PEPCO TO SELL POWER GENERAING ASSETS TO
                   SOUTHERN ENERGY FOR $2.65 BILLION

  All Stranded Cost Recovered, Including Power Purchase Agreements

      Potomac Electric Power Company (NYSE: POM) announced today that it
has entered into an agreement to sell the bulk of its electric
generating assets to Southern Energy Inc., a wholly owned subsidiary of
Southern Company. The purchase price is $2.65 billion. When added to
the $152.5 million Pepco will receive for the sale of its interest in
the Conemaugh generating station, announced previously, this
transaction will bring the total for Pepco's sale of generation
resources to $2.8 billion. The agreement was reached following an
extensive competitive bidding process that began in January 2000.

     Also included as part of the transaction is a provision for Pepco
to buy power from Southern Energy for up to four years, at prices below
Pepco's current average cost of production. This will enable Pepco to
continue to provide power to customers who do not elect to switch to
another electricity supplier, as customer choice becomes effective.

     "This sale is beneficial to both our customers and shareholders,"
said John M. Derrick, Jr., Pepco chairman and chief executive officer.
Under sharing arrangements contained in settlements approved last year
by the Maryland and District of Columbia Public Service Commissions,
profits from the sale will be shared with customers. The sale also
eliminates customers' exposure to payment of "stranded costs" arising
from the transition to a competitive electricity market. "This
transaction will provide what the parties to the settlements hoped it
would. Customers' share of the proceeds will lower their electricity
bills and they will not have to pay any stranded costs," Derrick added.

     Approximately 1,000 Pepco employees will be affected by the sale;
Southern Energy has indicated it intends to retain the vast majority of
them. Eligible Pepco employees who are left without work as a result
of the sale will be covered by a severance plan.

                                          -MORE-
PEPCO 2-2-2

     Once the transaction is complete, Southern Energy will acquire the
1,412 megawatt coal- and oil-fired Morgantown generating station,
located in Charles County, Md.; the 2,339 megawatt coal-, oil-, and
gas-fired Chalk Point station, located in Prince George's County, Md.;
the 837 megawatt coal-, oil-, and gas-fired Dickerson station, located
in Montgomery County, Md.; and the Potomac River station, the 482
megawatt coal-fired facility located in Alexandria, Va. Southern
Energy also will acquire Pepco's rights and obligations to the 84
megawatt, Southern Maryland Electric Cooperative, Inc., combustion
turbine; Pepco's entitlements under five purchased power agreements
totaling 735 megawatts; and an engineering and maintenance service
facility. Two Pepco power plants located in Washington, D.C., are not
included in the sale, but will be operated and maintained by Southern
Energy. The transaction is expected to close later this year.

     "We are very pleased to have Southern make a commitment to power
generation in this region. Southern is a proven operator. That is
good news for our employees and the communities we serve," said Dennis
Wraase, Pepco president.

     Pepco is an investor-owned company that engages in regulated
utility operations and diversified competitive energy and
telecommunications businesses through its wholly owned subsidiaries.
The utility delivers electricity to 1.9 million people in Washington,
D.C., and major portions of Prince George's and Montgomery counties in
suburban Maryland and sells electricity at wholesale to the Southern
Maryland Electric Cooperative, Inc.

     Southern Energy Inc. - with operations in 13 countries on five
continents - develops, builds, owns and operates power production and
delivery facilities and provides a broad range of services to utilities
and industrial companies around the world. Its Southern Company Energy
Marketing unit provides energy marketing, risk management and financial
services and other energy-related commodities, products and services to
customers in the United States and Canada.

     Southern Company (NYSE: SO), the largest producer of electricity
in the United States, is also the parent firm of Alabama Power, Georgia
Power, Gulf Power, Mississippi Power and Savannah Electric.

     Pepco retained Navigant Consulting, Inc. (NYSE: NCI) to manage the
divestiture of its power generation portfolio. Merrill Lynch is
serving as Pepco's financial advisor, and the firm of Dickstein,
Shapiro, Morin & Oshinsky is the company's legal advisor.

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