant Secretary of the
Board or any other authorized person to affix the seal of the Bank thereto and
to attest it.

Section 2. TRUST DEPARTMENT SIGNING AUTHORITY. The Chief Executive Officer,
the Chairman of the Board, the President, any Vice Chairman of the Board, the
Officer in Charge of the Trust Department, any senior officer of Vice
President in such department and, in the case of (c) below, any officer in the
Trust Department shall have full power and authority, in the name and on
behalf of the Bank as trustee, administrator, executor, registrar, transfer
agent, or in any other fiduciary capacity, under seal of the Bank or
otherwise;

(a) To execute, acknowledge and deliver deeds, bonds, mortgages,
agreements, indentures, bills of sale, powers of attorney and all other
instruments in writing that may be necessary or proper in the management or
in the sale, leasing or other disposition of any real or personal property
held by the Bank in any fiduciary capacity; and to execute, acknowledge,
deliver or accept agreements, indentures, deeds of trust or mortgages that
may be necessary or proper in the acceptance of trusts, depositaryships,
agency, custodian, escrow or any other fiduciary accounts;

(b) To execute, acknowledge and deliver any instrument in writing that
may be necessary in order to assign, subordinate, release, satisfy or
affect in any other manner of record the whole or part of any judgment or
of any mortgage or other lien (except a corporate mortgage, deed of trust,
indenture or other instrument executed and delivered to the Bank as trustee
for the purpose of securing an issue of corporate obligations) held by the
Bank in any fiduciary capacity;

(c) To execute, acknowledge and deliver all receipts, schedules,
affidavits, authentications or certifications of the Bank as trustee under
any mortgage, deed of trust, indenture or agreement securing or providing
for bonds, debentures, notes or other securities and all certificates as
registrar or transfer agent, and all checks as disbursing agent, and all
certificates of deposit, interim certificates and trust receipts or
certificates;

(d) To execute, acknowledge and deliver, pursuant to the terms of any
corporate mortgage, deed of trust, indenture or other instrument executed
and delivered to the Bank as trustee for the purpose of securing an issue
of corporate obligations, any instrument in writing that may be necessary
to assign, modify, release or satisfy any such mortgage, deed of trust,
indenture or other instrument or that may be necessary to release all or
any part of the property covered by such mortgage, deed of trust, indenture
or other instrument from the lien thereof;

(e) To appear in any court of record and to enter upon the record in such
court an assignment, subordination, release or satisfaction, in whole or in
part, of any judgment held by or controlled by the Bank in any fiduciary
capacity;

(f) To verify under oath all pleadings and all other instruments of every
nature and description that may be prepared by or on behalf of the Bank in
any fiduciary capacity and of which such verification may be necessary or
proper.

All such powers and authority shall be subject to such limitations as the
Board of Directors or the Chief Executive Officer may impose.

Any such agreement, instrument or other document may also be executed,
acknowledged and delivered in the name and on behalf of the Bank in any
fiduciary capacity, under seal of the Bank or otherwise, by such other
officers, employees or agents of the Bank as the Board of Directors, the Chief
Executive Officer, the Officer in Charge of the Trust Department or the
delegate of any of them may from time to time authorize. In each such case,
the authority so conferred shall be subject to such limitations as the Board
of Directors, the Chief Executive Officer, the Officer in Charge of the Trust
Department or the delegate may impose.

Any officer, employee or agent authorized hereunder to execute, acknowledge
and deliver any such agreement, instrument or document is also authorized to
cause the Secretary of the Board, any Assistant

B-9
<PAGE>

Secretary of the Board, any Trust Department officer or any other authorized
person to affix the seal of the Bank thereto and to attest it or to guarantee
signatures to assignments of any registered securities.

ARTICLE SEVEN

TRUST DEPARTMENT

Section 1. EXERCISE OF FIDUCIARY POWERS. The administration of all fiduciary
powers of the Bank, except those incident to the conduct of the banking
business, shall be conducted through the Trust Department. All fiduciary
records of the Trust Department shall be kept separate and distinct from other
records of the Bank.

Section 2. TRUST COMMITTEE. The Board shall appoint, from among its members,
a Trust Committee of not less than five members which, so far as may be
permitted by law and except as specifically limited by the Board pursuant to
Article Three, Section 1 hereof, shall have general responsibility for the
proper exercise of the fiduciary powers of the Bank. The Trustee Committee may
appoint such committees of the Trust Department as it may deem necessary or
desirable for the proper exercise of the Bank's fiduciary powers, and it may
assign to any such committee or to any officer or employee of the Trust
Department the administration of such of the fiduciary powers of the Bank as
it may consider proper.

Section 3. MANAGEMENT. The Board of Directors shall appoint an Officer of
the Bank who shall be responsible for the activities of the Trust Department,
subject to the general supervision of the Board of Directors and the Chief
Executive Officer. The Officer in Charge of the Trust Department shall do or
cause to be done all things necessary or proper in carrying on the business of
the Trust Department in accordance with the provisions of law and all
applicable regulations.

Section 4. TRUST DEPARTMENT OFFICERS. The Board of Directors or the Chief
Executive Officer may appoint such other officers of the Trust Department as
it or he may deem necessary or desirable for the proper exercise of the Bank's
fiduciary powers. Such officers shall, respectively, have and exercise such
powers and duties as pertain to their several offices or as may be conferred
upon, or assigned to, them by the Board of Directors or the Chief Executive
Officer.

