<PAGE>
                                      Page 1 of 14




                                        FORM 10-Q



                           SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, D.C.  20549





                       Quarterly Report under Section 13 or 15(d)
                         of the Securities Exchange Act of 1934




For Quarter Ended September 30, 1996


Commission File Number 1-3376-2





                               THE POTOMAC EDISON COMPANY
                 (Exact name of registrant as specified in its charter)




  Maryland and Virginia                               13-5323955
(State of Incorporation)                 (I.R.S. Employer Identification No.)


                 10435 Downsville Pike, Hagerstown, Maryland  21740-1766
                             Telephone Number - 301-790-3400



         The registrant (1) has filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 
preceding 12 months and (2) has been subject to such filing requirements for 
the past 90 days.

         At November 13, 1996, 22,385,000 shares of the Common Stock (no par 
value) of the registrant were outstanding, all of which are held by Allegheny 
Power System, Inc., the Company's parent.



<PAGE>
                                          - 2 -



                               THE POTOMAC EDISON COMPANY

                     Form 10-Q for Quarter Ended September 30, 1996


                                          Index


                                                                       Page
                                                                        No.

PART I--FINANCIAL INFORMATION:

  Statement of income - Three and nine months ended
    September 30, 1996 and 1995                                          3


  Balance sheet - September 30, 1996
    and December 31, 1995                                                4


  Statement of cash flows - Nine months ended
    September 30, 1996 and 1995                                          5


  Notes to financial statements                                         6-8


  Management's discussion and analysis of financial
    condition and results of operations                                 9-13



PART II--OTHER INFORMATION                                               14



<PAGE>
<TABLE>
                                                     - 3 -

                                         THE POTOMAC EDISON COMPANY
                                             Statement of Income

<CAPTION>

                                                         Three Months Ended                 Nine Months Ended
                                                            September 30                      September 30
                                                         1996           1995              1996               1995
                                                                      (Thousands of Dollars)

    <S>                                             <C>             <C>               <C>                <C>
    ELECTRIC OPERATING REVENUES:
       Residential                                  $     68,053    $    74,986       $  244,339         $  231,921
       Commercial                                         36,575         38,027          109,234            107,673
       Industrial                                         48,880         50,211          144,910            148,720
       Wholesale and other, including affiliates*          8,212          7,988           26,590             21,006
       Bulk power transactions, net*                       5,607          5,024           19,173             15,020
         Total Operating Revenues                        167,327        176,236          544,246            524,340


    OPERATING EXPENSES:
      Operation:
       Fuel                                               33,756         36,887          104,514            102,113
       Purchased power and exchanges, net*                32,608         29,514          103,695             99,216
       Deferred power costs, net                          (1,416)         4,245            5,268             12,137
       Other**                                            25,483         26,472           84,266             72,493
      Maintenance                                         15,592         14,841           44,025             43,397
      Depreciation                                        17,748         17,276           53,159             51,707
      Taxes other than income taxes                       11,803         12,130           35,123             36,075
      Federal and state income taxes                       6,726          8,101           27,270             23,992
              Total Operating Expenses                   142,300        149,466          457,320            441,130
              Operating Income                            25,027         26,770           86,926             83,210

    OTHER INCOME AND DEDUCTIONS:
      Allowance for other than borrowed funds
       used during construction                              422           (406)             933                664
      Other income, net                                    3,084          3,295            8,791              9,385
              Total Other Income and Deductions            3,506          2,889            9,724             10,049

              Income Before Interest Charges              28,533         29,659           96,650             93,259

    INTEREST CHARGES:
      Interest on long-term debt                          11,904         12,119           36,069             36,937
      Other interest                                         506            543            1,682              1,506
      Allowance for borrowed funds used during
       construction                                         (258)           270             (716)              (439)

              Total Interest Charges                      12,152         12,932           37,035             38,004


    NET INCOME                                      $     16,381    $    16,727       $   59,615         $   55,255

</TABLE>

    * Prior period amounts have been reclassified for comparative purposes to 
reflect a change in 1996 in reporting certain bulk power transmission 
transactions with nonaffiliated utilities.  See Note 3 on page 6.

    **Includes restructuring charges of $2.3 million and $18.6 million for the 
three and nine-month periods ended September 30, 1996, respectively.

      Includes restructuring charges of $4.0 million for the three and nine-
month periods ended September 30, 1995.

      See Note 4 on pages 6 and 7 for additional information on the 
restructuring charges.

