|SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549                                                                                                                                                                                                          
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|Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934                                                                                                                                                                                   
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|For Quarter Ended                                                                                                                                                                                                                                                   
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|Commission File Number                                                                                                                                                                                                                                              
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|Potomac Electric Power Company(Exact name of registrant as specified in its charter)                                                                                                                                                                                
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|District of Columbia and Virginia(State or other jurisdiction of
 incorporation or organization)                                                                                                                                                                    
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|701 Ninth Street, N.W., Washington, D.C.(Address of principal executive office)                                                                                                                                                                                     
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|202-872-2000
(Registrant's telephone number, including area code)                                                                                                                                                                                                   
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|Indicate by check mark whether 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.
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|Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.                                                                                                                                       
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|Class                                                                                                                                                                                                                                                               
|Common Stock, $1 par value                                                                                                                                                                                                                                          

TABLE OF CONTENTS



|PART I - Financial Information                                                                                           | Page
|------------------------------------------------------------------------------------------------------------------------ | ----
|Item 1. - Consolidated Financial Statements                                                                              |     
|Consolidated Statements of Earnings and Retained Income                                                                  | 2   
|Consolidated Balance Sheets                                                                                              | 3   
|Consolidated Statements of Cash Flows                                                                                    | 4   
|Notes to Consolidated Financial Statements                                                                               |     
|(1)   Organization and Segment Information                                                                               | 5   
|(2)   Summary of Significant Accounting Policies                                                                         | 7   
|(3)   Derivative Instruments and Hedging Activities                                                                      | 8   
|(4)   Treasury Stock Transactions                                                                                        | 9   
|(5)   Commitments and Contingencies                                                                                      | 10  
|Report of Independent Accountants on Review of Interim
            Financial Information                                 | 11  
|Item 2. - Management's Discussion and Analysis of Consolidated
            Results of Operations and
Financial Condition |     
|Safe Harbor Statements                                                                                                   | 12  
|Consolidated Results of Operations                                                                                       | 13  
|Capital Resources and Liquidity                                                                                          | 15  
|Item 3. - Quantitative and Qualitative Disclosures About
            Market Risk                                         | 15  
|PART II - Other Information                                                                                              |     
|Item 1. - Legal Proceedings                                                                                              | 15  
|Item 5 - Other Information                                                                                               | 15  
|Item 6. - Exhibits and Reports on Form 8-K                                                                               | 18  
|Signatures                                                                                                               | 19  
|Computation of Ratios - Utility Operations Only                                                                          | 20  
|Computation of Ratios - Consolidated Basis                                                                               | 21  
|Independent Accountants Awareness Letter                                                                                 | 22  



|Part I      FINANCIAL INFORMATION                                                                                  
|-------------------------------------------------------------------------------------------------------------------
|Item 1.    CONSOLIDATED FINANCIAL STATEMENTS                                                                       
|POTOMAC ELECTRIC POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED INCOME
(Unaudited)
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|(Millions, except per share data)                                                                                  
|Operating Revenue                                                                                                  
|Utility                                                                                                            
|Competitive                                                                                                        
|Gain on divestiture of generation     assets                                                                       
|Total Operating Revenue                                                                                            
|Operating Expenses                                                                                                 
|Fuel and purchased energy                                                                                          
|Other operation and maintenance                                                                                    
|Depreciation and amortization                                                                                      
|Other taxes                                                                                                        
|Total Operating Expenses                                                                                           
|Operating Income                                                                                                   
|Other Income (Expenses)                                                                                            
|Interest and dividend income                                                                                       
|Interest expense                                                                                                   
|Loss from Equity Investments,
     Principally a Telecommunication     Entity                                      
|Other income                                                                                                       
|Total Other Expenses                                                                                               
|                                                                                                                   
|Distributions on Preferred Securities of Subsidiary Trust                                                          
|                                                                                                                   
|Income Tax Expense                                                                                                 
|                                                                                                                   
|Net Income                                                                                                         
|                                                                                                                   
|Dividends on Preferred Stock                                                                                       
|                                                                                                                   
|Earnings Available for Common Stock                                                                                
|                                                                                                                   
|Retained Income at Beginning of Period                                                                             
|Dividends on Common Stock                                                                                          
|Other Comprehensive Income (Loss), Net of Tax                                                                      
|Retained Income at End of Period                                                                                   
|                                                                                                                   
|Basic Average Common Shares Outstanding                                                                            
|Basic Earnings Per Share of Common Stock                                                                           
|Diluted Average Common Shares Outstanding                                                                          
|Diluted Earnings Per Share of Common Stock                                                                         
|Cash Dividends Per Share of Common Stock                                                                           
|The accompanying Notes are an integral part of these Consolidated Financial Statements.                            







