POTOMAC ELECTRIC POWER CO, POS AM, 1999-02-09

POTOMAC ELECTRIC POWER CO
POS AM, 1999-02-09
ELECTRIC SERVICES

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Registration No. 333-66127
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________

POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
____________________

POTOMAC ELECTRIC POWER COMPANY
(Exact name of registrant as specified in its charter)
____________________

DISTRICT OF COLUMBIA AND VIRGINIA 53-0127880
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.
____________________

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, ESQ.
Associate General Counsel, 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:
D. Michael Lefever, Esq. Richard L. Harden, Esq.
Covington & Burling Winthrop, Stimson, Putnam &
1201 Pennsylvania Avenue, N.W. Roberts
Washington, D.C. 20004 One Battery Park Plaza
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. [_]

<PAGE>

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. [_]
____________________

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus to
be used in separate offerings of Debt Securities in an aggregate
principal amount of $270,000,000. One prospectus will be used in
connection with the offer and sale of First Mortgage Bonds (the
"Bond Prospectus") and the other prospectus will be used in
connection with the offer and sale of Senior Notes (the "Note
Prospectus"). The Bond Prospectus and the Note Prospectus are
identical with the exception of their respective cover pages, the
sections describing the respective Debt Securities and the
security for such Debt Securities, and minor conforming changes
to the sections entitled "Incorporation of Certain Information by
Reference," "Use of Proceeds," and "Plan of Distribution." In
addition, the Bond Prospectus includes a section entitled
"Description of Mortgage Bonds and Mortgage," whereas the Note
Prospectus includes sections entitled "Description of Senior
Notes," "Description of Indenture," and "Description of Senior
Note Mortgage Bonds and Mortgage."

<PAGE>

<PAGE>
PRELIMINARY PROSPECTUS DATED FEBRUARY 9, 1999
SUBJECT TO COMPLETION
POTOMAC ELECTRIC POWER COMPANY
SENIOR NOTES
____________________
Potomac Electric Power Company (the "Company") may offer
from time to time up to $270,000,000 in principal amount of
Senior Notes (the "Senior Notes"). The Company will offer the
Senior Notes in separate series. 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 each such series of Senior Notes will be determined at
the time of sale and will be described in a Prospectus Supplement
that will accompany this Prospectus (the "Prospectus
Supplement").

Until the Release Date, payment of principal, premium, if
any, and interest on the Senior Notes will be secured by a
corresponding series of First Mortgage Bonds issued under the
Company's Mortgage and Deed of Trust. The First Mortgage Bonds
will have terms that are substantially the same as the Senior
Notes, including the same interest rate, interest payment dates
and maturity date. The payment of principal, premium, if any,
and interest on all First Mortgage Bonds issued under the
Mortgage and Deed of Trust is secured by a first lien on
substantially all of the Company's assets. The trustee under the
indenture for the Senior Notes will hold the First Mortgage Bonds
for the benefit of the holders of the secured series of Senior
Notes.

The Release Date is the date on which all outstanding First
Mortgage Bonds, other than First Mortgage Bonds that secure any
series of Senior Notes, are repaid. From and after the Release
Date, the Senior Notes (and all other series of Senior Notes that
are secured by First Mortgage Bonds) will cease to be secured by
Senior Note Mortgage Bonds or any other specific assets, and
instead will become general unsecured obligations of the Company.
See "Description of Senior Notes" "Description of the Indenture"
and "Description of Senior Note Mortgage Bonds and Mortgage."

The Company may sell the Senior Notes through underwriters
that it selects or through dealers or agents. The Company also
may sell Senior Notes directly to a limited number of
institutional purchasers. See "Plan of Distribution." The
Prospectus Supplement will set forth the names of any
underwriters, dealers or agents, the amount of any commissions or
discounts allowed them for selling the Senior Notes, and the net
proceeds the Company receives from the sale of the Senior Notes.
________________________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
____________________

THE DATE OF THIS PROSPECTUS IS ________, 1999

<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. Neither this Prospectus nor any
Prospectus supplement is 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 our affairs thereafter.
____________________

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by the Company with the
Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (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, 1997.

(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.

(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.

(e) The Company's Current Reports on Form 8-K, dated
January 26, 1998, July 1, 1998, January 4, 1999, January 29,
1999, February 1, 1999 and February 3, 1999.

All documents that the Company files with the SEC
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 will 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 will 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.

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<PAGE>

The Company will provide to each person, including any
beneficial owner, to whom a copy of this Prospectus has been
delivered, a copy of any or all of the information that has
been or may be incorporated by reference in this Prospectus but
not delivered with the Prospectus (including any exhibits that
are specifically incorporated by reference in that information).
The Company will provide this information upon written or oral
request and at no cost to the requestor. Requests for such
information should be directed to Ellen Sheriff Rogers, Associate
General Counsel, Secretary and Assistant Treasurer, Potomac
Electric Power Company, 1900 Pennsylvania Avenue, N.W.,
Washington, D.C. 20068 (202-872-3526).

The Company is subject to the informational reporting
requirements of the 1934 Act, and therefore files Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, proxy statements and other information with the SEC.
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
documents. The public may read and copy these documents at the
SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The
address of that site is http://www.sec.gov. Information
concerning the Company also can be obtained at the Company's
website, the address of which is http://www.pepco.com.

The Company has filed a registration statement on Form S-3
with the SEC relating to the Senior Notes that are being offered
by this Prospectus (which, together with all amendments and
exhibits, is referred to herein as the "Registration Statement")
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 Statement, certain parts of which are omitted
in accordance with the rules and regulations of the SEC. For
further information, please read the Registration Statement.

THE COMPANY

Potomac Electric Power Company, a District of Columbia and
Virginia corporation, 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.
The Company has a contract to supply electric energy at wholesale,
through at least December 31, 2000, 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"),
provides a vehicle to conduct the Company's ongoing nonutility
investment programs and operating businesses. PCI's principal
financial investments consist of aircraft and power generation
equipment,

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<PAGE>

equipment leasing and marketable securities, primarily preferred
stock with mandatory redemption features, and real estate. PCI
also is involved in the development and expansion of operating
businesses in the competitive markets for energy and
telecommunications products and services. 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 $270,000,000 of
Senior Notes.

Except as otherwise described in the Supplemental
Prospectus, the proceeds from the sale of the Senior Notes will
be used for one or more of the following purposes (i) to refund
short-term debt incurred primarily to finance, on a temporary
basis, the Company's utility construction program and operations
or (ii) to refund the Company's senior securities, including the
retirement of long-term debt and the satisfaction of contractual
sinking fund requirements, as more fully set forth in the
Prospectus Supplement.

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, 1997 and consolidated
financial statements contained in the Company's Current Report on
Form 8-K dated January 29, 1999, which is available as described
herein under "Incorporation of Certain Information by Reference."

12 Months Ended
-------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995
-------- -------- -------- --------
(Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Income Statement Data:
Total Revenue............................. $2,063,928 $1,863,510 $2,010,311 $1,876,102
Operating Revenue......................... 1,886,080 1,810,829 1,834,857 1,822,432
Net Income................................ 226,347 181,830 236,960 94,391
Earnings for Common Stock................. 208,267 165,251 220,356 77,540
Basic Earnings Per Share of Common Stock.. 1.76 1.39 1.86 .65
Diluted Earnings Per Share of Common Stock 1.73 1.38 1.82 .65
Balance Sheet Data at end of period:
Property and Plant, net................... $4,521,177 $4,486,334 $4,423,249 $4,400,311

</TABLE>
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<PAGE>

<TABLE>
<CAPTION>
As of Dec. 31, 1998
-------------------------
Amount Ratio
----------- -----
(Thousands)
<S> <C> <C>
Capital Structure (excluding nonutility subsidiary debt and
current maturities):
Long-Term Debt...............................................$1,859,077 46.4%
Preferred Securities......................................... 125,000 3.1
Preferred Stock.............................................. 150,000 3.7
Common Equity................................................ 1,877,355 46.8
---------- ------
Total Capitalization...........................................$4,011,432 100.0%

Parent Company Long-Term Debt and Preferred Stock Redemption
Due in One Year and Short-Term Debt.......................... $ 236,919

</TABLE>

<TABLE>
RATIOS OF EARNINGS TO FIXED CHARGES
<CAPTION>
12 Months Ended
---------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parent company only............. 2.95 2.54 3.08 3.05 3.23 3.20
Fully consolidated.............. 2.50 2.03 2.24 1.52 2.37 2.31

</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.

DESCRIPTION OF SENIOR NOTES

General.

The Senior Notes will be issued under an Indenture between
the Company and The Bank of New York, as trustee (the "Indenture
Trustee"), as supplemented by a separate supplemental indenture
(a "Senior Note Supplemental Indenture") each time a new series
of Senior Notes is issued. The Indenture will be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The terms of the Indenture consist of those set forth
in the Indenture and those made part of the Indenture by the
Trust Indenture Act. The Indenture, as supplemented by each
Senior Note Supplemental Indenture, is referred to herein as the
"Indenture." See "Description of Indenture." The Indenture and
the form of Senior Note Supplemental Indenture are filed as
exhibits to the Registration Statement and are hereby
incorporated herein by reference.

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<PAGE>

Reference is made to the accompanying Prospectus Supplement
for the following terms and other information with respect to the
Senior Notes being offered hereby: (i) the designation and
aggregate principal amount of such Senior Notes, (ii) the date on
which such Senior Notes will mature, (iii) the rate per annum at
which such Senior Notes will bear interest, or the method of
determining such rate, (iv) the dates on which such interest will
be payable, (v) any redemption terms; (vi) whether such Senior
Notes will be issued in certificated or book-entry form, and
(vii) other specific terms applicable to such Senior Notes.

Until the Release Date (as hereinafter defined), the Senior
Notes will be secured by a corresponding series of Mortgage Bonds
("Senior Note Mortgage Bonds") issued under the Mortgage (as
hereinafter defined) and delivered to and held by the Indenture
Trustee. On the Release Date, all outstanding Senior Notes
issued under the Indenture (including the Senior Notes offered
hereby) will cease to be secured by a corresponding series of
Senior Note Mortgage Bonds, and will become unsecured general
obligations of the Company and will rank on a parity with all
other unsecured indebtedness of the Company. See "Security;
Release of Security."

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

The following summary of the terms of the Senior Notes does
not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to,
the Indenture and the Prospectus Supplement. The cited Articles
and Sections, unless otherwise indicated, are citations to the
Indenture.

Registration of Transfer and Exchange.

The Senior Notes will be fully registered and will be issued
in either certificated or book-entry form without coupons
(Section 302). Except as otherwise specified in the Prospectus
Supplement, the Senior Notes will be issued in denominations of
$1,000 or any integral multiple thereof (Section 302).

So long as a Senior Note remains outstanding, the Company is
required to maintain an office or agency where the Senior Notes
may be presented or surrendered for payment or for registration
of transfer or exchange and where notices and demands to or upon
the Company may be served. The Company has designated the
corporate trust office of the Indenture Trustee in New York, New
York, as its agent for these purposes (Section 1002). See
"Relationships with Indenture Trustee."

Senior Notes in certificated form may be exchanged for other
Senior Notes of the same series of any authorized denomination
and of a like aggregate principal amount and tenor (Section
305(c)). In the event that a series of Senior Notes is to be
redeemed in whole or in

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<PAGE>

part, the Indenture Trustee is not required to register the
transfer or exchange of the Senior Notes called or to be selected
for redemption, except, in the case of a Senior Note to be
redeemed in part, for the portion thereof that is not to be
redeemed (Section 305(g)).

No service charge will be made to holders of Senior Notes
for any registration of transfer or exchange of Senior Notes, but
the Company may require payment of a sum sufficient to cover any
tax or governmental charge incident to the registration of
transfer or exchange (Section 305(f)).

Payment of Principal and Interest.

Payments of principal, premium, if any, and interest at
maturity (or on the redemption date, if redeemed prior to
maturity) on Senior Notes in certificated form will be made in
immediately available funds at the corporate trust office of the
Institutional Trustee or at the office of any paying agent
designated by the Company (Section 1002). Interest payments
other than at maturity will be made in the same manner or, at the
option of the Company, by check mailed to the address of the
registered holder of a Senior Note.

If the date on which any payment of principal, premium or
interest is due to be made is not a Business Day in the place of
payment, then such payment need not be made on such date
and instead may be made, at the election of the Company, on the
next succeeding Business Day in the place of payment with the
same effect as if made on the scheduled payment date, and no
interest shall accrue from the scheduled payment date through
such next succeeding Business Day (Section 114). The term
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day in the place of payment on which
banking institutions are authorized or obligated by law or
executive order to close.

Book-Entry Senior Notes.

The Senior Notes of any series may be issued in whole or in
part in the form of one or more fully-registered global notes
(each, a "Book-Entry Note"), which will be deposited with
a depositary (the "Depositary") and registered in the name of the
Depositary or its nominee (Section 301). So long as the
Depositary 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 of the Senior Notes represented by such
Book all purposes under the Indenture (Section 308). Except as
described below, owners of beneficial interests in a Book-Entry
Note will not be entitled to have Senior Notes represented by
such Book-Entry Note registered in their names, will not receive
or be entitled to receive physical delivery of Senior Notes in
certificated form, and will not be considered the owners thereof
under the Indenture.

Principal, premium, if any, and interest payments on Senior
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 registered owner of the related Book-Entry
Note. Neither the
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<PAGE>

Company nor the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments
made on account of, beneficial ownership interests in a
Book-Entry Note, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Payments of principal, premium, if any, and interest on the
Senior Notes issued in the form of Book-Entry Notes will be made
to DTC in immediately available funds.

