Pepco-Conectiv merger agreement reached

Agreement extends rate caps and provides $2 million for ‘smart meter’ pilot program for residential customers

WASHINGTON and WILMINGTON, Del., Feb. 27, 2002 — Potomac Electric Wednesday that the parties to their merger approval proceeding before the District of Columbia Public Service Commission have reached a settlement which, if adopted by the Public Service Commission, would result in approval of the merger.

The proposed settlement includes key provisions extending distribution rate caps and funding a “smart meter” pilot program in the District, once the merger is completed.

The agreement will be submitted as a unanimous proposed settlement to the D.C. Public Service Commission, which has the authority to accept or reject it.

The merger has already been approved by the Federal Energy Regulatory Commission, Pennsylvania Public Utility Commission and Virginia State Corporation Commission. The merger has cleared review by the Federal Trade Commission and U.S. Justice Department. Approvals also are required by regulators in Delaware, Maryland and New Jersey and by the U.S. Securities and Exchange Commission.

“This settlement agreement is a significant achievement. It offers extended rate cap protections for our customers in the District of Columbia and moves us a step closer to completing the merger process,” said Dennis Wraase, Pepco President and Chief Operating Officer. “We hope that the Commission will approve the settlement as in the public interest.”

Parties to the settlement include Pepco; the Office of the People’s Counsel of the District of Columbia; the General Services Administration; Washington Metropolitan Area Transit Authority; Apartment and Office Building Association of Metropolitan Washington; the International Brotherhood of Electrical Workers, Local 1900, and AES New Energy, Inc. The settlement agreement includes the following key provisions:

Rate Caps to be extended in the District of Columbia until 2007

The settlement agreement caps the distribution portion of Pepco’s rates for almost 40 months, until August 2007 and requires the company to file cost information with the D.C. Public Service Commission by July 2004 to determine if a rate decrease is warranted.

$2 million for a “smart meter” pilot

The company will contribute $2 million to support the development and implementation of a “smart meter” pilot program for residential customers in the District of Columbia. Smart metering technology allows customers to more closely monitor their energy usage, enabling them to change usage patterns to their benefit.

Following the merger, Pepco and Conectiv will continue to operate as separate companies. Together they will serve more than 1.8 million customers in Delaware, the District of Columbia, Maryland, New Jersey and Virginia.

About Pepco

Pepco is an investor owned company that delivers electricity to more than 700,000 customers in Washington, D.C. and the Maryland suburbs. Through its family of subsidiaries, Pepco also operates in the competitive arena of telecommunications and energy products and services in the mid-Atlantic region. For more information visit the company’s web site at .

About Conectiv

Conectiv, a Fortune 500 company headquartered in Wilmington, Del., is focused on two core energy businesses. Conectiv Power Delivery provides energy to more than one million customers in New Jersey, Delaware, Maryland and Virginia. For more information, visit the company’s web site at .

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