    See accompanying notes to financial statements.

<PAGE>
                                                   - 4 -

                                          THE POTOMAC EDISON COMPANY
                                               Balance Sheet
<TABLE>
<CAPTION>

                                                                  September 30,                 December 31,
                                                                      1996                          1995
                                                                               (Thousands of Dollars)  
    <S>                                                            <C>                            <C>
    ASSETS:                                                                                                                       
      Property, Plant, and Equipment:
         At original cost, including $52,325,000
           and $49,987,000 under construction                      $2,096,462                     $2,050,835
         Accumulated depreciation                                    (777,847)                      (729,653)
                                                                    1,318,615                      1,321,182
      Investments:
         Allegheny Generating Company - common stock at equity         58,828                         59,963
         Other                                                            687                            868
                                                                       59,515                         60,831
      Current Assets:
         Cash                                                           3,592                          2,953
         Accounts receivable:
            Electric service, net of $912,000 and $1,344,000
               uncollectible allowance                                 89,155                         93,250
            Affiliated and other                                        1,831                          2,917
            Notes receivable from affiliates                           11,850                         -
         Materials and supplies--at average cost:
            Operating and construction                                 24,936                         26,414
            Fuel                                                       14,321                         19,148
         Prepaid taxes                                                 15,593                         13,748
         Other                                                          7,686                          3,158
                                                                      168,964                        161,588
      Deferred Charges:
         Regulatory assets                                             80,145                         80,693
         Unamortized loss on reacquired debt                           18,239                         18,926
         Other                                                         11,871                         11,224
                                                                      110,255                        110,843

                Total Assets                                       $1,657,349                     $1,654,444

    CAPITALIZATION AND LIABILITIES:
      Capitalization:
         Common stock                                                $447,700                       $447,700
         Other paid-in capital                                          2,690                          2,690
         Retained earnings                                            226,714                        216,852
                                                                      677,104                        667,242
         Preferred stock                                               16,378                         16,378
         Long-term debt and QUIDS                                     628,336                        628,854
                                                                    1,321,818                      1,312,474
      Current Liabilities:
         Short-term debt                                               -                              21,637
         Long-term debt due within one year                               800                         18,700
         Accounts payable                                              25,367                         28,931
         Accounts payable to affiliates                                15,547                         15,608
         Taxes accrued:
            Federal and state income                                    7,565                          3,293
            Other                                                      16,258                         12,603
         Interest accrued                                              13,636                          9,638
         Customer deposits                                              6,510                          6,540
         Restructuring liabilities                                     14,827                          4,251
         Other                                                         14,392                          8,251
                                                                      114,902                        129,452
      Deferred Credits and Other Liabilities:
         Unamortized investment credit                                 24,171                         25,816
         Deferred income taxes                                        156,372                        155,432
         Regulatory liabilities                                        14,814                         15,255
         Restructuring liabilities                                        650                         -
         Other                                                         24,622                         16,015
                                                                      220,629                        212,518

                Total Capitalization and Liabilities               $1,657,349                     $1,654,444
</TABLE>

      See accompanying notes to financial statements

<PAGE>
                                                    - 5 -


                                         THE POTOMAC EDISON COMPANY
                                          Statement of Cash Flows
<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                              September 30
                                                                         1996               1995
                                                                         (Thousands of Dollars)

    <S>                                                               <C>                <C>    
    CASH FLOWS FROM OPERATIONS:
         Net income                                                     $59,615            $55,255
         Depreciation                                                    53,159             51,707
         Deferred investment credit and income taxes, net                (2,963)             3,665
         Deferred power costs, net                                        5,268             12,137
         Unconsolidated subsidiaries' dividends in excess of earnings     1,193              1,809
         Allowance for other than borrowed funds used
             during construction                                           (933)              (664)
         Restructuring liability                                         12,845              3,956
         Changes in certain current assets and
             liabilities:
                Accounts receivable, net                                  5,181             (5,489)
                Materials and supplies                                    6,305              2,465
                Accounts payable                                         (3,625)           (14,003)
                Taxes accrued                                             7,927             10,338
                Interest accrued                                          3,998              5,675
                Other deferred credits                                      (45)            (3,989)
         Other, net                                                       6,017               (509)
                                                                        153,942            122,353

    CASH FLOWS FROM INVESTING:
         Construction expenditures                                      (52,296)           (61,060)
         Allowance for other than borrowed funds used
            during construction                                             933                664
                                                                        (51,363)           (60,396)