|POTOMAC ELECTRIC POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited at March 31, 2002)                                     
|----------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                              
|                                                                                                                                              
|ASSETS                                                                                                                                        
|CURRENT ASSETS                                                                                                                                
|Cash and cash equivalents                                                                                                                     
|Marketable securities                                                                                                                         
|Accounts receivable, less allowance for
     uncollectible accounts of $18.2 and $17.2                                                        
|Fuel, materials and supplies - at average cost                                                                                                
|Prepaid expenses and other                                                                                                                    
|Total Current Assets                                                                                                                          
|INVESTMENTS AND OTHER ASSETS                                                                                                                  
|Investment in finance leases                                                                                                                  
|Operating lease equipment - net of accumulated
     depreciation of $126.4 and $123.6, 
     respectively                                 
|Regulatory assets, net                                                                                                                        
|Other                                                                                                                                         
|Total Investments and Other Assets                                                                                                            
|PROPERTY, PLANT AND EQUIPMENT                                                                                                                 
|Property, plant and equipment                                                                                                                 
|Accumulated depreciation                                                                                                                      
|Net Property, Plant and Equipment                                                                                                             
|TOTAL ASSETS                                                                                                                                  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                          
|CURRENT LIABILITIES                                                                                                                           
|Short-term debt                                                                                                                               
|Accounts payable and accrued payroll                                                                                                          
|Capital lease obligations due within one year                                                                                                 
|Interest and taxes accrued                                                                                                                    
|Other                                                                                                                                         
|Total Current Liabilities                                                                                                                     
|DEFERRED CREDITS                                                                                                                              
|Income taxes                                                                                                                                  
|Investment tax credits                                                                                                                        
|Other                                                                                                                                         
|Total Deferred Credits                                                                                                                        
|                                                                                                                                              
|LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                                                                                  
|                                                                                                                                              
|COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED   SECURITIES OF SUBSIDIARY TRUST WHICH HOLDS   SOLELY PARENT JUNIOR SUBORDINATED DEBENTURES
|                                                                                                                                              
|PREFERRED STOCK                                                                                                                               
|Serial preferred stock                                                                                                                        
|Redeemable serial preferred stock                                                                                                             
|Total Preferred Stock                                                                                                                         
|COMMITMENTS AND CONTINGENCIES                                                                                                                 
|SHAREHOLDERS' EQUITY                                                                                                                          
|Common stock, $1 par value - authorized 
     200,000,000 shares, issued 118,544,883 shares                                                   
|Premium on stock and other capital contributions                                                                                              
|Capital stock expense                                                                                                                         
|Accumulated other comprehensive loss                                                                                                          
|Retained income                                                                                                                               
|                                                                                                                                              
|                                                                                                                                              
|Less cost of shares of common stock in treasury
     (11,418,907 shares and 11,323,707 shares,
      respectively)                            
|                                                                                                                                              
|Total Shareholders' Equity                                                                                                                    
|                                                                                                                                              
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                    
|The accompanying Notes are an integral part of these Consolidated Financial Statements.                                                       



