Pepco/Conectiv merger approved in Maryland

WASHINGTON and WILMINGTON, Del., April 12, 2002 — The merger of Potomac Electric Power Co. and Conectiv moved a step closer Friday with approval by the Maryland Public Service Commission.

The merger will benefit the 725,000 Maryland customers served by the two utilities by extending electric delivery rate caps, funding energy efficiency programs for residential customers and providing additional resources to enhance electric reliability.

The merger of Washington, D.C.-based Pepco and Wilmington, Del.-based Conectiv will create the largest electricity delivery company in the mid- Atlantic region with a transmission network serving 1.8 million customers in a 10,000-square-mile area. The two utilities, however, will continue as separate operating companies.

A proposed merger settlement agreement is awaiting approval in the District of Columbia. The merger also needs regulatory approval in New Jersey and by the U.S. Securities and Exchange Commission.

The merger has already been cleared by the Federal Trade Commission and the U.S. Justice Department. The merger also has been approved by the Federal Energy Regulatory Commission, regulators in Delaware and Virginia, where Conectiv serves customers on the Delmarva Peninsula, and in Pennsylvania, where both companies own transmission assets.

Under the agreement in Maryland, the distribution rates of both companies will be capped for an additional 30 months until December 2006. The combined companies agreed to absorb merger-related expenses and also will contribute $1 million to support development of residential energy efficiency programs. Commitments were also made to participate in working groups to address issues involving service quality guarantees and transmission reliability on Maryland’s Eastern Shore.

Pepco ( ) is an investor-owned company that delivers electricity to more than 700,000 customers in Washington, D.C. and the Maryland suburbs. Conectiv ( ) is focused on two core energy businesses. Conectiv Power Delivery provides energy to more than one million customers in N.J., Del., Md., and Va. Conectiv Energy manages a growing portfolio of “mid-merit” power plants that can respond quickly to changes in the demand for power with the PJM power pool.

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