A Book-Entry Note may not be transferred other than to the
Depositary or its nominee or to a successor of the Depositary or
its nominee, except that, if at any time (i) the Depositary is
unwilling or unable to continue as depository or it ceases to be
a "clearing agency" registered under the 1934 Act and a successor
depository is not appointed by the Company within 90 days, (ii)
the Company determines that one or more Book-Entry Notes will be
exchangeable for certificated Senior Notes, or (iii) an Event of
Default under the Indenture (or any event which with notice or
the lapse of time or both would become an Event of Default under
the Indenture) has occurred and is continuing with respect to
Senior Notes represented by a Book-Entry Note, all affected
Book-Entry Notes may be exchanged for Senior Notes in
certificated form registered in the names of such persons as the
Depositary shall direct (Section 305(h)).

If any series of Senior Notes is issued in whole or in part
in the form of a Book-Entry Note, the Depository Trust Company
("DTC") will act as the Depositary for such series of Senior
Notes and such Senior Notes will be issued in the name of Cede &
Co., as DTC's nominee. The following description of DTC and its
activities is based on information provided to the Company by
DTC.

DTC has advised the Company that it is a limited-purpose
trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the 1934 Act. DTC holds
securities that its participants deposit with DTC. DTC also
facilitates the clearance and settlement of securities
transactions among its participants in deposited securities
through electronic book-entry changes in the accounts of the
participants, thereby eliminating the need for physical movement
of securities certificates. Participants in DTC include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a
number of its participants and by The New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to DTC's
book-entry system also is available to others, such as securities
brokers and dealers, banks and trust companies that clear
transactions through, or maintain a custodial relationship with,
a participant, either directly or indirectly. The rules of DTC
are on file with the SEC.

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<PAGE>

Purchasers of Senior Notes within the DTC system must be
made by or through participants, which will receive a credit for
the Senior Notes on DTC's records. The ownership interest of
each actual purchaser of a Senior Note (a "beneficial owner")
will in turn to be recorded on the records of direct and indirect
DTC participants. Beneficial owners will not receive written
confirmation from DTC of their purchases, but beneficial owners
are expected to receive written confirmations providing details
of the transactions, as well as periodic statements of their
holdings, from the participant or indirect participant through
which the beneficial owners purchase Senior Notes. Transfers of
ownership interests in the Senior Notes will be accomplished by
entries made on the books of participants acting directly or
indirectly on behalf of beneficial owners.

DTC will credit participants' accounts on the relevant
payment date in accordance with their respective holdings shown
on DTC's records. Payments by participants and indirect
participants to beneficial owners will be governed by standing
instructions and customary practices and will be the
responsibility of such participants and indirect participants and
not of DTC, the Indenture Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect from
time to time.

DTC has no knowledge of the actual beneficial owners of the
Senior Notes in book-entry form. DTC's records reflect only the
identity of the participants to whose accounts such Senior Notes
are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible
for keeping account of their holdings on behalf of their
customers.

Conveyance of notices and other communications by DTC to
participants, by participants to indirect participants, and by
participants and indirect participants to beneficial owners will
be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.

Redemption notices in respect of the Senior Notes held in
book-entry form will be sent to DTC or its nominee. If less than
all of the Senior Notes are being redeemed, DTC will determine
the pro rata amount of the interest of each participant to be
redeemed in accordance with its procedures.

The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of securities in
certificated form. Such laws may impair the ability to transfer
beneficial interests in Senior Notes represented by a Book-Entry
Note.

Security; Release of Security.

Until the Release Date, Senior Notes of each series offered
hereby and under the accompanying Prospectus Supplement will be
secured by a corresponding series of Senior Note Mortgage Bonds
issued under, and secured by the lien of, the Mortgage. See

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<PAGE>

"Description of Senior Note Mortgage Bonds and Mortgage". The
"Release Date" is the date on which all Mortgage Bonds issued and
outstanding under the Mortgage, other than Senior Note Mortgage
Bonds securing any Senior Notes issued under the Indenture, have
been retired through payment or redemption (including those
Mortgage Bonds "deemed to have been paid" within the meaning of
Article XVI of the Mortgage). From and after the Release Date,
the Senior Note Mortgage Bonds held by the Indenture Trustee will
cease to secure any obligation of the Company under the Indenture
or the Senior Notes, including the payment of principal of, and
any premium or interest on, the Senior Notes, and the Senior
Notes will become unsecured general obligations of the Company
(Section 1404).

Pledge of Senior Note Mortgage Bonds. Simultaneously with
or prior to the issuance of the Senior Notes of each series, the
Company will issue, deliver and pledge to the Indenture Trustee,
for the benefit of the holders of the Senior Notes of such
series, Senior Note Mortgage Bonds registered in the name of the
Indenture Trustee (i) in an aggregate principal amount equal to
or exceeding the aggregate principal amount of the Senior Notes
of such series, (ii) with a stated maturity date not earlier than
the stated maturity date of the Senior Notes of such series,
(iii) bearing an interest rate equal to the interest rate borne
by the Senior Notes of such series, (iv) having interest payment
dates that are the same as the interest payment dates of the
Senior Notes of such series, (v) with the same redemption
provisions, if any, as the Senior Notes of such series (in
addition to those described below under "Redemption of Senior
Note Mortgage Bonds"), and (vi) in all other material respects
conforming as nearly as is practicable to the terms of the Senior
Notes of such series (Section 1402).

Until the Release Date, the Senior Note Mortgage Bonds
delivered to and pledged with the Indenture Trustee will be held
in trust by the Indenture Trustee for the equal and proportionate
benefit and security of the holders from time to time of the
corresponding series of Senior Notes, and shall serve as security
for (i) the full and prompt payment of the principal of and
premium, if any, on the corresponding series of Senior Notes when
and as the same shall become due in accordance with the terms and
provisions of the Senior Notes and the Indenture, whether at the
stated maturity or by declaration of acceleration, call for
redemption or otherwise, and (ii) the full and prompt payment of
interest on such Senior Notes when and as the same shall become
due in accordance with the terms and provisions of the Senior
Notes and the Indenture (Section 1404).

Each series of Senior Notes will be secured by only one
corresponding series of Senior Note Mortgage Bonds, and each such
series of Senior Note Mortgage Bonds will secure only that series
of Senior Notes (Section 1402). No series of Senior Notes will
be secured by any particular assets, franchises, rights, powers
or entitlements of the Company other than the series of Senior
Note Mortgage Bonds pledged to the Indenture Trustee with respect
to such series of Senior Notes (Section 1405).

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<PAGE>

Payment of Principal, Premium and Interest on Senior Note
Mortgage Bonds. The obligation of the Company to make any
payment of principal of, or premium, if any, or interest on, any
Senior Note Mortgage Bonds securing Senior Notes will be deemed
to be satisfied and discharged to the extent that payment of the
principal of, or premium, if any, or interest on, the
corresponding Senior Notes has been made or otherwise discharged
by the Company (Section 1406).

Restrictions on Transfer of Senior Note Mortgage Bonds.
Except as required to effect an assignment of its rights and
obligations under the Indenture to a successor trustee and except
for the release of the Senior Note Mortgage Bonds to the Company
or the Mortgage Trustee in accordance with the Indenture, the
Indenture Trustee may not transfer any Senior Note Mortgage Bonds
pledged to it as security for Senior Notes (Section 1408).

Redemption of Senior Note Mortgage Bonds. The Senior Note
Mortgage Bonds securing any series of Senior Notes will be
redeemable upon the acceleration of maturity of the series of
Senior Notes secured thereby as the result of any Event of
Default under the Indenture, at a redemption price equal to the
principal amount of such Senior Note Mortgage Bonds, plus accrued
and unpaid interest thereon to the date of the redemption demand
(Part III, Section 2, of the Mortgage Bond Supplemental
Indenture). In such event, the Indenture Trustee is required
under the Indenture to file with the Company a demand for
redemption (Section 502).

Effect of Release Date. After the Release Date (which is
the date on which the Mortgage ceases to secure any debt
obligations of the Company, other than Senior Note Mortgage
Bonds) the Indenture Trustee is required to surrender to the
Company or the Mortgage Trustee all Senior Note Mortgage Bonds
then held by it and the Company is required to terminate the
Mortgage and may not issue any additional Mortgage Bonds
thereunder (Sections 1404 and 1409). The Company is required to
cause the Indenture Trustee to provide notice to all holders of
Senior Notes of the occurrence of the Release Date. (Section
1409(e)).

Release of Security Prior to Release Date. The Indenture
permits the Company to reduce, prior to the Release Date, the
aggregate principal amount of a series of Senior Note Mortgage
Bonds securing a series of Senior Notes to the extent of payment
or provision for the payment, in whole or part, of the principal
of such Senior Notes. In no event may the principal amount of
Senior Note Mortgage Bonds pledged to the Indenture Trustee as
security for the Senior Notes of any series be reduced prior to
the Release Date to an amount less than the aggregate principal
amount of outstanding Senior Notes of such series (Section 1409).

Voting of Senior Note Mortgage Bonds. At any meeting of the
holders of any series of Senior Note Mortgage Bonds, or if the
consent of holders of such series of Senior Note Mortgage Bonds
is sought without a meeting, the Indenture Trustee is required to
vote all Senior Note Mortgage Bonds of such series then held by
it, or to grant or withhold its consent

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with respect thereto, as the Indenture Trustee determines to be
in the best interests of the holders of the corresponding series
of Senior Notes, unless the Trustee is directed otherwise by the
holders of not less than a majority in aggregate principal amount
of such series of Senior Notes. In exercising such
responsibilities, the Trustee may solicit instructions from the
holders of any series of Senior Notes and, if so, shall vote or
shall grant or withhold its consent with respect to the Senior
Note Mortgage Bonds as directed by the holders of a majority in
aggregate principal amount of the Senior Notes (Section 1407).

DESCRIPTION OF INDENTURE

The following summary of the terms of the Indenture does not
purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to,
the Indenture. The cited Articles and Sections are citations to
the Indenture. Capitalized terms that are not defined in this
Prospectus are used as defined in the Indenture.

Issuance of Additional Senior Notes.

The principal amount of debt securities that may be issued
under the Indenture is unlimited (Section 301). However, the
principal amount of Mortgage Bonds that may be issued under the
Mortgage (and thereby serve as security for Senior Notes) is
limited by the terms of the Mortgage. See "Description of Senior
Note Mortgage Bonds and Mortgage -- Issuance of Additional
Bonds." As determined by the Board of Directors of the Company,
debt securities issued under the Indenture (i) may be secured as
to payment of principal, premium, if any, and interest by Senior
Note Mortgage Bonds or they may be unsecured (Section 301) and
(ii) may have such other terms and conditions consistent with the
Indenture as are established by the Board of Directors at the
time of issuance.

Certain Covenants of the Company.

Limitations on Liens. From and after the Release Date and
so long as the Senior Notes of any series are outstanding, the
Company may not create, incur, assume or permit to exist any
indebtedness that is secured by a mortgage, deed of trust, lien,
pledge or similar encumbrance (a "Lien") on its property or
assets, unless all Senior Notes then outstanding and subsequently
issued under the Indenture are secured equally and ratably with
all other indebtedness secured by such Lien (Section 1006). This
restriction does not apply to certain Liens, including (i) Liens
existing as of the date of the Indenture, (ii) any Lien existing
on any property or asset prior to the acquisition thereof by the
Company (provided that such Lien was not created in contemplation
of or in connection with such acquisition and does not extend to
any other property or assets of the Company), (iii) Liens for
taxes not yet due or that are being contested, (iv) various types
of Liens incurred in the ordinary course of business, (v)
restrictions on the use of real property and similar encumbrances
that are not substantial in amount and do not materially detract
from the value of such property or interfere with the

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ordinary course of business of the Company, (vi) Liens on any
property acquired, constructed or improved by the Company that
are created or incurred within 18 months after such acquisition,
construction or improvement to secure or provide for payment of
any part of the purchase price for such property or the cost of
construction or improvement, (vii) liens upon bills, notes and
accounts receivable, cash, contracts, operating agreements and
leases in which the Company is the lessor, (viii) liens on stock,
bonds, notes or other securities owned by the Company, (ix) liens
on equipment and material not installed as a part of the fixed
property of the Company and merchandise and supplies acquired by
the Company for the purpose of resale or leasing to customers in
the ordinary course of business, (x) liens on electric energy and
other materials or products generated, manufactured, produced or
purchased by the Company for sale, distribution or use in the
ordinary course of business, (xi) extensions, renewals and
replacements of Liens referred to in clauses (i) through (x)
above, (xii) Liens on the capital stock or assets of any
subsidiary of the Company, and (xiii) Liens to secure
indebtedness if immediately after the incurrence thereof the
amount of all indebtedness secured by Liens that would not be
permitted but for this clause (xiii) does not exceed 20% of the
Company's stockholders' equity (in each case, a "Permitted
Lien").

Limitation on Sale and Lease-back Transactions. From and
after the Release Date and so long as the Senior Notes of any
series are outstanding, the Company will not enter into any
arrangement pursuant to which the Company sells any electric
generation plant or electric transmission and distribution
facility located in the United States (except for any plant or
facility that the Board of Directors of the Company by resolution
determines is not of material importance to the total business
conducted by the Company and its subsidiaries as an entirety) and
thereafter leases back such property (Section 1007). This
limitation does not apply to any sale and lease-back transaction
(i) entered into prior to the date of the Indenture, (ii)
involving a lease with a term of four years or less, (iii) if the
lease with respect to any property is entered into within 18
months after the later of the acquisition, completion of
construction or commencement of operation such property, or (iv)
if within 120 days after the effective date of the lease the
Company applies to the retirement of indebtedness maturing more
than one year from the date of such payment an amount equal to
the greater of (a) the net proceeds from the sale of the property
and (b) the fair market value of the property.

Indenture Defaults.