|POTOMAC ELECTRIC POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|-------------------------------------------------------------------------------------------------
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|OPERATING ACTIVITIES                                                                             
|Net income                                                                                       
|Adjustments to reconcile net income to net cash
   (used by) from operating activities:          
|Depreciation and amortization                                                                    
|Gain on divestiture of generation assets                                                         
|Changes in:                                                                                      
|Accounts receivable and unbilled revenue                                                         
|Regulatory assets, net                                                                           
|Prepaid expenses                                                                                 
|Accounts payable and accrued payroll                                                             
|Interest and taxes accrued                                                                       
|Net other operating activities,
including          divestiture related items in 2001             
|Net Cash Used By Operating Activities                                                            
|INVESTING ACTIVITIES                                                                             
|Net investment in property, plant and equipment                                                  
|Proceeds from/changes in:                                                                        
|Divestiture of generation assets                                                                 
|Sales of marketable securities, net of purchases                                                 
|Sales of other investments, net of purchases                                                     
|Net other investing activities                                                                   
|Net Cash (Used By) From Investing Activities                                                     
|FINANCING ACTIVITIES                                                                             
|Dividends paid on preferred and common stock                                                     
|Redemption of preferred stock                                                                    
|Reacquisition of the Company's common stock                                                      
|Reacquisition of debt                                                                            
|Issuances of debt                                                                                
|Net other financing activities                                                                   
|Net Cash From (Used By) Financing Activities                                                     
|                                                                                                 
|Net Decrease In Cash and Cash Equivalents                                                        
|Cash and Cash Equivalents at Beginning of Year                                                   
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                         
|                                                                                                 
|Cash paid for interest (net of capitalized interest of $.1 and $1.4) and income taxes:           
|Interest                                                                                         
|Income taxes                                                                                     
|                                                                                                 
|The accompanying Notes are an integral part of these Consolidated Financial Statements.          





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For additional information, other than the information discussed in the 
Notes to Consolidated Financial Statements section herein, refer to Item 8. 
Financial Statements and Supplementary Data of the Company's 2001 Form 10-K.

(1)     Organization and Segment Information

Organization

Potomac Electric Power Company (Pepco or the Company) is engaged in 
three principal lines of business.  These business lines consist of (1) the 
provision of regulated electric utility transmission and distribution 
services in the Washington, D.C. (D.C.) metropolitan area, (2) the management 
of a diversified financial investments portfolio and (3) the supply of energy 
products and services in competitive retail markets.  The Company's regulated 
electric utility activities are referred to herein as the "Utility" or 
"Utility Operations," and its financial investments and competitive energy 
activities are referred to herein as its "Competitive Operations."    The 
Company's wholly owned unregulated subsidiary, POM Holdings, Inc. (PHI), 
formerly Pepco Holdings, Inc., is the parent company of two wholly owned 
subsidiaries, Potomac Capital Investment Corporation (PCI) and Pepco Energy 
Services, Inc. (Pepco Energy Services).  The Company's financial investment 
portfolio is managed by PCI and its competitive energy products and services 
are provided by Pepco Energy Services.  Additionally, the Company has a 
wholly owned Delaware statutory business trust, Potomac Electric Power 
Company Trust I, and a wholly owned Delaware Investment Holding Company, 
Edison Capital Reserves Corporation.

During 2001 the Company continued to position its business activities 
for the future through the execution of its business plan to respond to the 
electric utility industry's transition from a regulatory to a competitive 
environment.  On February 12, 2001, the Company and Conectiv announced that 
each company's board of directors approved an agreement for a strategic 
transaction whereby the Company will acquire Conectiv for a combination of 
cash and stock valued at approximately $2.2 billion.  Also during the first 
quarter of 2001 the Company completed its plan to divest its generation 
assets when it sold its 9.72 percent interest in a Pennsylvania generating 
plant.  This sale followed the divestiture of substantially all of the 
Company's generation assets in December 2000.  Additionally, the Utility's 
comprehensive plans to implement customer choice were completed on January 1, 
2001, when D.C. customers began to have their choice of electricity 
suppliers.  Maryland customers received customer choice on July 1, 2000.

After the closing of the acquisition of Conectiv, Pepco and Conectiv 
will become subsidiaries of a new holding company, to be called Pepco 
Holdings, Inc. (formerly New RC, Inc.).  The Utility Operations of the merged 
company will have more than twice the Company's current customer base, 
serving more than 1.8 million electric and gas customers in Maryland, the 
District of Columbia, Virginia, Delaware and New Jersey.  The acquisition 
will also create an expanded market serving a 10,000 square-mile service 
territory in a growing region with 4 million in population and will deliver 
more than 46,000 gigawatt-hours of electricity annually.  The new company 
will be the largest owner of transmission in the Pennsylvania/New 
Jersey/Maryland power pool (PJM).  The combination, which will be accounted 
for as a purchase of Conectiv by Pepco, has received approval from both 
companies' shareholders, from the Delaware, District of Columbia, Maryland, 
Pennsylvania and Virginia Public Service Commissions, and from the Federal 
Energy Regulatory Commission; antitrust clearance has been received under the 
Hart-Scott-Rodino Antitrust Improvements Act.  The transaction is expected to 
close during the second or third quarter of 2002 pending receipt of 
regulatory approvals from the SEC and from New Jersey, where a settlement 
agreement among the major parties has been filed.  At March 31, 2002, the 
Company has deferred approximately $12.5 million in merger acquisition costs.