    CASH FLOWS FROM FINANCING:
         Retirement of preferred stock                                     -               (48,396)
         Issuance of long-term debt                                        -               207,018
         Retirement of long-term debt                                   (18,700)          (175,249)
         Short-term debt, net                                           (21,637)             5,500
         Notes receivable from affiliates                               (11,850)             1,900
         Dividends on capital stock:
            Preferred stock                                                (613)            (2,250)
            Common stock                                                (49,140)           (48,575)
                                                                       (101,940)           (60,052)


    NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS                       639              1,905
    Cash and Temporary Cash Investments at January 1                      2,953              2,196
    Cash and Temporary Cash Investments at September 30               $   3,592          $   4,101


    Supplemental cash flow information:
         Cash paid during the period for:
             Interest (net of amount capitalized)                       $31,734            $32,129
             Income taxes                                                27,800             16,764

</TABLE>

    See accompanying notes to financial statements.

<PAGE>
                                   - 6 -


                        THE POTOMAC EDISON COMPANY

                       Notes to Financial Statements


1.         The Company's Notes to Financial Statements in the Allegheny
           Power System companies' combined Annual Report on Form 10-K for
           the year ended December 31, 1995, should be read with the
           accompanying financial statements and the following notes. 
           With the exception of the December 31, 1995 balance sheet in
           the aforementioned annual report on Form 10-K, the accompanying
           financial statements appearing on pages 3 through 5 and these
           notes to financial statements are unaudited.  In the opinion of
           the Company, such financial statements together with these
           notes contain all adjustments (which consist only of normal
           recurring adjustments) necessary to present fairly the
           Company's financial position as of September 30, 1996, the
           results of operations for the three and nine months ended
           September 30, 1996 and 1995, and cash flows for the nine months
           ended September 30, 1996 and 1995.


2.         The Statement of Income reflects the results of past operations
           and is not intended as any representation as to future results. 
           For purposes of the Balance Sheet and Statement of Cash Flows,
           temporary cash investments with original maturities of three
           months or less, generally in the form of commercial paper,
           certificates of deposit, and repurchase agreements, are
           considered to be the equivalent of cash.


3.         Effective in 1996 the Company changed its method of reporting
           certain bulk power transmission transactions with nonaffiliated
           utilities, and reclassified prior year's bulk power revenues
           and operation expenses to achieve a consistent presentation. 
           In prior years, some use of the Company's transmission system
           was recorded as purchased power from selling utilities and as
           sales of power to buying utilities.  The benefit to the Company
           was the difference between the two.  Because of new Federal
           Energy Regulatory Commission requirements, the Company
           predominantly does not "buy" and "sell" such energy, but rather
           a transmission fee is charged.

           Under the new reporting method all such transactions are
           recorded on a net revenue basis.  The effect of the
           reclassification was to reduce amounts reported for bulk power
           transaction revenues and operation expenses by $28.8 million
           and $80.5 million for the three and nine months ended September
           1995, respectively, with no change in operating income or net
           income.


4.         As reported in the 1995 third quarter 10-Q, the System is
           undergoing a reorganization and reengineering process
           (restructuring) to simplify its management structure and to
           increase efficiency.  In March 1996, the Company and its
           affiliates announced additional restructuring plans which
           included consolidating operating divisions, and centralizing
           and changing many accounting, customer services, and other
           functions.  As of September 1996, the Company and its
           affiliates reduced their work force by about 750 employees. 
           The reductions were accomplished through an enhanced separation
           plan, attrition, and layoffs.  An additional reduction of about
           
<PAGE>
                                   - 7 -


           250 employees during the next two or three years will occur
           primarily through attrition, early retirement packages, and, in
           the union workforce, pursuant to appropriate contract terms.

           Restructuring charges previously recorded were adjusted and
           additional charges were recorded in the third quarter to
           reflect current estimates.  Restructuring charges reflect
           estimated liabilities for severance, employee termination
           costs, and other restructuring costs.  Estimated additional
           restructuring charges of about $7 to $9 million will be
           recorded as the liabilities are incurred.  A summary of
           restructuring liabilities is provided below:

<TABLE>
<CAPTION>
                                                             Three Months Ended         Nine Months Ended
                                                               September 1996             September 1996 
                                                                       (Millions of Dollars)
                                                                  
           <S>                                                        <C>                      <C>
           Restructuring liability (before tax):
             Balance at beginning of period                           $15.2                    $ 4.3
               Accruals/adjustments                                     2.3                     18.6
               Benefit plans curtailment
                 liabilities/adjustments*                               1.9                     (1.6)   
               Less payments                                           (3.9)                    (5.8)
             Balance at end of period                                 $15.5                    $15.5
</TABLE>

           *Primarily recorded in other deferred credits.
           