Events of Default under the Indenture with respect to the
Senior Notes of any series include (i) the failure to pay
principal when it becomes due (whether at the stated maturity or
otherwise), (ii) the failure to pay interest or to satisfy any
sinking fund obligation within 30 days after it becomes due,
(iii) the failure to observe or perform any other covenant or
agreement, which failure continues for at least 60 days after
notice to the Company by the Trustee or the holders of at least a
majority in principal amount of such series of Senior Notes, and
(iv) certain events of bankruptcy, insolvency or reorganization
(Section 501). In the case of Senior Notes of any series that
are secured by Senior Note Mortgage Bonds, the occurrence of an
"event of default" under the Mortgage (a "Mortgage Default") also
constitutes an Event

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<PAGE>

of Default under the Indenture (Section 501). See "Description
of Senior Note Mortgage Bonds and Mortgage -- Mortgage Defaults".

Upon the occurrence of an Event of Default under the
Indenture, other than as the result of a Mortgage Default, the
Indenture Trustee or the holders of not less than 33% in
outstanding principal amount of the Senior Notes of the affected
series may declare all of the Senior Notes of such series to be
immediately due and payable (Section 502(a)). In the case of
an Event of Default under the Indenture by reason of a Mortgage
Default, the Senior Notes of all series that are secured by
Senior Note Mortgage Bonds automatically will become due and
payable effective upon the acceleration of the Senior Note
Mortgage Bonds in accordance with the terms of the Mortgage
(Section 502(b)).

If following a declaration that the principal of any series
of Senior Notes is immediately due and payable, and before any
judgment or decree for the payment of the moneys due is obtained,
all matured installments of interest have been paid and all
defaults have been cured, then the holders of a majority is
aggregate principal amount of the Senior Notes of such series
may waive such defaults and rescind the acceleration of the
Senior Notes (Section 502(c)). The waiver or cure of any
Mortgage Default and the rescission and annulment of its
consequences in accordance with the terms of the Mortgage also
will constitute an automatic waiver of the corresponding Event of
Default under the Indenture and a rescission and annulment of the
consequences thereunder (Section 502(b)).

If an Event of Default with respect to any series of Senior
Notes occurs and is continuing, the Indenture Trustee may, in its
discretion, proceed to protect and enforce its rights and the
rights of the holders of Senior Notes of such series by such
appropriate judicial proceeds as the Indenture Trustee shall deem
most effectual to protect and enforce such rights, including,
prior to the Release Date, the exercise of all rights that the
Indenture Trustee may have as the holder of the Senior Note
Mortgage Bonds securing that series of Senior Notes (Sections 504
and 518).

The holders of a majority in principal amount of Senior
Notes of such series, subject to certain limitations, may direct
the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or for exercising any
trust or power conferred on the Indenture Trustee, including the
exercise by the Indenture Trustee of the rights, powers and
privileges possessed by the Indenture Trustee as a holder of the
Senior Note Mortgage Bonds securing such series of Senior Notes
(Section 513).

No Holder of Senior Notes of any series has the right to
institute any proceeding for the enforcement of the Indenture, or
for any remedy thereunder, unless (i) such holder previously has
given written notice to the Indenture Trustee of a continuing
Event of Default with respect to the Senior Notes of that series,
(ii) the holders of not less than a majority in principal amount
of the Senior Notes of that series have requested in writing that
the Indenture Trustee institute proceedings in respect of such
Event of Default, (iii) such holder or holders

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offered to the Indenture Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with
such request, (iv) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has failed
to institute any such proceeding, and (v) no direction
inconsistent with such written request has been given to the
Indenture Trustee during such 60-day period by the holders of a
majority in principal amount of the Senior Notes of that series
(Section 508). However, this provision does not impair the right
of any holder of a Senior Note to enforce the obligation of the
Company to pay principal and any premium or interest on such
Senior Note (Section 509).

The Indenture requires the Company to furnish to the
Indenture Trustee annually a certificate as to compliance with
the terms of the Indenture (Section 1005).

Modification of Indenture.

The Company with the consent of the holders of not less than
a majority in principal amount of Senior Notes of all series
affected by such change (voting as a single class), by entry into
a supplemental indenture, may add to, change in any manner or
eliminate any of the provisions of the Indenture or modify the
rights of the holders of Senior Notes, except that, without the
consent of the holder of each Senior Note affected thereby, the
Indenture may not be amended (i) to change the terms of payment
of the principal or interest on any Senior Notes, (ii) to reduce
the percentage of holders of Senior Notes required to effect any
amendment to the Indenture or any waiver provided for in the
Indenture, and (iii) with respect to any Senior Notes secured by
Senior Note Mortgage Bonds, to impair the security interest
under the Indenture in such Senior Note Mortgage Bonds or reduce
the principal amount of such Senior Note Mortgage Bonds held by
the Indenture Trustee to an amount that is less than the
outstanding principal amount of the Senior Notes secured thereby
(Section 902).

Certain changes to the Indenture may be effected by the
Company without the consent of the holders of the Senior Notes,
including (i) to add to the covenants of the Company for the
benefit of the holders of all or any series of Senior Notes and
(ii) to cure any ambiguity, to correct or supplement any
provision that is inconsistent with any other provision, or to
make any other provisions with respect to matters or questions
arising under the Indenture, provided that such action does not
adversely affect the interests of the holders of Senior Notes of
any series in any material respect (Section 901).

Defeasance and Discharge.

The Indenture provides that the Company will be deemed to
have paid and discharged its entire indebtedness with respect to
the Senior Notes of any series and to have satisfied all of its
obligations under the Indenture in respect of such series of
Senior Notes (except for certain obligations, including the
obligation to register the transfer or exchange of Senior Notes,
the replacement of lost, stolen or mutilated Senior Notes and the
maintenance of a paying agency) if the Company, in addition to
satisfying certain other requirements, irrevocably deposits with

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the Trustee, in trust for the benefit of holders of Senior Notes
of such series, (i) money in an amount, (ii) certain United
States government obligations, which through the scheduled
payment of principal and interest in accordance with their terms
will provide money in an amount, or (iii) a combination of money
and such United States Government obligations, that is
sufficient, without reinvestment, to make all payments of
principal of, and any premium and interest on, the Senior Notes
on the dates such payments are due in accordance with the terms
of the Indenture and the Senior Notes. Thereafter, the holders
of Senior Notes of such series may look only to such deposit for
payment of the principal and any interest or premium (Article
13).

Consolidations, Mergers and Disposition of Assets.

Nothing contained in the Indenture, or in any Senior Notes
issued under the Indenture, prevents the consolidation or merger
of the Company with or into any other entity, or the sale or
other disposition of the Company's property or assets to another
entity, provided that (i) the entity formed by such consolidation
or into which the Company is merged or any entity that acquires
the property or assets of the Company as an entirety or
substantially as an entirety must be a corporation organized and
existing under the laws of the United States, any State thereof
or the District of Columbia that is authorized to acquire and
operate the assets acquired, (ii) such successor assumes by
supplemental indenture under the Indenture the due and punctual
payment of the principal of, and any premium or interest on, the
Senior Notes and the due and punctual performance and observance
of all covenants and conditions under the Indenture, and (iii) if
prior to the Release Date, such successor also assumes by
supplemental indenture under the Mortgage the due and punctual
payment of the principal of, and any premium or interest on, the
Senior Note Mortgage Bonds securing any series of Senior Notes
and the due and punctual performance and observance of all
covenants and conditions of the Mortgage required to be performed
by the Company with respect to such Senior Note Mortgage Bonds
(Section 801(a)). Upon any such consolidation, merger or sale or
transfer of assets as an entirety or substantially as an
entirety, the successor corporation will succeed to and be
substituted for the Company under the Indenture, and will be
entitled to exercise every right and power of the Company under
the Indenture (Section 802(a)). Nothing contained in
the Indenture or in any of the Senior Notes issued under the
Indenture prevents the Company from merging into itself any other
entity, from acquiring by purchase or otherwise all or part of
the property or assets or any other entity, or from selling or
disposing of its property or assets not as an entirety or
substantially as an entirety (Section 802(b)).

For purposes of the Indenture, the conveyance or other
transfer by the Company, in a single transaction or a series of
related transactions, of either (i) all or any portion of the
Company's facilities for the generation and transmission of
electric energy or (ii) all or any portion of the Company's
facilities for the distribution of electric energy, in either
case alone or in combination with other assets (but not in
combination with the other) will not be deemed to constitute a
conveyance or other transfer of the properties and assets of the
Company as an entirety or substantially as an entirety. The
character of particular facilities will be determined

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in accordance with the Uniform System of Accounts prescribed for
public utilities and licensees subject to the Federal Power Act,
as amended, to the extent applicable (Section 801(b)).

Resignation or Removal of the Indenture Trustee.

The Indenture Trustee may resign at any time with respect to
the Senior Notes of any series, which resignation shall become
effective upon the appointment of a successor trustee (Section
609). If the Indenture Trustee acquires a conflicting interest
within the meaning of the Trust Indenture Act, the Indenture
Trustee is obligated to eliminate such conflicting interest or
resign (Section 607).

The Indenture Trustee may be removed as trustee with respect
to any series or Senior Notes at any time by action of the
holders of a majority of the principal amount of Senior Notes of
such series, and under certain circumstances may be removed by
the Company (Section 609).

Governing Law.

The Indenture and the Senior Notes are governed by, and
construed in accordance with, New York law.

Relationships with Indenture Trustee.

The Bank of New York, the Indenture Trustee under the
Indenture, also is the trustee nder the Mortgage and under other
indentures of the Company relating to its (i) medium-term notes,
(ii) 5% Convertible Debentures due 2002, (iii) 7% Convertible
Debentures due 2018, (iv) 7-3/8% Junior Subordinated Debentures
due 2038 and (v) sale and leaseback of the Company's Control
Center. The Company maintains with The Bank of New York or its
affiliates, as it does with various other banks, a demand deposit
account and conventional and revolving credit arrangements. The
Bank of New York also is the issuing and paying agent for
medium-term notes issued by PCI and is the institutional trustee
of Potomac Electric Power Company Trust I, the Company's wholly
owned financing subsidiary trust.

The Indenture provides that any money collected by the
Trustee following an Event of Default first shall be applied to
discharge the Company's obligations to compensate the Indenture
Trustee, to reimburse the Indenture Trustee for expenses,
disbursements and advances, and to satisfy the Company's
indemnification obligations to the Trustee (Sections 507 and
606).

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DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS AND MORTGAGE

General.

The Senior Note Mortgage Bonds will be issued under the
Mortgage and Deed of Trust, dated July 1, 1936, between the
Company and The Bank of New York, as trustee (the "Mortgage
Trustee") and as successor in such capacity to The Riggs National
Bank of Washington, D.C., as amended and supplemented and as to be
further supplemented by a separate supplemental indenture (a
"Mortgage Bond Supplemental Indenture") each time a new series of
Mortgage Bonds is issued under the Mortgage and Deed of Trust
(including a series of Senior Note Mortgage Bonds issued in
connection with the issuance of a new series of Senior Notes). The
Mortgage and Deed of Trust, as so amended and supplemented and as
it is further supplemented, is referred to herein as the
"Mortgage." Copies of the documents currently constituting the
Mortgage and the form of Mortgage Bond Supplemental Indenture are
filed as exhibits to the Registration Statement and are hereby
incorporated by reference.

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

The following summary of the terms of the Senior Note
Mortgage Bonds and the Mortgage does not purport to be complete and
is subject in all respects to the provisions of, and is qualified
by reference to, the Mortgage and the Prospectus Supplement. The
cited Sections and Articles, unless otherwise indicated, are
citations to the Mortgage. Capitalized terms that are not
defined in this Prospectus are used as defined in the Mortgage.
Unless the context otherwise requires, all references to Mortgage
Bonds include the Senior Note Mortgage Bonds.

Issuance of Additional Bonds.

Additional Mortgage Bonds may be issued under the Mortgage
in an aggregate principal amount of up to (i) 60% of the net
bondable value of property additions that are not subject to a
prior lien, (ii) the amount of cash deposited with the Mortgage
Trustee for such purpose (which cash thereafter may be withdrawn on
the same basis that additional Mortgage Bonds may be issued, and if
not withdrawn within three years must be used by the Mortgage
Trustee to purchase or redeem outstanding Mortgage Bonds), and
(iii) the aggregate principal amount of Mortgage Bonds paid at
maturity, redeemed or repurchased (other than with funds from the
trust estate) and not previously used as the basis for the issuance
of additional Mortgage Bonds, the withdrawal of cash or the
reduction of the amount of cash required to be paid to the Mortgage
Trustee upon the release of property ("Refundable Bonds"), in each
case, subject to the limitation described below (Sections 4, 6 and
7 of Article III; and Section 4 of Article VIII).

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Additional Mortgage Bonds may not be issued unless Net
Earnings of the Company Available for Interest and Property
Retirement Appropriations (defined generally as earnings before
depreciation, amortization, income taxes and interest charges)
for any 12 consecutive calendar months during the immediately
preceding 15 calendar months have been at least two times the
aggregate annual interest charges on all outstanding Mortgage Bonds
and the additional Mortgage Bonds then being issued. However, this
limitation does not apply if the Mortgage Bonds are being issued
on the basis of (i) Mortgage Bonds paid at or redeemed or purchased
within two years prior to maturity or (ii) under limited
circumstances, certain property additions (Sections 3, 4 and 7
of Article III). Giving effect to the issuance of the Senior Note
Mortgage Bonds at an assumed rate of interest of 7%, such Net
Earnings for the twelve months ended December 31, 1998, would be
approximately 5.7 times such annual interest charges. This level
of coverage would permit issuance of approximately $3.1 billion
of additional Mortgage Bonds (in addition to the Senior Note
Mortgage Bonds) at an assumed average interest rate of 7% per
annum, against property additions or cash deposits, although only
approximately $690 million of additional Mortgage Bonds could
be issued on the basis of unbonded net property additions.

So long as any Senior Note Mortgage Bonds are outstanding,
property additions constructed or acquired on or before December
31, 1946, may not be made the basis for the issuance of Mortgage
Bonds, the withdrawal of cash or the reduction of cash required
to be paid to the Mortgage Trustee (Part IV, Section 2, of the
Mortgage Bond Supplemental Indenture).