Segment Information

The Company has identified the Utility's operations including the Trust 
(Utility Segment) and PHI's operations (Competitive Segment) as its two 
reportable segments.  The following tables present condensed financial 
information for the three months ended March 31, 2002 and 2001, respectively.

|                                                                              |                                                                                                                                                                   | Competitive Segment |                       |       
|----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | --------------------- | ------
|                                                                              | Utility                                                                                                                                                           | PCI                 | Pepco 
EnergyServices | Total 
|Three Months Ended:                                                           | (Unaudited, In Millions of Dollars)                                                                                                                              
|March 31, 2002                                                                |                                                                                                                                                                   |                     |                       |       
|Operating Revenue                                                             | $316.1                                                                                                                                                            | $ 28.6              | $ 157.1               | $185.7
|Operating Expenses                                                            |                                                                                                                                                                   |                     |                       |       
|Fuel and Purchased
    Energy                                                 | 132.2                                                                                                                                                             | -                   | 133.5                 | 133.5 
|Other Operation and 
    Maintenance                                          | 53.1                                                                                                                                                              | 11.0                | 25.7                  | 36.7  
|Depreciation and 
    Amortization                                            | 35.8                                                                                                                                                              | .7                  | 1.4                   | 2.1   
|Other Taxes                                                                   | 45.5                                                                                                                                                              | -                   | -                     | -     
|Total Operating   Expenses                                                    | 266.6                                                                                                                                                             | 11.7                | 160.6                 | 172.3 
|Operating Income                                                              | 49.5                                                                                                                                                              | 16.9                | (3.5)                 | 13.4  
|Other (Expenses)   Income                                                     |                                                                                                                                                                   |                     |                       |       
|Interest and     Dividend Income                                              | 3.8                                                                                                                                                               | 2.5                 | -                     | 2.5   
|Interest Expense                                                              | (20.8)                                                                                                                                                            | (10.6)              | -                     | (10.6)
|Loss from Equity   
Investments,   Principally a   Telecommunication   Entity | -                                                                                                                                                                 | (.6)                | .2                    | (.4)  
|Other Income                                                                  | .6                                                                                                                                                                | -                   | -                     | -     
|Total Other (Expenses)   Income                                               | (16.4)                                                                                                                                                            | (8.7)               | .2                    | (8.5) 
|Distributions on   Preferred Securities   of Subsidiary Trust                 | 2.3                                                                                                                                                               | -                   | -                     | -     
|Income Tax Expense   (Benefit)                                                | 12.7                                                                                                                                                              | (.4)                | (1.2)                 | (1.6) 
|Net Income (Loss)                                                             | $ 18.1                                                                                                                                                            | $  8.6              | $  (2.1)              | $  6.5
|                                                                              |                                                                                                                                                                   |                     |                       |       
|(A)                                                                           | Represents the elimination of rent paid to PCI for Pepco's lease of office space in PCI's 10-story commercial office building.  The lease commenced in June 2001.





|                                                                                           | Competitive Segment                
|------------------------------------------------------------------------------------------ | -----------------------------------
|                                                                                           | UtilitySegment                     
|Three Months Ended:                                                                        | (Unaudited, In Millions of Dollars)
|March 31, 2001                                                                             |                                    
|Operating Revenue                                                                          | $446.9(A)                          
|Operating Expenses                                                                         |                                    
|Fuel and Purchased Energy                                                                  | 188.8                              
|Other Operation and
    Maintenance                                                        | 50.8                               
|Depreciation and     Amortization                                                          | 34.4                               
|Other Taxes                                                                                | 53.2                               
|Total Operating Expenses                                                                   | 327.2                              
|Operating Income (Loss)                                                                    | 119.7                              
|Other (Expenses) Income                                                                    |                                    
|Interest and Dividend     Income                                                           | 26.3                               
|Interest Expense (Benefit)                                                                 | (34.7)                             
|(Loss) Income from Equity
    Investments, Principally
    a Telecommunication 
    Entity | -                                  
|Other Income                                                                               | 2.3                                
|Total Other (Expenses)   Income                                                            | (6.1)                              
|Distributions on Preferred
  Securities of Subsidiary
  Trust                              | 2.3                                
|Income Tax Expense (Benefit)                                                               | 47.5                               
|Net Income (Loss)                                                                          | $ 63.8(B)                          
|                                                                                           |                                    
|(A)Includes pre-tax gain of $50.2 million from the divestiture of Conemaugh.              
|(B)Includes after-tax gain of $22.4 million from the divestiture of Conemaugh.            