5.         The Company owns 28% of the common stock of Allegheny
           Generating Company (AGC), and affiliates of the Company own the
           remainder.  AGC owns an undivided 40% interest, 840 MW, in the
           2,100-MW pumped-storage hydroelectric station in Bath County,
           Virginia, operated by the 60% owner, Virginia Power Company, a
           nonaffiliated utility.  Following is a summary of income
           statement information for AGC:
<TABLE>
<CAPTION>
                                                          Three Months Ended            Nine Months Ended
                                                             September 30                  September 30  
                                                           1996            1995          1996           1995
                                                                         (Thousands of Dollars)

<S>                                                      <C>             <C>           <C>            <C>
Electric operating revenues                              $20,825         $21,573       $62,757        $65,730

Operation & maintenance expense                            1,299           1,324         3,633          4,691
Depreciation                                               4,290           4,274        12,870         12,722
Taxes other than income taxes                              1,174           1,221         3,582          3,768
Federal income taxes                                       3,296           3,410        10,002         10,135
Interest charges                                           4,081           4,385        12,490         13,802
Other income, net                                             (1)             (5)           (4)           (14)
           Net income                                    $ 6,686         $ 6,964       $20,184        $20,626

</TABLE>
           The Company's share of the equity in earnings above was $1.9
           million for each of the three months ended September 30, 1996
           and 1995, and $5.7 million and $5.8 million for the nine months
           ended September 30, 1996 and 1995, respectively, and was
           included in other income, net, on the Statement of Income.

<PAGE>

                                   - 8 -


6.         Common stock dividends per share declared and paid during the
           periods for which income statements are included are as
           follows:
<TABLE>
<CAPTION>
                                                  1996                                    1995        
                                          Number            Amount               Number             Amount 
                                        of Shares         Per Share             of Shares         Per Share

           <S>                         <C>                   <C>               <C>                   <C>
           First Quarter               22,385,000            $.73              22,385,000            $.73
           Second Quarter              22,385,000            $.73              22,385,000            $.73
           Third Quarter               22,385,000            $.74              22,385,000            $.71

</TABLE>
           Earnings per share are not reported inasmuch as the common
           stock of the Company is 100% owned by its parent, Allegheny
           Power System, Inc.

<PAGE>
                                   - 9 -


                        THE POTOMAC EDISON COMPANY

        Management's Discussion and Analysis of Financial Condition
                         and Results of Operations                 


   COMPARISON OF THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 
        WITH THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995


Review of Operations

NET INCOME

                    Net income for the third quarter of 1996 was $16.4
million compared with $16.7 million for the corresponding 1995 period. 
For the first nine months of 1996, net income was $59.6 million compared
with $55.2 million for the corresponding 1995 period.

                    The three and nine month periods ended September 1996
include a restructuring charge of $2.3 million ($1.5 million, net of
taxes) and $18.6 million ($11.7 million, net of taxes), respectively.  The
three and nine month periods ended September 1995 include a restructuring
charge of $4.0 million ($2.5 million, net of taxes).  Restructuring
activities reported in the first six months continued in the third quarter
(see Note 4 to the financial statements).

                    The decrease in earnings for the third quarter,
excluding restructuring charges, was primarily due to a decrease in
kilowatt-hour (kWh) sales to residential customers because of relatively
cool weather this summer compared with the extremely hot weather in the
summer of 1995.  The increase in year-to-date earnings, excluding
restructuring charges, was primarily due to an increase in residential and
commercial kWh sales due to increases in both the number of customers and
usage.