The issuance by the Company of bonds secured by a lien that
is prior to the lien of the Mortgage is permitted by the Mortgage
under certain circumstances (Section 16 of Article IV).

After giving effect to the issuance of the Senior Note
Mortgage Bonds (which are to be issued against property
additions), approximately $700 million of property additions and
$1.2 billion of Refundable Bonds will remain available for the
purposes permitted in the Mortgage, including the issuance of
additional Mortgage Bonds.

Security.

Mortgage Lien. The Senior Note Mortgage Bonds will be
secured, together with all other Mortgage Bonds now or hereafter
issued under the Mortgage, by a direct first lien (subject to
certain permitted leases, liens and other minor encumbrances) on
substantially all of the properties and franchises of the Company
(the principal properties being the Company's generating stations
and its electric transmission and distribution systems), but
excluding 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, other materials, merchandise and supplies acquired by
the Company for the purpose of resale or leasing to its customers
in the ordinary course of business, and all electric energy and
other materials or products generated,

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manufactured, produced or purchased by the Company for sale,
distribution or use in the ordering course of business. 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 lien of the Mortgage extends to after-acquired
property, subject to rights of persons having superior equities
attaching prior to the recording or filing of an appropriate
supplemental indenture.

Release of Property from Mortgage Lien. The Mortgage
permits property to be released from the lien of the Mortgage upon
the deposit with the Mortgage Trustee of cash or purchase money
obligations secured by the property released, in an aggregate
amount at least equal to the fair value of the property to be
released. The Mortgage alternatively permits the Company to
reduce the amount required to be deposited upon the release of
property by reducing by an equal amount the principal amount of
Refundable Bonds against which additional Mortgage Bonds may be
issued. The Mortgage also contains certain requirements relating
to the withdrawal of cash deposited to obtain a release of property
(Articles VII and VIII).

Mortgage Defaults.

Upon the occurrence of an Event of Default under the
Mortgage, the Mortgage Trustee may, and upon the written request of
the holders of not less than 25% of the principal amount of all
outstanding Mortgage Bonds the Mortgage Trustee shall, declare
all of the outstanding Mortgage Bonds immediately due and payable.
Such declaration, however, is subject to the condition that, if
all interest in arrears has been paid and all defaults have been
cured, the holders of a majority of the outstanding principal
amount of Mortgage Bonds may waive such default and rescind such
acceleration (Section 1 of Article IX).

Upon the occurrence of an Event of Default, the Mortgage
Trustee may, and upon the written request of the holders of not
less than 25% of the principal amount of all outstanding Mortgage
Bonds the Mortgage Trustee shall, enforce the lien of the
Mortgage by foreclosing on the trust estate (Section 4 of Article
IX). The holders of a majority in principal amount of Mortgage
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 may not involve the Mortgage Trustee in any
personal liability without indemnifying it to its satisfaction
(Section 11 of Article IX).

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No holder of a Mortgage Bond has the right to institute
proceedings for the enforcement of the Mortgage, unless (i) such
holder previously has given the Mortgage Trustee written notice
of an existing default, (ii) the holders of at least 25% of the
outstanding principal amount of the Mortgage Bonds have requested
in writing that the Mortgage Trustee take action under the
Mortgage (and provided the Mortgage Trustee with indemnity
satisfactory to it), and (iii) the Mortgage Trustee refuses or
neglects to comply with such request within a reasonable time
(Section 12 of Article IX). However, this provision does not
impair the right of any holder of a Mortgage Bond to enforce the
obligation of the Company to pay the principal and interest on such
Mortgage Bond when due.

Events of Defaults under the Mortgage include (i) the
failure to pay principal when it becomes due (whether at the stated
maturity or otherwise), (ii) the failure to pay interest or to
satisfy any sinking fund obligation within 30 days after the date
on which it becomes due, (iii) the failure to perform or observe
any other covenant, agreement or condition of the Mortgage, which
failure continues for at least 60 days after notice to the
Company by the Mortgage Trustee or the holders of at least 15% in
principal amount of Mortgage Bonds, and (iv) certain events of
bankruptcy, insolvency or reorganization (Section 1 of Article IX).

While the Mortgage by its terms does not require that
periodic evidence be furnished to the Mortgage Trustee as to the
absence of defaults or as to compliance with the terms of the
Mortgage, the Trust Indenture Act requires the Company to provide
to the Mortgage Trustee annually a certificate as to compliance
with the conditions and covenants under the Mortgage.

Modification of Mortgage.

With the consent of the holders of 80% in principal amount
of Mortgage Bonds, and of 80% in principal amount of Mortgage Bonds
of each series affected if less than all are affected, the Mortgage
may be amended to alter the rights and obligations of the Company
and of the holders of Mortgage Bonds, except that no such
amendment may change the terms of payment of the principal or
interest on any Mortgage Bonds or reduce the percentage of holders
whose consent is required to effect any change (Section 6 of
Article XV).

The Mortgage Bond Supplemental Indenture provides that the
foregoing percentages shall be reduced to 60% upon the consent or
agreement to such change by the holders of all outstanding
Mortgage Bonds. The Indenture Trustee, as registered holder of the
Senior Note Mortgage Bonds, will be deemed to have agreed to such
reduction pursuant to the terms of the Mortgage Bond Supplemental
Indenture. This change will become effective as to all of the
outstanding Mortgage Bonds, including the Senior Note Mortgage
Bonds that will secure the Senior Notes to be issued pursuant to
this Prospectus, at such time as all of the supplemental
indentures with respect to outstanding Mortgage Bonds include this
provision. After giving effect to the issuance of Senior Note
Mortgage Bonds securing the Senior Notes offered hereby, 92.2% of
the outstanding Mortgage Bonds will have been issued under a
supplemental indenture containing the modified provision.

- 21 -

<PAGE>

Defeasance and Discharge.

If moneys for the payment or redemption of Mortgage Bonds,
including the payment of all interest due thereon, is deposited
with the Mortgage Trustee and the Company has observed all of its
covenants under the Mortgage, the Mortgage Bonds will be deemed
paid under the Mortgage and, upon the request of the Company, the
Mortgage Trustee is obligated to cancel and discharge the lien of
the Indenture (Article XVI).

Consolidations, Mergers and Dispositions of Assets.

Nothing contained in the Mortgage, or any Mortgage Bonds
issued under the Mortgage, prevents the consolidation with the
Company or the merger into the Company of another corporation,
the merger of the Company into another corporation, or the sale or
lease by the Company of its property as an entirety or
substantially as an entirety, provided that (i) the transaction
is permitted by law and is approved by all required governmental
entities, (ii) the terms of the transaction do not impair the
lien and security of the Mortgage on any part of the trust estate
or the rights and powers of the Mortgage Trustee or the holders of
Mortgage Bonds, (iii) in the case that the Company is not the
surviving corporation or in the case of a sale of assets, the
surviving or acquiring corporation satisfies certain financial
requirements, and (iv) the successor corporation assumes by
supplemental indenture the obligations of the Company under the
Mortgage (Section 1 of Article XII).

PLAN OF DISTRIBUTION

The Company may sell the Senior Notes: (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 Senior Notes being offered thereby sets forth the terms of
the offering of such Senior Notes, including the name or names of
any underwriters, the purchase price of such Senior Notes 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 Senior Notes may be listed.

If underwriters are used in the sale, the Senior Notes 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 Senior Notes
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 Senior Notes
offered thereby will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all such
Senior Notes if any are purchased. Any initial public

- 22 -

<PAGE>

offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.

Senior Notes 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 Senior Notes 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 Senior Notes 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.

EXPERTS

The consolidated financial statements as of December 31,
1997 and 1996 and for each of the three years in the period ended
December 31, 1997 incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and the consolidated financial statements as of
December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998 included in the Company's Form 8-K
dated January 29, 1999, which Form 8-K is incorporated by
reference in this Prospectus, have been so incorporated in reliance
on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in
auditing and accounting.

- 23 -

<PAGE>

consolidated financial information. PricewaterhouseCoopers LLP
has not carried out any significant or additional audit tests
beyond those which would have been necessary if their report had
not been included. 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.
PricewaterhouseCoopers 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 report is
not a "report" or a "part" of the registration statement prepared
or certified by PricewaterhouseCoopers LLP within the meaning of
Sections 7 and 11 of the 1933 Act.

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.

- 24 -

<PAGE>

PRELIMINARY PROSPECTUS DATED FEBRUARY 9, 1999
SUBJECT TO COMPLETION

POTOMAC ELECTRIC POWER COMPANY

FIRST MORTGAGE BONDS
____________________

Potomac Electric Power Company (the "Company") may offer
from time to time up to $270,000,000 in principal amount of First
Mortgage Bonds (the "Bonds"). The Company will offer the Bonds
in separate series. 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
each such series of Bonds will be determined at the time of sale
and will be described in a Prospectus Supplement that will
accompany this Prospectus (the "Prospectus Supplement"). The
principal amount of Bonds offered hereby will be reduced by the
principal amount of any Senior Notes sold pursuant to a separate
prospectus under the same Registration Statement registering the
Bonds.

The payment of principal, premium, if any, and interest on
all First Mortgage Bonds issued by the Company, including the
Bonds, is secured by a first lien on substantially all of the
Company's assets.

The Company may sell the Bonds through underwriters that it
selects or through dealers or agents. The Company also may sell
Bonds directly to a limited number of institutional purchasers.
See "Plan of Distribution." The Prospectus Supplement will set
forth the names of any underwriters, dealers or agents, the
amount of any commissions or discounts allowed them for selling the
Bonds, and the net proceeds the Company receives from the sale of
the Bonds.
____________________

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
____________________

THE DATE OF THIS PROSPECTUS IS ________, 1999

<PAGE>

The Information in this Prospectus is not complete and may be
changed. The Company may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This Prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

<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. Neither this Prospectus nor any
Prospectus supplement is 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 our affairs thereafter.
____________________

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

(a) The Company's Annual Report on Form 10-K for the year
ended December 31, 1997.

(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.

(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.

(e) The Company's Current Reports on Form 8-K, dated
January 26, 1998, July 1, 1998, January 4, 1999 and January 29,
1999, February 1, 1999 and February 3, 1999.

All documents that the Company files with the SEC 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 will 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 will 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.

- 2 -

<PAGE>

The Company will provide to each person, including any
beneficial owner, to whom a copy of this Prospectus has been
delivered, a copy of any or all of the information that has
been or may be incorporated by reference in this Prospectus but
not delivered with the Prospectus (including any exhibits that are
specifically incorporated by reference in that information). The
Company will provide this information upon written or oral
request and at no cost to the requestor. Requests for such
information should be directed to Ellen Sheriff Rogers, Associate
General Counsel, Secretary and Assistant Treasurer, Potomac
Electric Power Company, 1900 Pennsylvania Avenue, N.W., Washington,
D.C. 20068 (202-872-3526).

The Company is subject to the informational reporting
requirements of the 1934 Act, and therefore files Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, proxy statements and other information with the SEC.
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
documents. The public may read and copy these documents at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC. The address of that site
is http://www.sec.gov. Information concerning the Company also can
be obtained at the Company's website, the address of which is
http://www.pepco.com.

The Company has filed a registration statement on Form S-3
with the SEC relating to the Bonds that are being offered by this
Prospectus (which, together with all amendments and exhibits, is
referred to herein as the "Registration Statement") 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 Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For
further information, please read the Registration Statement.

THE COMPANY

- 3 -

<PAGE>

redemption features, and real estate. PCI also is involved in the
development and expansion of operating businesses in the
competitive markets for energy and telecommunications products and
services. 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 $270,000,000 of
Bonds.

Except as otherwise described in the Supplemental
Prospectus, the proceeds from the sale of the Bonds will be used
for one or more of the following purposes (i) to refund short-term
debt incurred primarily to finance, on a temporary basis, the
Company's utility construction program and operations or (ii) to
refund the Company's senior securities, including the retirement of
long-term debt and the satisfaction of contractual sinking fund
requirements, as more fully set forth in the Prospectus Supplement.

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, 1997 and consolidated financial
statements contained in the Company's Current Report on Form 8-K
dated January 29, 1999, which is available as described herein
under "Incorporation of Certain Information by Reference."

12 Months Ended
------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995
-------- -------- -------- --------
(Thousands of Dollars Except Per Share Data)
<S> <C> <C> <C> <C>
Income Statement Data:
Total Revenue............................. $2,063,928 $1,863,510 $2,010,311 $1,876,102
Operating Revenue......................... 1,886,080 1,810,829 1,834,857 1,822,432
Net Income................................ 226,347 181,830 236,960 94,391
Earnings for Common Stock................. 208,267 165,251 220,356 77,540
Basic Earnings Per Share of Common Stock.. 1.76 1.39 1.86 .65
Diluted Earnings Per Share of Common Stock 1.73 1.38 1.82 .65
Balance Sheet Data at end of period:
Property and Plant, net................... $4,521,177 $4,486,334 $4,423,249 $4,400,311

</TABLE>

Parent Company Long-Term Debt and Preferred Stock Redemption
Due in One Year and Short-Term Debt.......................... $ 236,919

</TABLE>

- 4 -

<PAGE>

<TABLE>

RATIOS OF EARNINGS TO FIXED CHARGES

<CAPTION>
12 Months Ended
----------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parent company only............. 2.95 2.54 3.08 3.05 3.23 3.20
Fully consolidated.............. 2.50 2.03 2.24 1.52 2.37 2.31

DESCRIPTION OF MORTGAGE BONDS AND MORTGAGE

General.