(2)   Summary of Significant Accounting Policies

Basis of Presentation

The information furnished in the accompanying consolidated financial 
statements reflects all adjustments (which consist only of normal recurring 
accruals) which are, in the opinion of management, necessary for a fair 
presentation of the Company's results of operations for the interim periods 
presented.  The accompanying consolidated financial statements and notes 
thereto should be read in conjunction with the Company's 2001 Form 10-K. 
Certain prior period amounts have been reclassified in order to conform to 
the current period presentation.

The accompanying consolidated financial statements present the financial 
results of the Company and its wholly owned subsidiaries. All intercompany 
balances and transactions with wholly owned subsidiaries have been 
eliminated.  Investments in entities in which the Company has a 20% to 50% 
interest are accounted for using the equity method.

Accounts Receivable and Allowance for Uncollectible Accounts

The Company's accounts receivable balance consists of customer accounts 
receivable, other accounts receivable, and accrued unbilled revenue.  Accrued 
unbilled revenue represents revenue earned in the current period but not 
billed to the customer until a future date, usually within one month.  
Receivables from the Company's wholly owned subsidiaries are eliminated in 
consolidation.  The Company uses the allowance method to account for 
uncollectible accounts receivable.

(3)   Derivative Instruments and Hedging Activities

On January 1, 2001, the Company adopted the provisions of Statement of 
Financial Accounting Standards No. 133 (SFAS 133) entitled "Accounting for  
Derivative Instruments and Hedging Activities."  Specifically, PCI has 
entered into interest rate swap agreements for the purpose of managing its 
overall borrowing rate and limiting its interest rate risk associated with 
debt issued under its Medium Term Note (MTN) program.  PCI currently hedges 
100% of its variable rate debt and approximately 19% of its fixed rate debt 
for the MTN program.  In accordance with the terms of the swap agreements, 
PCI receives or pays the net difference between interest payments and the 
rates from its swap counterparties, thereby minimizing its interest expense 
and cash flow variations.

Pepco Energy Services purchased natural gas futures contracts to hedge 
price risk in connection with the purchase of physical natural gas for 
delivery to customers in future months.  Pepco Energy Services accounts for 
its natural gas futures contracts as cash flow hedges of forecasted 
transactions.  As of March 31, 2002, PHI had issued $231.4 million and PCI 
had issued $67.4 million of guarantees on contracts between Pepco Energy 
Services and third parties.  Both PHI and PCI believe that they will not have 
to perform under these agreements, because the method of default by Pepco 
Energy Services is remote.

On the date of adoption, PHI formally designated its interest rate swap 
agreements as both cash flow hedge and fair value hedge instruments which, 
for accounting purposes, are measured at fair market value and recorded as 
liabilities in the Company's consolidated balance sheet.  The effective 
portion of the change in fair value of the interest rate swaps, designated as 
cash flow hedges, and natural gas futures, are reported as a component of 
Accumulated Other Comprehensive Income (AOCI).  As a yield adjustment is 
realized, the related amounts reflected in AOCI are subsequently reclassified 
into interest expense.  The gain or loss on the fair value hedge is 
recognized in earnings by calculating the change in the fair value of the 
interest rate swap and the change in the fixed rate debt obligation.

Management at PCI and Pepco Energy Services assesses interest rate and 
gas price risks by continually identifying and monitoring changes in the 
marketplace that may adversely impact expected future cash flows and by 
evaluating hedging opportunities.