SALES AND REVENUES

                    Retail kWh sales to residential and commercial
customers in the third quarter decreased 8% and 2%, respectively, and to
industrial customers increased 2%.  Retail kWh sales in the first nine
months to residential, commercial, and industrial customers increased 8%,
4%, and 1%, respectively.  Decreased weather-related sales in the third
quarter largely due to cooling degree days that were more than 15% below
normal and 25% below the corresponding 1995 period more than offset growth
in the number of customers which resulted in the decrease in residential
and commercial sales.  The increase in kWh sales to residential and
commercial customers in the first nine months was due to increases in both
the number of customers and usage.  Heating degree days in the relatively
cold January through April 1996 period were 12% above the corresponding
1995 period.  The increase in kWh sales to industrial customers in the
first nine months of 1996 resulted primarily from increased sales to
rubber, coal, and paper customers.  Revenues from sales to industrial
customers decreased in both the third quarter and nine months ended

<PAGE>
                                  - 10 -


September 1996 due primarily to a decrease in the fuel and energy cost
component.  The changes in revenues from retail customers resulted from
the following:
  
<TABLE>
<CAPTION>
                                                                               Change from Prior Periods
                                                                               Quarter       Nine Months
                                                                                 (Millions of Dollars)

           <S>                                                                  <C>             <C>
           Increased (decreased) kWh sales                                      $(5.1)          $18.2 
           Fuel and energy cost adjustment clauses*                              (4.9)           (7.2)
           Other                                                                   .3             (.8)
                                                                                $(9.7)          $10.2

</TABLE>
           *Changes in revenues from fuel and energy cost adjustment
            clauses have little effect on net income.


                    The increase in wholesale and other revenues for the
nine months ended September 1996 reflects increased revenues from
wholesale customers due to a rate increase effective in June 1995,
increased weather-related sales, and load additions to the wholesale
customers' systems.

<PAGE>
                                  - 11 -


                    KWh deliveries to and revenues from bulk power
transactions are comprised of the following items: 
<TABLE>
<CAPTION>
                                                           Three Months Ended          Nine Months Ended
                                                              September 30                September 30     
                                                            1996          1995*         1996           1995*

<S>                                                         <C>           <C>          <C>            <C>
KWh deliveries (in billions):
  From transmission services                                 1.4           1.3           4.3            3.3
  From sale of Company generation                              -            .1            .2             .2
                                                             1.4           1.4           4.5            3.5
Revenues (in millions):
  From transmission services                                $4.0          $3.5         $13.3          $10.9
  From sale of Company generation                            1.6           1.5           5.9            4.1
                                                            $5.6          $5.0         $19.2          $15.0

</TABLE>
                    Increased transmission services and sales of Company
generation resulted primarily from increased activity from power
marketers.  About 95% of the benefits from bulk power transactions are
passed on to retail customers and have little effect on net income.


OPERATING EXPENSES

                    Fuel expenses for the third quarter and the first nine
months of 1996 decreased 8% and increased 2%, respectively.  The change in
fuel expenses for both periods was due primarily to changes in kWh
generated.  Fuel expenses are primarily subject to deferred power cost
accounting procedures with the result that changes in fuel expenses have
little effect on net income.

                    "Purchased power and exchanges" represents power
purchases from and exchanges with nonaffiliated utilities, capacity
charges paid to Allegheny Generating Company (AGC), an affiliate partially
owned by the Company, and other transactions with affiliates made pursuant
to a power supply agreement whereby each company uses the most economical
generation available in the Allegheny Power System at any given time, and
is comprised of the following items:

<TABLE>
<CAPTION>
                                                           Three Months Ended           Nine Months Ended
                                                              September 30                 September 30  
                                                            1996             1995*       1996             1995*
                                                                         (Millions of Dollars)
<S>                                                        <C>              <C>         <C>              <C>
Nonaffiliated transactions:
  Purchased power                                          $ 2.4            $ 2.2       $ 10.2           $10.5
  Power exchanges                                             .1             (1.0)         1.8             (.5)
Affiliated transactions:
  AGC capacity charges                                       6.7              6.9         20.2            21.2
  Other affiliated capacity
           charges                                          11.9             11.1         35.6            32.7
  Energy and spinning reserve 
           charges                                          11.5             10.3         35.9            35.3
                                                           $32.6            $29.5       $103.7           $99.2
                    
</TABLE>

*Prior period amounts have been reclassified for comparative purposes to
 reflect a change in the method of reporting certain bulk power
 transmission transactions with nonaffiliated utilities.  See Note 3 to
 the Financial Statements for further information.

<PAGE>
                                  - 12 -


                    The cost of purchased power, AGC capacity charges in
West Virginia, and affiliated energy and spinning reserve charges is
mostly recovered from customers currently through the regular fuel and
energy cost recovery procedures followed by the Company's regulatory
commissions and is primarily subject to deferred power cost procedures
with the result that changes in such costs have little effect on net
income.  