The Bonds will be issued under the Mortgage and Deed of
Trust, dated July 1, 1936, between the Company and The Bank of New
York, as trustee (the "Mortgage Trustee") and as successor in such
capacity to The Riggs National Bank of Washington, D.C., as
amended and supplemented and as to be further supplemented by a
separate supplemental indenture (a "Supplemental Indenture") each
time a new series of Mortgage Bonds is issued under the Mortgage
and Deed of Trust. The Mortgage and Deed of Trust, as so amended
and supplemented and as it is further supplemented, is referred to
herein as the "Mortgage." Copies of the documents currently
constituting the Mortgage and the form of Supplemental
Indenture are filed as exhibits to the Registration Statement and
are hereby incorporated by reference.

Reference is made to the accompanying Prospectus Supplement
for the following terms and other information with respect to the
Bonds being offered hereby: (i) the designation and aggregate
principal amount of such Bonds, (ii) the date on which such Bonds
will mature, (iii) the rate per annum at which such Bonds will
bear interest, or the method of determining such rate, (iv) the
dates on which such interest will be payable, (v) any redemption
terms; and (vi) other specific terms applicable to such Bonds.

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

The following summary of the terms of the Bonds and the
Mortgage does not purport to be complete and is subject in all
respects to the provisions of, and is qualified by reference
to, the Mortgage and the Prospectus Supplement. The cited
Sections and Articles, unless otherwise indicated, are citations to
the Mortgage. Capitalized terms that are not defined in

- 5 -

<PAGE>

this Prospectus are used as defined in the Mortgage. Unless the
context otherwise requires, all references to Mortgage Bonds
include the Bonds.

Registration of Transfer and Exchange.

The Bonds will be issued only in fully registered form
without coupons. Except as otherwise specified in the Prospectus
Supplement, the Bonds will be issued in denominations of $1,000
or any integral multiple thereof (Part I, Section 3, of the
Supplemental Indenture).

So long as any Mortgage Bonds remain outstanding, the
Company is required to maintain an office or agency where the
Mortgage Bonds may be presented or surrendered for payment or for
registration of transfer or exchange and where notices and
demands to or upon the Company may be served (Section 4 of Article
II; Section 4 of Article IV). The Company has designated the
corporate trust office of the Mortgage Trustee in New York, New
York, as its agent for these purposes. See "Relationships with
Mortgage Trustee." The Company will not impose any charges for
exchanges of Bonds.

Payment of Principal and Interest.

Payments of principal, premium, if any, and interest on
Bonds will be made in immediately available funds at the corporate
trust office of the Mortgage Trustee or at the office of any paying
agent designated by the Company.

No Sinking Fund.

The Supplemental Indenture will not provide for an
improvement and sinking fund or any maintenance and replacement
requirement or dividend restriction with respect to the Bonds.
Neither the Mortgage nor any supplemental indenture relating to any
outstanding Mortgage Bonds contains such provisions.

Issuance of Additional Bonds.

Additional Mortgage Bonds may be issued under the Mortgage
in an aggregate principal amount of up to (i) 60% of the net
bondable value of property additions that are not subject to a
prior lien, (ii) the amount of cash deposited with the Mortgage
Trustee for such purpose (which cash thereafter may be withdrawn on
the same basis that additional Mortgage Bonds may be issued, and if
not withdrawn within three years must be used by the Mortgage
Trustee to purchase or redeem outstanding Mortgage Bonds), and
(iii) the aggregate principal amount of Mortgage Bonds paid at
maturity, redeemed or repurchased (other than with funds
from the trust estate) and not previously used as the basis for
the issuance of additional Mortgage Bonds, the withdrawal of cash
or the reduction of the amount of cash required to be paid to the
Mortgage Trustee upon the release of property ("Refundable
Bonds"), in each case, subject to the limitation described below
(Sections 4, 6 and 7 of Article III; and Section 4 of Article
VIII).

- 6 -

<PAGE>

Additional Mortgage Bonds may not be issued unless Net
Earnings of the Company Available for Interest and Property
Retirement Appropriations (defined generally as earnings
before depreciation, amortization, income taxes and interest
charges) for any 12 consecutive calendar months during the
immediately preceding 15 calendar months have been at least two
times the aggregate annual interest charges on all outstanding
Mortgage Bonds and the additional Mortgage Bonds then being
issued. However, this limitation does not apply if the Mortgage
Bonds are being issued on the basis of (i) Mortgage Bonds paid at
or redeemed or purchased within two years prior to maturity or (ii)
under limited circumstances, certain property additions (Sections
3, 4 and 7 of Article III). Giving effect to the issuance of the
Bonds at an assumed rate of interest of 7%, such Net Earnings for
the twelve months ended December 31, 1998, would be approximately
5.7 times such annual interest charges. This level of coverage
would permit issuance of approximately $3.1 billion of additional
Mortgage Bonds (in addition to the Bonds) at an assumed average
interest rate of 7% per annum, against property additions or cash
deposits, although only approximately $690 million of additional
Mortgage Bonds could be issued on the basis of unbonded net
property additions.

So long as any Bonds are outstanding, property additions
constructed or acquired on or before December 31, 1946, may not
be made the basis for the issuance of Mortgage Bonds, the
withdrawal of cash or the reduction of cash required to be paid to
the Mortgage Trustee (Part IV, Section 2, of the Supplemental
Indenture).

The issuance by the Company of bonds secured by a lien that
is prior to the lien of the Mortgage is permitted by the Mortgage
under certain circumstances (Section 16 of Article IV).

After giving effect to the issuance of the Bonds (which are
to be issued against property additions), approximately $700
million of property additions and $1.2 billion of Refundable Bonds
will remain available for the purposes permitted by the Mortgage,
including the issuance of additional Mortgage Bonds.

Security.

Mortgage Lien. The Bonds will be secured, together with all
other Mortgage Bonds now or hereafter issued under the Mortgage,
by a direct first lien (subject to certain permitted leases, liens
and other minor encumbrances) on substantially all of the
properties and franchises of the Company (the principal properties
being the Company's generating stations and its electric
transmission and distribution systems), but excluding 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, other materials,
merchandise and supplies acquired by the Company for the purpose of
resale or leasing to its customers in the ordinary course of
business, and all electric energy and other materials or products
generated, manufactured, produced or purchased by the Company for
sale, distribution or use in the ordering course of business. 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,

- 7 -

<PAGE>

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 lien of the Mortgage extends to after-acquired property,
subject to rights of persons having superior equities attaching
prior to the recording or filing of an appropriate supplemental
indenture.

Mortgage Defaults.

- 8 -

<PAGE>

satisfactory to it), and (iii) the Mortgage Trustee refuses or
neglects to comply with such request within a reasonable time
(Section 12 of Article IX). However, this provision does not
impair the right of any holder of a Mortgage Bond to enforce the
obligation of the Company to pay the principal and interest on
such Mortgage Bond when due.

Events of Defaults under the Mortgage include (i) the
failure to pay principal when it becomes due (whether at the stated
maturity or otherwise), (ii) the failure to pay interest or to
satisfy any sinking fund obligation within 30 days after the date
on which it becomes due, (iii) the failure to perform or observe
any other covenant, agreement or condition of the Mortgage,
which failure continues for at least 60 days after notice to the
Company by the Mortgage Trustee or the holders of at least 15% in
principal amount of Mortgage Bonds, and (iv) certain events of
bankruptcy, insolvency or reorganization (Section 1 of
Article IX).

While the Mortgage by its terms does not require that
periodic evidence be furnished to the Mortgage Trustee as to the
absence of defaults or as to compliance with the terms of the
Mortgage, the Trust Indenture Act of 1939, as amended, requires the
Company to provide to the Mortgage Trustee annually a certificate
as to compliance with the conditions and covenants under the
Mortgage.

Modification of Mortgage.

The Supplemental Indenture provides that the foregoing
percentages shall be reduced to 60% upon the consent or agreement
to such change by the holders of all outstanding Mortgage
Bonds. Purchasers of the Bonds will be deemed to have agreed to
such reduction pursuant to the terms of the Supplemental
Indenture. This change will become effective as to all of the
outstanding Mortgage Bonds, including the Bonds, at such time as
all of the supplemental indentures with respect to outstanding
Mortgage Bonds include this provision. After giving effect to the
issuance of the Bonds, 92.2% of the outstanding Mortgage Bonds will
have been issued under a supplemental indenture containing the
modified provision.

Defeasance and Discharge.

- 9 -

<PAGE>

Consolidations, Mergers and Dispositions of Assets.

Relationships with Mortgage Trustee.

The Bank of New York, the Mortgage Trustee under the
Mortgage, also is the trustee under other indentures of the Company
relating to its (i) medium-term notes, (ii) 5% Convertible
Debentures due 2002, (iii) 7% Convertible Debentures due 2018, (iv)
7-3/8% Junior Subordinated Debentures due 2038, (v) Senior Notes,
and (vi) sale and leaseback of the Company's Control Center. The
Company maintains with The Bank of New York or its affiliates, as
it does with various other banks, a demand deposit account and
conventional and revolving credit arrangements. The Bank of New
York also is the issuing and paying agent for medium-term notes
issued by PCI and is the institutional trustee of Potomac Electric
Power Company Trust I, the Company's wholly owned financing
subsidiary trust.

The Mortgage provides that the Mortgage Trustee has a lien
on the trust estate and the proceeds therefrom securing payment of
its compensation and expenses prior to the payment of any other
amount secured by the Mortgage, including any payment on the Bonds
(Section 2 of Article XIII).

PLAN OF DISTRIBUTION

The Company may sell the 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 Bonds being
offered thereby sets forth the terms of the offering of such Bonds,
including the name or names of any underwriters, the purchase
price of such 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 Bonds may be
listed.

- 10 -

<PAGE>

If underwriters are used in the sale, the 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 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 Bonds offered thereby will be
subject to certain conditions precedent, and the underwriters
will be obligated to purchase all such 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.

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 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 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.

EXPERTS

- 11 -

<PAGE>

With respect to the unaudited consolidated financial
information of the Company for the three- and twelve-month
periods ended March 31, 1998 and 1997, the three-, six- and
twelve-month periods ended June 30, 1998 and 1997 and the three-,
nine- and twelve-month periods ended September 30, 1998 and 1997
incorporated by reference in this Prospectus,
PricewaterhouseCoopers 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 13,
1998, August 11, 1998 and November 12, 1998 incorporated by
reference herein, states that they did not audit and they do not
express opinions on that unaudited consolidated financial
information. PricewaterhouseCoopers LLP has not carried out any
significant or additional audit tests beyond those which would have
been necessary if their report had not been included. 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. PricewaterhouseCoopers 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 report is not a "report" or a "part" of the registration
statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the 1933 Act.

LEGAL OPINIONS

- 12 -

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Estimated expenses relating to the Senior Notes (assuming an
issuance of $270,000,000) are as follows:

Registration fee. . . . . . . . . . . . . . . .$ 79,650
Recordation taxes . . . . . . . . . . . . . . . 1,200,000
Rating Agency fees. . . . . . . . . . . . . . . 50,000
Printing. . . . . . . . . . . . . . . . . . . . 40,000
Trustee's fees and expenses . . . . . . . . . . 50,000
Fee of independent accountants. . . . . . . . . 25,000
Fees of counsel . . . . . . . . . . . . . . . . 115,000
Expenses incidental to qualification
under Blue Sky Laws . . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . 20,305
Total. . . . . . . . . . . . . . $1,590,000

Estimated expenses relating to the First Mortgage Bonds
(assuming an issuance of $270,000,000) are as follows:

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 29-304(1b) of the District of Columbia
Business Corporation Act, a corporation may indemnify against
expenses any directors or officers made party to a proceeding by
reason of his service as such, except in relation to matters as to
which any such director or officer shall be adjudged to be liable
for negligence or misconduct in the performance of duty. Such
indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of
shareholders or otherwise.

Under Section 13.1-697 of the Virginia Stock Corporation Act
("VSCA"), a Virginia corporation may indemnify a director who
was, is or is threatened to be made a party to any proceeding if
the director acted in good faith and (i) he believed, in the case
of conduct in his official capacity with the corporation, that his
conduct was in the best interests of the

II-1

<PAGE>

corporation or, in the case of other conduct, that his conduct
was at least not opposed to the best interests of the corporation,
or (ii) in the case of a criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. A corporation may not
indemnify a director in connection with (i) a proceeding by or in
the right of the corporation in which the director was found
liable to the corporation or (ii) any other proceeding charging
improper personal benefit to him, whether or not involving action
in his official capacity, in which he was adjudged liable on the
basis that personal benefit was improperly received.
Indemnification permitted under this section of the VSCA in
connection with a proceeding by or in the right of the corporation
is limited to reasonable expenses incurred in connection with the
proceeding.

Under Section 13.1-698, unless limited by its Articles of
Incorporation, a corporation must indemnify against reasonable
expenses a director who entirely prevails in the defense of
any proceeding to which he was a party because he is or was a
director of the corporation.

Under Section 13.1-700.1, a court of appropriate
jurisdiction, upon the application of a director, may order a
corporation to advance or reimburse expenses or provide
indemnification if the court determines that the director is so
entitled. With respect to a proceeding by or in the right of the
corporation, a court may order indemnification of the director to
the extent of his reasonable expenses even though he was adjudged
liable to the corporation.

Under Section 13.1-699, a corporation may advance reasonable
expenses to a director made a party to a proceeding under certain
circumstances, including the furnishing by the director of (i) a
written statement of his good faith belief that he has met the
standard of conduct necessary to obtain indemnification and (ii)
a written undertaking to repay the advance if it is ultimately
determined that he did not meet that standard. Under Section
13.1-702, a corporation may indemnify an officer, employee or
agent of a corporation to the same extent as a director. Under
Section 13.1-704, a corporation may provide indemnification in
addition to that provided by statute if authorized by its Articles
of Incorporation, a by-law made by the shareholders, or any
resolution adopted by the shareholders, except indemnification
against willful misconduct or a knowing violation of the criminal
law.

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, the underwriters 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.

II-2

<PAGE>

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

ITEM 16. EXHIBITS.