Section 5. TRUST AND SECURITIES AND INVESTMENTS. Any funds or assets held in
the Trust Department shall be kept separate from the assets of the Bank and
shall be placed in the joint custody or control of not less than two officers
or employees of the Bank who are adequately bonded and are designated for that
purpose by the Trust Committee of the Board of Directors or by any officer of
the Trust Department to whom the Trust Committee may delegate such power of
designation.

Section 6. VOTING OF SECURITIES. The Officer in Charge of the Trust
Department, and any officer of the Trust Department designated by him, may
vote shares of stock of any corporation held by the Bank in a fiduciary
capacity, whether by proxy or by attendance at a meeting of the holders of
such shares.

ARTICLE EIGHT

GENERAL PROVISIONS

Section 1. FISCAL YEAR. The fiscal year of the Bank shall be the calendar
year.

Section 2. RECORDS. The Articles of Association, By-Laws and the proceedings
of all meetings of the shareholders, the Board of Directors, the Executive
Committee, and any other committee of the Board shall be recorded in
appropriate minute books provided for the purpose. The minutes of each meeting
shall be signed by the Secretary of the Board or other person acting as
secretary of the meeting.

B-10
<PAGE>

Section 3. SEAL. The Board of Directors shall from time to time prescribe
the form of a suitable corporate seal.

Section 4. GENDER AND NUMBER. Any reference in these By-Laws to one gender,
whether masculine, feminine or neuter, includes the other two, and the
singular includes the plural and vice versa unless the context indicates
otherwise.

ARTICLE NINE

BY-LAWS

Section 1. AMENDMENTS. These By-Laws may be amended, altered and repealed,
and new By-Laws may be adopted, either by action of the shareholders or
(except as otherwise provided by law) by action of the Board of Directors.

Section 2. INSPECTION. A copy of the By-Laws, with all amendments thereto,
shall at all times be kept in a convenient place at the main office of the
Bank and shall be open for inspection by all shareholders during normal
business hours.

B-11
<PAGE>

EXHIBIT T1B

REPORT OF CONDITION

CONSOLIDATED DOMESTIC AND FOREIGN SUBSIDIARIES OF
THE RIGGS NATIONAL BANK OF WASHINGTON, D. C.
AS OF MARCH 31, 1995

ASSETS
<TABLE>
<CAPTION>
THOUSANDS
OF DOLLARS
----------
<S> <C>
Cash and balances due from depository institutions
Noninterest-bearing balances and currency and coin............... $ 188,129
Interest-bearing balances........................................ 205,035
Held-to-maturity securities........................................ 474,138
Available-for-sale securities...................................... 530,083
Federal funds sold and securities purchased under agreements to
resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in
IBFs:
Federal funds sold............................................... 140,000
Loans and lease financing receivables:
</TABLE>
<TABLE>
<S> <C>
Loans and leases, net of unearned income........................... $2,189,305
LESS: Allowance for loan and lease losses.......................... 90,762
----------
</TABLE>
<TABLE>
<S> <C>
Loans and leases, net of unearned income and allowance............ 2,098,543
Assets held in trading accounts..................................... 63
Premises and fixed assets (including capitalized leases)............ 127,630
Other real estate owned............................................. 45,997
Investments in unconsolidated subsidiaries and associated companies. 0
Customer's liability to this bank on acceptances outstanding........ 750
Intangible assets................................................... 15,200
Other assets........................................................ 82,322
----------
TOTAL ASSETS........................................................ $3,907,890
==========
LIABILITIES
Deposits:
In domestic offices............................................... 2,987,290
</TABLE>
<TABLE>
<S> <C>
Noninterest-bearing................................................ $ 738,540
Interest-bearing................................................... 2,248,750
----------
</TABLE>
<TABLE>
<S> <C>
In foreign offices, Edge and Agreement subsidiaries, and IBFs...... 312,068
</TABLE>
<TABLE>
<S> <C>
Noninterest-bearing................................................ $ 10,587
Interest-bearing................................................... 301,481
----------
</TABLE>
<TABLE>
<S> <C>
Federal funds purchased and securities sold under agreement to
repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in
IBFs:
Federal funds purchased......................................... 8,500
Securities sold under agreements to repurchase.................. 195,931
Demand notes issued to the U.S. Treasury.......................... 39,337
Trading liabilities............................................... 566
Other borrowed money:
With original maturity of one year or less...................... 363
Bank's liability on acceptances executed and outstanding.......... 750
Other liabilities................................................. $ 60,402
----------
TOTAL LIABILITIES................................................. $3,605,207
----------
EQUITY CAPITAL
Common Stock...................................................... 20,771
Surplus........................................................... 242,422
Undivided profits and capital reserves............................ 51,963
Net unrealized holding gains (losses) on available-for-sale
securities........................................................ (13,174)
Cumulative foreign currency transaction adjustments............... 701
TOTAL EQUITY CAPITAL.............................................. 302,683
----------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY
CAPITAL.......................................................... 3,907,890
==========
</TABLE>
<PAGE>

I, John L. Davis, Executive Vice President and Chief Financial Officer of
the above-named bank do hereby declare that this Report of Condition is true
and correct to the best of my knowledge and belief.

/s/ John L. Davis
_____________________________________
JOHN L. DAVIS

We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.

/s/ Joe L. Allbritton /s/ Timothy C. Coughlin
___________________________________ _____________________________________
JOE L. ALLBRITTON TIMOTHY C. COUGHLIN

D-2