                    While the Company does not currently purchase
generation from qualified facilities under the Public Utility Regulatory
Policies Act of 1978 (PURPA), an agreement has been reached with one
facility to commence purchasing generation in 1999.  This project may
significantly increase the cost of power purchases.

                    The increase in other operation expense for the nine
months ended September 1996 resulted primarily from restructuring charges
which are discussed in Note 4 to the Financial Statements.
 
                    Maintenance expenses represent costs incurred to
maintain the power stations, the transmission and distribution (T&D)
system, and general plant, and reflect routine maintenance of equipment
and rights-of-way as well as planned major repairs and unplanned
expenditures, primarily from forced outages at the power stations and
periodic storm damage on the T&D system.  In September 1996, the Company
experienced storm damage costs of approximately $1.4 million related to
tropical storm "Fran".  Variations in maintenance expense result primarily
from unplanned events and planned major projects, which vary in timing and
magnitude depending upon the length of time equipment has been in service
without a major overhaul and the amount of work found necessary when
equipment is dismantled.  

                    The net changes in federal and state income taxes for
the third quarter and first nine month periods resulted primarily from
variances in income before income taxes.

                    The combined increase of $1.4 million and $.5 million
in allowance for funds used during construction (AFDC) for the three and
nine months ended September 1996 is a result of a correction to reduce
previously accrued AFDC by $1.4 million in the third quarter of 1995.


Financial Condition and Requirements

                    The Company's discussion on Financial Condition and
Requirements and Changes in the Electric Utility Industry in the Allegheny
Power System companies' combined Annual Report on Form 10-K for the year
ended December 31, 1995, should be read with the following information.

                    In the normal course of business, the Company is
subject to various contingencies and uncertainties relating to its
operations and construction programs, including cost recovery in the
regulatory process, laws, regulations and uncertainties related to
environmental matters, and legal actions.

                    In July 1996, the Company presented an offer to buy the
Hagerstown, Maryland municipal electric distribution system.  The offer
includes a $23 million cash payment, plus other incentives.  The offer
came as a result of discussions with a municipal Study Committee which has
recommended a public

<PAGE>
                                  - 13 -


referendum on the November 1996 ballot to let voters decide the issue.  In
late September 1996, following a vote by the City Council not to allow
citizens to decide on the sale in a referendum, the Company withdrew its
offer to purchase the system.

                    The Virginia State Corporation Commission on October
29, 1996, approved an agreement filed by the Company and the Staff of the
Commission that will lower electric rates for Virginia customers.  The
decrease in gross revenues will be about $1.2 million on an annual basis. 
The new rates became effective with service rendered on November 1, 1996.

                    The Company continues to advocate true competition in
the electric utility industry.  In Virginia, the Company told the State
Corporation Commission that "the public interest will be best served by
moving to implement a more competitive structure for the delivery of
retail electric service".  The Company is very proactive in its efforts to
promote deregulation in the electric utility industry in the states in
which it serves.  The Company also believes that a Federal framework of
legislation to speed customer choice and provide uniform rules for all
players is necessary because of differences among the states.  Along with
Federal legislation, the Company supports deregulation of all generation,
regulation of transmission by Federal Energy Regulatory Commission, and
regulation of distribution companies by the states.


<PAGE>
                                  - 14 -


                        THE POTOMAC EDISON COMPANY

                 Part II - Other Information to Form 10-Q
                   for Quarter Ended September 30, 1996  


ITEM 5.    OTHER INFORMATION

                    The Company received a questionnaire on October 1, 1996
from the U.S. Environmental Protection Agency (EPA) concerning a release
or threat of release of hazardous substances, pollutants, or contaminants
into the environment at the Butler Tunnel Site located in Luzerne County,
Pennsylvania.

                    Following a diligent and reasonable search of its
records and discussions with appropriate employees, the Company notified
the EPA that it has no records or recollection of any business relations
with the site or any of the companies identified in the questionnaire.

                    It is not possible to determine at this time what
impact, if any, this matter may have on the Company.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)      (27)    Financial Data Schedule

           (b)      No reports on Form 8-K were filed on behalf of the
                    Company for the quarter ended September 30, 1996.




                                 Signature


                    Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                                                  THE POTOMAC EDISON COMPANY



                                                  /s/   THOMAS J. KLOC      
                                                        Thomas J. Kloc
                                                          Controller
                                                 (Chief Accounting Officer)



November 13, 1996