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

1.1 --Form of Underwriting Agreement Filed previously.
for the Senior Notes

1.2 --Form of Underwriting Agreement Filed herewith.
for the First Mortgage Bonds

4.1.1 --Form of the Senior Note Mortgage Included in
Bonds Exhibit No.
4.4.1.

4.1.2 --Form of First Mortgage Bonds Included in
Exhibit No.
4.4.2.

4.2 --Form of the Senior Notes Included in
Exhibit No. 4.6.

4.3.1 --Mortgage and Deed of Trust, Exh. B-4 to
dated July 1, 1936, of the Company First Amendment,
to The Riggs National Bank of 6/19/36, to
Washington, D.C., as Trustee, Registration
securing First Mortgage Bonds Statement No.
of the Company, and Supplemental 2-2232.
Indenture dated 7/1/36

--Supplemental Indentures, to
the aforesaid Mortgage and Deed
of Trust, dated--

4.3.2 December 1, 1939 and Exhs. A & B
December 10, 1939 to Form 8-K,
1/3/40.

4.3.3 August 1, 1940 Exh. A to Form
8-K, 9/25/40.

4.3.4 July 15, 1942 and August 10, 1942 Exh. B-1 to
Amendment No. 2,
8/24/42, and B-3
to Post-
Effective
Amendment,
8/31/42, to
Registration
Statement No.
2-5032.

4.3.5 August 1, 1942 Exh. B-4 to Form
8-A, 10/8/42.

4.3.6 October 15, 1942 Exh. A to
Form 8-K,
12/7/42.

II-3

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

4.3.7 October 15, 1947 Exh. A to
Form 8-K,
12/8/47.

4.3.8 January 1, 1948 Exh. 7-B to
Post-Effective
Amendment No. 2,
1/28/48, to
Registration
Statement No.
2-7349.

4.3.9 December 31, 1948 Exh. A-2 to
Form 10-K,
4/13/49.

4.3.10 May 1, 1949 Exh. 7-B to
Post-Effective
Amendment No. 1,
5/10/49, to
Registration
Statement No.
2-7948.

4.3.11 December 31, 1949 Exh. (a)-1 to
Form 8-K,
2/8/50.

4.3.12 May 1, 1950 Exh. 7-B to
Amendment No. 2,
5/8/50, to
Registration
Statement No.
2-8430.

4.3.13 February 15, 1951 Exh. (a) to
Form 8-K,
3/9/51.

4.3.14 March 1, 1952 Exh. 4-C to
Post-Effective
Amendment No. 1,
3/12/52, to
Registration
Statement No.
2-9435.

4.3.15 February 16, 1953 Exh. (a)-1 to
Form 8-K,
3/5/53.

4.3.16 May 15, 1953 Exh. 4-C to
Post-Effective
Amendment No. 1,
5/26/53, to
Registration
Statement No.
2-10246.

4.3.17 March 15, 1954 and Exh. 4-B to
March 15, 1955 Registration
Statement No.
2-11627, 5/2/55.

4.3.18 May 16, 1955 Exh. A to Form
8-K, 7/6/55.

4.3.19 March 15, 1956 Exh. C to Form
10-K, 4/4/56.

4.3.20 June 1, 1956 Exh. A to Form
8-K, 7/2/56.

4.3.21 April 1, 1957 Exh. 4-B to
Registration
Statement No.
2-13884, 2/5/58.

II-4

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

4.3.22 May 1, 1958 Exh. 2-B to
Registration
Statement No.
2-14518,
11/10/58.

4.3.23 December 1, 1958 Exh. A to
Form 8-K,
1/2/59.

4.3.24 May 1, 1959 Exh. 4-B to
Amendment No. 1,
5/13/59, to
Registration
Statement No.
2-15027.

4.3.25 November 16, 1959 Exh. A to
Form 8-K,
1/4/60.

4.3.26 May 2, 1960 Exh. 2-B to
Registration
Statement No.
2-17286,
11/9/60.

4.3.27 December 1, 1960 and Exh. A-1 to
April 3, 1961 Form 10-K,
4/24/61.

4.3.28 May 1, 1962 Exh. 2-B to
Registration
Statement No.
2-21037,
1/25/63.

4.3.29 February 15, 1963 Exh. A to
Form 8-K,
3/4/63.

4.3.30 May 1, 1963 Exh. 4-B to
Registration
Statement No.
2-21961,
12/19/63.

4.3.31 April 23, 1964 Exh. 2-B to
Registration
Statement No.
2-22344,
4/24/64.

4.3.32 May 15, 1964 Exh. A to Form
8-K, 6/2/64.

4.3.33 May 3, 1965 Exh. 2-B to
Registration
Statement No.
2-24655,
8/16/66.

4.3.34 April 1, 1966 Exh. A to Form
10-K, 4/21/66.

4.3.35 June 1, 1966 Exh. 1 to Form
10-K, 4/11/67.

4.3.36 April 28, 1967 Exh. 2-B to
Post-Effective
Amendment No. 1
to Registration
Statement No.
2-26356, 5/3/67.

4.3.37 May 1, 1967 Exh. A to Form
8-K, 6/1/67.

4.3.38 July 3, 1967 Exh. 2-B to
Registration
Statement No.
2-28080,
1/25/68.

4.3.39 February 15, 1968 Exh. II-I to
Form 8-K,
3/7/68.

II-5

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

4.3.40 May 1, 1968 Exh. 2-B to
Registration
Statement No.
2-31896,
2/28/69.

4.3.41 March 15, 1969 Exh. A-2 to Form
8-K, 4/8/69.

4.3.42 June 16, 1969 Exh. 2-B to
Registration
Statement No.
2-36094,
1/27/70.

4.3.43 February 15, 1970 Exh. A-2 to
Form 8-K,
3/9/70.

4.3.44 May 15, 1970 Exh. 2-B to
Registration
Statement No.
2-38038,
7/27/70.

4.3.45 August 15, 1970 Exh. 2-D to
Registration
Statement No.
2-38038,
7/27/70.

4.3.46 September 1, 1971 Exh. 2-C to
Registration
Statement No.
2-45591, 9/1/72.

4.3.47 September 15, 1972 Exh. 2-E to
Registration
Statement No.
2-45591, 9/1/72.

4.3.48 April 1, 1973 Exh. A to Form
8-K, 5/9/73.

4.3.49 January 2, 1974 Exh. 2-D to
Registration
Statement No.
2-49803,
12/5/73.

4.3.50 August 15, 1974 Exhs. 2-G and
2-H to Amendment
No. 1 to
Registration
Statement No.
2-51698,
8/14/74.

4.3.51 June 15, 1977 Exh. 4-A to Form
10-K, 3/19/81.

4.3.52 July 1, 1979 Exh. 4-B to Form
10-K, 3/19/81.

4.3.53 June 16, 1981 Exh. 4-A to Form
10-K, 3/19/82.

4.3.54 June 17, 1981 Exh. 2 to
Amendment No. 1,
6/18/81, to Form
8-A.

4.3.55 December 1, 1981 Exh. 4-C to
Form 10-K,
3/19/82.

4.3.56 August 1, 1982 Exh. 4-C to
Amendment No. 1
to Registration
Statement No.
2-78731,
8/17/82.

4.3.57 October 1, 1982 Exh. 4 to
Form 8-K,
11/8/82.

II-6

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

4.3.58 April 15, 1983 Exh. 4 to Form
10-K, 3/23/84.

4.3.59 November 1, 1985 Exh. 2-B to
Form 8-A,
11/1/85.

4.3.60 March 1, 1986 Exh. 4 to Form
10-K, 3/28/86.

4.3.61 November 1, 1986 Exh. 2-B to
Form 8-A,
11/5/86.

4.3.62 March 1, 1987 Exh. 2-B to Form
8-A, 3/27/87.

4.3.63 September 16, 1987 Exh. 4-B to
Registration
Statement No.
33-18229,
10/30/87.

4.3.64 May 1, 1989 Exh. 4-C to
Registration
Statement No.
33-29382,
6/16/89.

4.3.65 August 1, 1989 Exh. 4 to Form
10-K, 3/28/90.

4.3.66 April 5, 1990 Exh. 4-C to
Registration
Statement No.
33-36875,
9/24/90.

4.3.67 May 21, 1991 Exh. 4 to Form
10-K, 3/27/92.

4.3.68 May 7, 1992 Exh. 4-C to
Registration
Statement No.
33-48325,
6/2/92.

4.3.69 September 1, 1992 Exh. 4 to
Form 10-K,
3/26/93.

4.3.70 November 1, 1992 Exh. 4 to
Form 10-K,
3/26/93.

4.3.71 March 1, 1993 Exh. 4 to Form
10-K, 3/26/93.

4.3.72 March 2, 1993 Exh. 4 to Form
10-K, 3/26/93.

4.3.73 July 1, 1993 Exh. 4.4 to
Registration
Statement No.
33-49973,
8/11/93.

4.3.74 August 20, 1993 Exh. 4.4 to
Registration
Statement No.
33-50377,
9/23/93.

4.3.75 September 29, 1993 Exh. 4 to
Form 10-K,
3/25/94.

4.3.76 September 30, 1993 Exh. 4 to
Form 10-K,
3/25/94.

4.3.77 October 1, 1993 Exh. 4 to
Form 10-K,
3/25/94.

4.3.78 February 10, 1994 Exh. 4 to
Form 10-K,
3/25/94.

II-7

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

4.3.79 February 11, 1994 Exh. 4 to
Form 10-K,
3/25/94.

4.3.80 March 10, 1995 Exh. 4.3 to
Registration
Statement No.
33-61379,
7/28/95.

4.3.81 September 6, 1995 Exh. 4 to
Form 10-K,
4/1/96.

4.3.82 September 7, 1995 Exh. 4 to
Form 10-K,
4/1/96.

4.3.83 October 2, 1997 Exh. 4 to
Form 10-K,
3/26/98.

4.4.1 --Form of Supplemental Indenture Filed previously.
between the Registrant and
The Bank of New York, as successor
Trustee, with respect to the Senior
Note Mortgage Bonds

4.4.2 --Form of Supplemental Indenture Filed herewith.
between the Registsrant and The
Bank of New York, as successor
Trustee, with respect to the
First Mortgage Bonds

4.5 Form of Indenture between the Filed previously.
the Registrant and The Bank
of New York, as Indenture
Trustee, with respect to the
Senior Notes

4.6 --Form of Supplemental Indenture Filed previously.
between the Registrant and The
Bank of New York, as Indenture
Trustee, with respect to the
Senior Notes

5 --Opinion of William T. Torgerson Filed previously.
with respect to the Senior Notes

5.1 --Opinion of William T. Torgerson Filed herewith.
with respect to the First
Mortgage Bonds

12 --Computation of Ratios Exh. 12 to Form
8-K, 1/29/99.

15 --Letter re Unaudited Financial Filed herewith.
Information

23.1 --Consent of Filed herewith.
PricewaterhouseCoopers LLP

II-8

<PAGE>

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
- ----------- ---------------------- ----------

23.2 --Consent of William T. Torgerson Contained in
with respect to the Senior Notes Exhibit 5 filed
previously.

23.3 --Consent of Covington & Burling Filed herewith.

23.4 --Consent of William T. Torgerson Contained in
with respect to the First Exhibit 5.1 filed
Mortgage Bonds herewith.

24 --Power of Attorney Filed previously.

25.1 --Form T-1 Statement of Filed previously.
Eligibility and Qualification
under the Trust Indenture Act
of 1939 of The Bank of New York,
with respect to the First
Mortgage Bonds

25.2 --Form T-1 Statement of Filed previously.
Eligibility and Qualification
under the Trust Indenture Act
of 1939 of The Bank of New York,
with respect to the Senior Notes

* 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

II-9

<PAGE>

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 or any material change to such
information in the registration statement;

provided, however, that paragraphs (1)(i) and (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) That, 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 (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 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-10

<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 to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Washington, District of Columbia, on the 9th day of
February, 1999.

POTOMAC ELECTRIC POWER COMPANY

By John M. Derrick, Jr.*

(JOHN M. DERRICK, JR., PRESIDENT AND
CHIEF EXECUTIVE OFFICER)

Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the date indicated.

(i) Principal Executive Officer:

John M. Derrick, Jr.* President, Chief Executive
(JOHN M. DERRICK, JR.) Officer and DirectorFebruary 9, 1999

(ii) Principal Financial Officer and
(iii) Principal Accounting Officer:

D. R. Wraase* Senior Vice President,
(DENNIS R. WRAASE) Chief Financial Officer
and Director February 9, 1999

(iv) Directors:

Roger R. Blunt, Sr.* Director
(ROGER R. BLUNT, SR.) February 9, 1999

Edmund B. Cronin, Jr.* Director
(EDMUND B. CRONIN, JR.) February 9, 1999

David O. Maxwell* Director
(DAVID O. MAXWELL) February 9, 1999

Floretta D. McKenzie* Director
(FLORETTA D. McKENZIE) February 9, 1999

Edward F. Mitchell* Director
(EDWARD F. MITCHELL) February 9, 1999

Peter F. O'Malley* Director
(PETER F. O'MALLEY) February 9, 1999

II-11

<PAGE>

__________________ Director
(LOUIS A. SIMPSON)

A. Thomas Young* Director
(A. THOMAS YOUNG) February 9, 1999

/s/ ELLEN SHERIFF ROGERS
*By: ________________________
(ELLEN SHERIFF ROGERS,
ATTORNEY-IN-FACT)

II-12

<PAGE>

</TABLE>

POTOMAC ELECTRIC POWER COMPANY

First Mortgage Bonds

UNDERWRITING AGREEMENT

[DATE]

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

Ladies and Gentlemen:

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 Bank of New York, as successor 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") a registration statement on Form S-3 (No.
No. 333-66127), including a prospectus, 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 statement has been declared
effective by the Commission and which Indenture has been qualified under
the 1939 Act. The Company has also filed with the Commission Post-
Effective Amendment No. 1 to such registration statement, and such Post-
Effective Amendment has been declared effective. Such registration
statement together with such Post-Effective Amendment are collectively
referred to herein as the "Registration Statement." The Registration
Statement, 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 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

<PAGE>

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) is hereinafter called the
"Prospectus;" 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.

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<PAGE>

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
when filed included or will include any untrue statement of a material
fact or omitted 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
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 PricewaterhouseCoopers LLP
("PWC"), 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
Certificate of Incorporation 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

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<PAGE>

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 The Bank of New York, 101
Barclay Street, New York, N.Y., to the Representatives for the respective
accounts of the several Underwriters. The date and time of such delivery and
payment are herein called the "Closing Date." Payment for the Bonds shall be
in immediately available 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 Bank of New York.

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.

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<PAGE>

(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 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 paragraph requiring the payment by the Company of
certain fees and expenses, not to exceed $5,000), and 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

- 5 -

<PAGE>

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 number of copies of 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.

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<PAGE>

(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 earning statement (in
form complying with the provisions of Section 11(a) of the 1933 Act and
Rule 158 of 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 paragraph
(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 or any securities secured by 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".

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<PAGE>

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, 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., each 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, sale and delivery 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 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.

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<PAGE>

(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 the 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 PWC 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
(i) 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 (ii) 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") and Current Reports to the Commission on Form 8-
K, if any (the "Forms 8-K"), 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 PWC: (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 (1) the unaudited consolidated financial data included in
the Forms 10-Q or Forms 8-K (if any) do not comply as to form in all
material respects with the applicable accounting requirements of the

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<PAGE>

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; (2) 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; (3) the
ratios of earnings to fixed charges, actual and (if any) pro forma, as
set forth in the Registration Statement were not arithmetically correct;
(4) 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 (5) 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 or (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 7% Convertible Debentures and the 5% Convertible
Debentures. The letter of PWC 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.

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<PAGE>

(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 telephone, 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.

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<PAGE>

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
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
arise out of any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus as originally filed or as subsequently
amended or supplemented, 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 Prospectus as originally filed or as
subsequently amended or supplemented; 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 or supplemented)
(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.

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<PAGE>

(b) Each Underwriter agrees to indemnify and hold harmless the Company,
its officers and directors, and each person who controls the Company or any of
its officers and directors 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 written consent of the Representatives) 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 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 arise out of any
untrue statement or alleged untrue statement of a material fact contained in
Prospectus as originally filed or as subsequently amended or supplemented, 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 Prospectus as originally filed or as subsequently amended or supplemented.
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, any of its officers or directors or any
controlling person 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

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<PAGE>

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

- 14 -

<PAGE>

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.

- 15 -

<PAGE>

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 the Closing 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.

- 16 -

<PAGE>

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, heirs or legal
representatives. 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, Secretary and Assistant Treasurer.

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

- 17 -

<PAGE>

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

By _________________________________
Dennis R. Wraase
Senior Vice President and
Chief Financial Officer

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

________________________
________________________
________________________
________________________

By ____________________

By____________________________

- 18 -

<PAGE>

SCHEDULE I

Underwriting Agreement dated

Registration Statement No. 333-66127

Representative and Address:

Bonds:

Designation: First Mortgage Bonds,

Principal Amount: $

Supplemental Indenture dated as of

Date of Maturity:

Interest Rate:

Purchase Price:

Public Offering Price:

Closing Date and Location: at 10:00 a.m.
At the offices of Potomac Electric Power
Company
Suite 841
1900 Pennsylvania Avenue, N.W.
Washington, DC 20068

- 19 -

<PAGE>

SCHEDULE II

Principal
Amount
Name of Underwriters of Bonds

------------
Total $
============

- 20 -

[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 Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, and as now further supplemented
by a Supplemental Indenture dated as of , 1999 (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 the Underwriters named
in the Underwriting Agreement dated , 1999, and between the
Underwriters and the Company with respect to the Bonds (the
"Underwriting Agreement"). As used herein, the term "Registration
Statement" means the registration statement of the Company on Form S-3
filed with the Securities and Exchange Commission, File Number 333-
66127, as amended by Post-Effective Amendment No. 1 thereto. All
other capitalized terms used in this opinion letter that 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 in the Underwriting
Agreement.

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 carry on the business in which it is now engaged

<PAGE>

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 by the Company and is a valid and legally
binding instrument of the Company that is enforceable against the
Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, or other laws of general application relating to the
enforcement of creditors' rights or 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 valid
and legally binding obligations of the Company enforceable in
accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, or
other laws of general application relating to the 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 Statement is effective under the
Securities Act of 1933, as amended (the "1933 Act"); no stop order
suspending the effectiveness of the 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.

(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 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

- 2 -

<PAGE>

(other than compliance with any applicable requirements of the
Virginia Securities Act, as to which I express no opinion). No
approval, consent or order of the Maryland Public Service Commission
is required for the valid authorization, issuance and sale of the
Bonds by the Company in accordance with the Underwriting Agreement
(other than compliance with any applicable requirements of the
Maryland Securities Law, as to which I express an opinion). I do not
know of any other approvals, consents or orders of any governmental
body that are required as a condition to the valid authorization and
issuance of the Bonds (other than compliance with the securities or
"blue sky" laws of any jurisdiction, as to which I express no
opinion).

(7) The summary of the terms of the Indenture and the Bonds
contained in the Registration Statement and 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 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.

(9) 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.

(10) 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.

(11) The Company has good and valid title in and to all of
the real property reflected in its most recent audited balance sheet
that is incorporated by reference in the Registration Statement
(except as is disclosed in the Prospectus and except for 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.

- 3 -

<PAGE>

I also advise you that, in my opinion, the Registration Statement
as of the original effective date thereof and as of the effective date
of Post Effective Amendment No. 1 thereto, 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 Trust
Indenture Act of 1939 as amended, and the applicable rules and
regulations of the Securities and Exchange Commission thereunder.

Except as set forth in paragraph 7 above, I am not passing upon,
and do not assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the Registration Statement
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 Statement 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 PricewaterhouseCoopers LLP, the independent accountants
of the Company, and with your representatives and your counsel, I do
not believe that the Registration Statement at the time it originally
became effective, or at the time Post-Effective Amendment No. 1
thereto became effective, 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 Securities and Exchange
Commission pursuant to Rule 424(b) under the 1933 Act 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 belief, however,
as to the financial statements or other financial or statistical data
constituting a part of or incorporated by reference in, the
Registration Statement or the Prospectus.

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

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 for any manner by any other

- 4 -

<PAGE>

person or for any other purpose, without my prior written consent,
except that Winthrop, Stimson, Putnam & Roberts may rely on this
opinion with respect to the application of the laws of the District of
Columbia, the State of Maryland and the Commonwealths of Pennsylvania
and Virginia that are relevant to its opinion, in connection with the
delivery of their opinions required to be delivered under the
Underwriting Agreement.

Very truly yours,

- 5 -

<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 $_______ in 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 Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, and as now further supplemented
by a Supplemental Indenture dated as of , 1999 (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 the Underwriters named
in the Underwriting Agreement dated ____________, 1999 between the
Underwriters and the Company with respect to the Bonds (the
"Underwriting Agreement"). As used herein, the term "Registration
Statement" means the registration statement of the Company on Form
S-3, File Number 333-66127, as amended by Post-Effective Amendment No.
1 thereto. All other terms used herein that 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:

<PAGE>

1. The Company has been duly incorporated and is validly
existing as a corporation under the laws of the District of Columbia
and under the laws of the Commonwealth of Virginia, and has the
corporate power and authority to execute the Underwriting Agreement
and the Supplemental 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 of the Company, 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
against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, fradulent
conveyance, 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
against the Company in accordance with their terms, except as such
enforcement as may be limited by bankruptcy, insolvency, fradulent
conveyance, 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 Statement is 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 the
Registration Statement has been issued and no proceedings for that
purpose are pending or threatened under Section 8(d) of the 1933 Act.
The Registration Statement, at the time it originally became effective
and at the time Post-Effective Amendment No. 1 thereto 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 for the financial statements and
other financial and statistical data 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 Form T-1 filed as
an exhibit to the Registration Statement. The documents or portions

- 2 -

<PAGE>

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, at the
times they were filed with the Commission pursuant to the 1934 Act
(except for the financial statements and other financial and
statistical date constituting part thereof as to which we express no
opinion) complied as to form in all material respects with the 1934
Act, and the rules and regulations of the Commission thereunder.

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 (other
than compliance with any applicable requirements of the Virginia
Securities Act, as to which we express no opinion); and we do not know
of any other approvals, consents or orders of any governmental body
under the laws of the District of Columbia or the Commonwealth of
Virginia 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 such jurisdictions, as to which we express no opinion).

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

In passing upon the form of the Registration Statement 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
Statement and the Prospectus, we had discussions with certain of its
officers and representatives. Our examination of the Registration
Statement and the Prospectus and our discussions did not disclose to
us any information which gives us reason to believe that, at the time
the Registration Statement became effective, or at the time Post-
Effective Amendment No. 1 thereto became effective, the Registration
Statement 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(b), or

- 3 -

<PAGE>

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 are not making any statement as to the financial statements and
other financial and statistical data constituting a part of the
Registration Statement or the Prospectus or incorporated by reference
therein.

The opinions set forth herein are solely for your benefit in
connection with the consummation of the transactions contemplated by
the Underwriting Agreement, and may not be relied upon by you for any
other purpose or by any other person for any purpose.

Very truly yours,

- 4 -

<PAGE>

[LETTERHEAD OF WINTHROP, STIMSON, PUTNAM & ROBERTS]

Ladies and Gentlemen:

We have acted as counsel for you in connection with your several
purchases from Potomac Electric Power Company (the "Company") of $
aggregate principal amount of its First Mortgage Bonds, %
Series due (the "Bonds") pursuant to the Underwriting Agreement,
dated , 1999, 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 Bank of New York, as successor trustee (the "Trustee"), as
heretofore supplemented and amended, including a Supplemental
Indenture dated as of , 1999 (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, for purposes of this
opinion do not hold ourselves out as experts on the laws of the
District of Columbia, 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, as to all matters covered in such opinion relating to the
laws of the District of Columbia, the State of Maryland and the
Commonwealths of Pennsylvania and Virginia. We do not pass upon the
organization of the Company, titles to property, franchises 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 authentication
and delivery 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 or photostatic

<PAGE>

copies. As used herein, the term "Registration Statement" means the
Company's registration statement on Form S-3 (No. 333-66127), as
amended by Post-Effective Amendment No. 1 thereto and the term
"Prospectus" has the same meaning as the same word in the Underwriting
Agreement.

Subject to the foregoing and to the further exceptions and
qualifications set forth below, we are of the opinion that:

1. The Bonds have been duly and validly authorized by all
necessary corporate action of the Company, 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 against the Company in accordance with their terms, except
as may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or other laws of general application affecting the
enforcement of mortgagees' and other creditors' rights and by general
principles of equity (regardless of whether enforceability is
considered in a proceeding at equity or in law), 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 against the Company
in accordance with its terms, except as limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization or other laws of
general application relating to the enforcement of mortgagees' and
other creditors' rights and by general principles of equity
(regardless of whether enforceability is considered in a proceeding at
equity or in law).

4. The Registration Statement is 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 the
Registration Statement has been issued and no proceedings for that
purpose are pending or threatened under Section 8(d) of the 1933 Act;
the Registration Statement, at the time it originally became effective
and at the time Post-Effective Amendment No. 1 thereto 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 of the Form T-1 filed as an exhibit
thereto. The documents or portions thereof filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934

<PAGE>

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.

5. The summary of the terms of the Indenture and the Bonds
contained in the Registration Statement and the 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 that 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 (other
than in accordance with any applicable requirements of the Virginia
Securities Act, as to which we express no opinion); 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).

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 Statement 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
Statement and the Prospectus, we have had conferences with certain of
its officers and representatives, with counsel for the Company, with
PricewaterhouseCoopers 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 Statement and the Prospectus. Our examination of the
Registration Statement 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 the Registration Statement, at
the time it became effective or at the time Post-Effective Amendment
No. 1 thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be

<PAGE>

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(b) 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 Statement or the Prospectus, or as to the parts
of the Registration Statement that constitute the statement of
eligibility of the Trustee.

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, without our prior written consent.

Very truly yours,

POTOMAC ELECTRIC POWER COMPANY

1900 Pennsylvania Avenue, N.W., Washington, D.C.

THE BANK OF NEW YORK

101 Barclay Street, New York, NY

AS TRUSTEE

________________

Supplemental Indenture

Dated as of _______ __, ____

________________

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 _______ __, ____

TABLE OF CONTENTS*
____________________
<TABLE>
<CAPTION>

PAGE
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . .
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . .

</TABLE>

<TABLE>
<CAPTION>
PART I
DESCRIPTION OF BONDS

<S> <C> <C>
SECTION 1. General description of Bonds of Series. . . . .
SECTION 2. Form of face of Bond of ____ Series . . . . . .
Form of Trustee's certificate . . . . . . . . .
Text appearing on reverse side of Bond of ____
Series . . . . . . . . . . . . . . . . . . .
SECTION 3. Denominations of Bonds of ____ Series . . . . .
SECTION 4. Execution and form of temporary Bonds of ____
Series . . . . . . . . . . . . . . . . . . .

PART II
ISSUE OF BONDS

SECTION 1. Limitation as to principal amount. . . . . . . .
SECTION 2. Issue of Bonds of ____ Series. . . . . . . . . .

PART III
REDEMPTION

The Bonds of _____ Series are not redeemable prior to
________ 2009. . . . . . . . . . . . . . . . . . . . . . . .

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 . . . . . . . . . . . . . . . .
SECTION 2. No property additions made on or prior to
December 31, 1946 to be used for any purpose
under the Indenture. . . . . . . . . . . . . . .

PART V

Amendment of Indenture to Permit Qualification Under Trust
Indenture Act of 1939. . . . . . . . . . . . . . . . . . . .
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PART VI

<S> <C>

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

PART VII
THE TRUSTEE

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

PART VIII
MISCELLANEOUS PROVISIONS

Execution of Supplemental Indenture in counterparts . . . . .
Appointment of attorneys-in-fact by parties . . . . . . . . .

TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPANY'S ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . .
TRUSTEE'S ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . .

</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>
SUPPLEMENTAL INDENTURE, dated as of the ___ day of _______,
________ _______________________ (____), 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
sometimes called the "Company"), party of the first part, and The
Bank of New York, a New York banking corporation organized and
existing under the laws of the State of New York (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 Riggs
National Bank of Washington, D.C., as trustee, to secure an issue
of First Mortgage Bonds of the Company, issuable in series; and

WHEREAS, the Trustee has succeeded The Riggs National Bank
of Washington, D.C. as trustee under the Original Indenture
pursuant to Article XIII, Section 3 thereof; and

WHEREAS, pursuant to the terms and provisions of the
Original Indenture, indentures supplemental thereto dated as of
July 1, 1936, December 1, 1939, August 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, August 15, 1974, June 15,
1977, July 1, 1979, 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, March 10, 1995,
September 6, 1995, September 7, 1995 and October 2, 1997 have
been heretofore entered into between the Company and the Trustee
to provide, respectively, for the creation of the first through
the sixty-second 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,
October 2, 1997 and one of the 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

<PAGE>

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), $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 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 twenty-third
series), $25,000,000 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 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-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 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 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 forty-first
series), $75,000,000 principal amount of Bonds of the 9% Series
due 1990 (the forty-second

<PAGE>

series), $75,000,000 principal amount of Bonds of the 9-3/4%
Series due 2019 (the forty-third series) and $75,000,000
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: $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 series); $40,000,000 principal amount of
Bonds of the 6-5/8% Series due 2003 (the nineteenth series);
$50,000,000 principal amount of Bonds of the Adjustable Rate
Series due 2001 (the thirty-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
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 series); $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 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); $38,300,000 principal
amount of Bonds of the 5-3/8% Series due 2024 (the fifty-eighth
series); $16,000,000 principal amount of Bonds of the 5-3/4%
Series due 2010 (the fifty-ninth series); $100,000,000 principal
amount of Bonds of the 6-1/2% series due 2005 (the sixtieth
series); $75,000,000 principal amount of Bonds of the 7-3/8%
Series due 2025 (the sixty-first series); and $175,000,000
principal amount of Bonds of the 6-1/4% Series due 2007 (the
sixty-second series); and

WHEREAS, for the purpose of conforming the Original
Indenture to the standards 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,

<PAGE>

July 1, 1993, August 20, 1993, September 29, 1993, September 30,
1993, October 1, 1993, February 10, 1994, February 11, 1994,
March 10, 1995, September 6, 1995, September 7, 1995 and
October 2, 1997 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, September 1, 1971, June
17, 1981, November 1, 1985, September 16, 1987, May 1, 1989,
May 21, 1991, May 7, 1992, July 1, 1993 and October 2, 1997 have
been heretofore entered into between 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 is entitled to have authenticated and
delivered additional 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 Original Indenture as amended;
and

WHEREAS, the Company has determined to issue a sixty-third
series of Bonds under the Original Indenture as amended in the
principal amount of $___,000,000, to be known as First Mortgage
Bonds, __% Series due ____ (hereinafter called "Bonds of ____
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 execution 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

<PAGE>

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 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 delivery 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 amended, for the benefit of those who hold the Bond
and coupons, or any of them, issued or to be issued hereunder or
under the Original Indenture as amended, as follows:

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 covenants 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 from the date of initial issuance at the rate
of ____________________ percent (__%) per annum, payable
semiannually, commencing ________ __, ____, on the ____ day of
________ and the ______ day of _______ in each year (each such
________ __ and _______ __ 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 Borough of
Manhattan, The City of New York.

<PAGE>

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 New York
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 defaulted 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 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 delivered by the Trustee after the close of
business on the record date with respect 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
Company 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 endorsed on the Bonds of ____ Series, shall be
substantially in the following forms, respectively:

<PAGE>

[FORM OF FACE OF BOND OF ____ SERIES]

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

First Mortgage Bond, __% Series Due ____

No. $
Cusip No.

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
called the "Company", which term shall include any successor
corporation as defined in the Amended Indenture hereinafter
referred to), for value received, hereby promises to pay to
................... or registered assigns, the sum of
..................dollars, on the _________ 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 __________ __ or _________ __ next preceding 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 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 __________ __, ____, on the _________
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 __________ __ or
_________ __ will, subject to certain exceptions provided in the
indenture dated as of _______ __, ____ supplemental 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 __________ __ or
_________ __. Both principal of, and interest on, this Bond are
payable at the agency of the Company in the Borough of Manhattan,
The City of New York.

Reference is made to the further provisions of this Bond set
forth on the reverse 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

<PAGE>

purpose, until The Bank of New York, the Trustee under the
Amended Indenture, or a successor trustee thereto under the
Amended Indenture, shall have signed the form of certificate
endorsed hereon.

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 dated as of _________ __, ____.

THE BANK OF NEW YORK, Trustee

By .........................
Authorized Signatory

[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 series hereinafter specified, all issued
and to be issued under and equally secured (except in so far as
any purchase or sinking fund or analogous provisions for any
particular series of Bonds, established by any indenture
supplemental 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

<PAGE>

Company to The Bank of New York as successor 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, March 10, 1995, September 6, 1995, September 7, 1995
and October 2, 1997 (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
description of the properties mortgaged and pledged, the nature
and extent of the security, 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
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
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 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 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, __% Series 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"),

<PAGE>

dated as of _______ __, ____, between the Company and the
Trustee, supplemental 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 date, all subject to the
conditions and as more fully set forth in the Amended Indenture
and the New Supplemental Indenture:

Redemption Price Redemption Price
If Redeemed Expressed as If Redeemed Expressed as
During the Percentage of During the Percentage of
12 Month Period the Principal 12 Month Period the Principal
Ending [DATE] Amount of Bonds Ending [DATE] Amount of Bonds
- --------------- --------------- --------------- ---------------

<S> <C> <C> <C>
........... ______% ........... ______%
........... ______% ........... ______%
........... ______% ........... ______%
........... ______% ........... ______%
........... ______% ........... ______%
........... ______% and
thereafter... ______%

</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 redeemed, 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.

In case an event of default, as defined in the Amended
Indenture, shall occur, 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 conditions and in the
manner and with the effect provided in the Amended Indenture. 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.
<PAGE>

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 purpose 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
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, either directly or through the Company or any such
predecessor or successor corporation, whether for amounts unpaid
on stock subscriptions or by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability, whether at common law,
in equity, by any constitution, statute or otherwise, of
incorporators, stockholders, directors or officers being released
by every owner hereof by the acceptance of this Bond and as part
of the consideration for the issue hereof, and being likewise
released by the terms of 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 delivery, the Company may execute, and upon its
request in writing the Trustee shall authenticate and deliver, in
lieu thereof, Bonds for such series in temporary form, as
provided in Section 9 of Article II of the Original Indenture as
amended.

<PAGE>

PART II.

ISSUE OF BONDS.

SECTION 1. Except for Bonds of ____ Series issued pursuant
to Section 13 of Article II of the Original Indenture as amended,
the principal amount of Bonds of ____ Series which may be
authenticated and delivered hereunder is limited to $___,000,000
aggregate principal amount.

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 authenticated by the
Trustee and delivered (either before or after the recording
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 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 Section 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 Indenture as amended, except that, as
required by Part V 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
authentication and delivery of Bonds of ____ Series; and

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

<PAGE>

PART III.

REDEMPTION.

The Bonds of ____ Series are not redeemable up to and
including ___________ __. ____. The Bonds of ____ Series shall,
in accordance with the provisions of Article 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 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 Indenture 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 be redeemed by the Trustee pursuant
to the provisions of this Part III shall forthwith be canceled.

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:

SECTION 1. The Company will not withdraw, pursuant to the
provisions of Section 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
refundable Bonds equal in aggregate principal amount to the
amount so withdrawn shall be deemed to have been made the basis
of 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

<PAGE>

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.

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 provisions of
the Original Indenture so as to permit the qualification of the
Original Indenture under the Trust Indenture Act of 1939.

Except to the extent specifically provided herein, no
provision of this Supplemental 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.

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
evidence 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.

<PAGE>

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 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 respect 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 Indenture 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 VIII.

MISCELLANEOUS PROVISIONS.

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

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 Bank of New York, hereby constitutes and appoints
__________________, one of its _______________, 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 Bank of New York.

<PAGE>

IN WITNESS WHEREOF, said Potomac Electric Power Company 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
Indenture to be attested by its Secretary or one of its Assistant
Secretaries; and said The Bank of New York, in evidence of its
acceptance of the trust hereby created, has caused this
Supplemental Indenture to be executed on its behalf by one of its
_______________, and its corporate seal to be hereto affixed and
said seal and this Supplemental Indenture to be attested by one
of its _____________, all as of the ___ day of ______, _________.

POTOMAC ELECTRIC POWER COMPANY

By .........................
(CORPORATE SEAL) DENNIS R. WRAASE,
Attested: Senior Vice President

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

THE BANK OF NEW YORK
(Corporate Seal)
By ....................
Attested:

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

Signed, sealed and delivered by The
Bank of New York 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
ELLEN SHERIFF ROGERS, whose names as Senior Vice President and
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 the 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 Secretary, and acknowledged the same
before me in my District aforesaid and acknowledged the foregoing
instrument to be the act and deed of Potomac Electric Power
Company.

Given under my hand and official seal this ___ day of
_______, ____.

(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 ___ day of _______, 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 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 affixed 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

<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
__________________ and __________________, whose names as
_______________and ___________________, of THE BANK OF NEW YORK,
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
acknowledged themselves to be, respectively, _______________ and
__________________ of The Bank of New York, and that they as
such, being authorized so to do, executed the said deed by
signing the name of The Bank of New York, by __________________
as ______________, and attested by __________________ as
______________, and acknowledged the same before me in my
District aforesaid and acknowledged the foregoing instrument to
be the act and deed of The Bank of New York, as therein set
forth.

Given under my hand and notarial seal this ___ day of
_______, ____.

(NOTARIAL SEAL)

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

My Commission Expires _____ __, ____.

<PAGE>

CITY OF WASHINGTON,
DISTRICT OF COLUMBIA, SS.:

__________________, of full age, being sworn according to
law, on his oath deposes and says that he is a ______________ of
THE BANK OF NEW YORK, 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 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.

.................................
Subscribed and sworn to before me
this ___ day of _______, ____.

.................................
Notary Public

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
__________________, a ______________ of THE BANK OF NEW YORK, a
corporation, one of the parties to the foregoing instrument
bearing date as of the ___ day of _______, ____, and hereto
annexed, this day personally appeared before me in the City of
Washington, the said ___________________, being personally well
known to me as the person who executed the said instrument as a
______________ of and on behalf of said The Bank of New York, 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 Bank of New York,
and delivered the same as such. I further certify that the said
__________________ , 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 ______ __, ____.

<PAGE>

CERTIFICATE OF RESIDENCE

The Bank of New York, Mortgagee and Trustee within named,
hereby certifies that its precise residence is 101 Barclay
Street, New York, NY 10286.

THE BANK OF NEW YORK

By .......................

<PAGE>

Exhibit 5.1

February 9, 1999

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 $270,000,000 aggregate principal amount of First Mortgage
Bonds (the "New Bonds") and with respect to which the Company is
today filing a Post-Effective Amendment to Registration Statement
No. 333-66127 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
under the laws 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 terms of
the New Bonds and of their issuance and sale in the manner and upon
the terms set forth in the Registration Statement and in the form
of Prospectus contained therein or issued supplemental thereto,
(c) the Post-Effective Amendment to the Registration Statement

<PAGE>

Potomac Electric Power Company
Page 2
February 9, 1999

being declared effective under the 1933 Act, (d) the qualification
under the Trust Indenture Act of 1939, as amended, 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"), (e) 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 (f) 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.

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 caption "Legal Opinions" in the form of
the New Bond Prospectus which constitutes a part of said
Registration Statement.

Very truly yours,

/s/ WILLIAM T. TORGERSON
William T. Torgerson

<PAGE>

Exhibit 15

February 8, 1999

Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

Ladies and Gentlemen:

We are aware that Potomac Electric Power Company has incorporated by reference
our reports dated May 13, 1998, August 11, 1998 and November 12, 1998 (issued
pursuant to the provisions of Statement on Auditing Standards No. 71) in the
Prospectus constituting part of its Registration Statement on Form S-3 to be
filed on or about February 8, 1999. We are also aware of our responsibilities
under the Securities Act of 1933.

Yours very truly,

/s/ PricewaterhouseCoopers LLP

Exhibit 23.1

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Prospectuses
constituting part of this Registration Statement on Form S-3 of our report dated
January 16, 1998, which appears on page 32 of the 1997 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, 1997. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule, which appears on page 49 of
such Annual Report on Form 10-K. We also hereby consent to the incorporation by
reference of our report dated January 25, 1999, which appears on page 38 of
Exhibit 99 of the Current Report on Form 8-K of Potomac Electric Power Company
dated January 29, 1999, which Form 8-K is incorporated by reference in the
Prospectuses. We also consent to the references to us under the headings
"Experts" in such Prospectuses.

/s/ PricewaterhouseCoopers LLP
Washington, D.C.
February 8, 1999

Exhibit 23.3

February 9, 1999

We hereby consent to the reference to this Firm under the
heading "Legal Opinions" in the Prospectuses constituting part of
Post-Effective Amendment No. 1 to Registration Statement
No. 333-66127 of Potomac Electric Power Company, as filed the
date hereof, relating to $270,000,000 of Debt Securities.

/s/ Covington & Burling
COVINGTON & BURLING