On January 1, 2001, PHI recorded an after-tax adjustment of $33 thousand 
to AOCI for the purposes of recognizing the fair value of interest rate swaps 
designated as cash flow hedges.  A similar adjustment was not required for 
the fair value hedges and natural gas futures as they did not exist at that 
date.  AOCI is adjusted monthly for changes in the fair value of the interest 
rate swaps designated as cash flow hedges and natural gas futures.  During 
the three months ended March 31, 2002 and 2001, PHI recorded a loss of $.4 
million and a gain of $.1 million, respectively, as a result of the change in 
the fair value of its cash flow hedges.  As of March 31, 2002, PCI recorded 
$3.5 million as an interest rate swap liability classified as deferred 
credits - other and Pepco Energy Services recorded $2.2 million as commodity 
assets included in accounts receivable.  As of December 31, 2001, PCI 
recorded $2.9 million as an interest rate swap liability classified 
as deferred credits - other and Pepco Energy Services recorded $1.6 million 
as purchase commitments included in accounts payable and accrued payroll.

PCI's cash flow hedges expire on March 24, 2004 and August 22, 2005.  
PCI's fair value hedge expires on December 5, 2008.  The expiration dates of 
these instruments coincide with the maturity dates of the MTNs to which the 
swaps relate.  Pepco Energy Services' natural gas futures contracts expire at 
various dates that coincide with the timing of delivery to customers.

Through the year ended March 31, 2003, approximately $2.8 million of 
losses in AOCI related to the interest rate swaps and natural gas futures 
contracts are expected to be reclassified into income as a yield or price 
adjustment of the hedged items.

The Company's components of comprehensive income are net income, 
unrealized losses on marketable securities and unrealized losses on 
derivative instruments.  A detail of comprehensive income is as follows:

|                                                                    | For the Three MonthsEnded March 31,
|------------------------------------------------------------------- | -----------------------------------
|                                                                    | 2002                               
|(Unaudited,     
In Millions of Dollars)                           
|Net Income                                                          | $24.6                              
|                                                                    |                                    
|Other Comprehensive Income:                                         |                                    
|Unrealized gains (losses) on derivative
    instruments:            |                                    
|Net unrealized holding gains 
      (losses) arising during period  | 4.2                                
|Add:  loss included in net income                                   | .4                                 
|Net unrealized gains (losses) on 
      derivative instruments      | 4.6                                
|Unrealized gains (losses) on marketable
     securities:            |                                    
|Unrealized holding gains (losses) 
           arising during period | 4.2                                
|Less:  gain and add (loss) included 
      in net income            | .1                                 
|Net unrealized gains (losses) on 
           marketable securities  | 4.1                                
|Other comprehensive income (loss), before tax                       | 8.7                                
|Income tax expense (benefit)                                        | 3.0                                
|Other comprehensive income (loss), net of tax                       | 5.7                                
|Comprehensive Income                                                | $30.3                              

(4)   Treasury Stock Transactions

The Company has a plan to repurchase its common stock in the open market 
or in privately negotiated transactions as determined by management depending 
on market conditions.  At March 31, 2002, the Company held 11.4 million 
shares in treasury at a total cost of approximately $280.3 million, which is 
reflected as a reduction to shareholders' equity on the accompanying 
consolidated balance sheets.

(5)   Commitments and Contingencies

Regulatory Contingencies

The Company has credited approximately $188.6 million to Maryland 
customers as their portion of divestiture gainsharing.  The Maryland 
Commission has instituted a case to determine whether additional bill credits 
should be provided to the Maryland customers.  Hearings in this case were 
held on March 19, 2002 before a Hearing Examiner and the case is now in the 
briefing stage, with final briefs due on May 14, 2002.

The Company has credited approximately $50.1 million to D.C. customers 
as their portion of divestiture gainsharing.  The District of Columbia 
Commission has instituted a case to determine whether additional bill credits 
should be provided to the District of Columbia customers.  Hearings in the 
case are scheduled for June 26-27, 2002, with final briefs due on July 24, 
2002.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

This Quarterly Report on Form 10-Q, including the report of 
PricewaterhouseCoopers LLP on review of unaudited interim financial 
information dated May 10, 2002 will automatically be incorporated by 
reference in the Prospectuses constituting parts of the Company's 
Registration Statements on Form S-3 (Number 33-58810) and Forms S-8 (Numbers 
33-36798, 33-53685, 33-54197, 333-56683 and 333-57221), and under Pepco 
Holdings, Inc.'s (formerly New RC, Inc.) Registration Statement on Form S-4 
(Number 333-57042), filed under the Securities Act of 1933.  Such report of 
PricewaterhouseCoopers LLP, however, is not a "report" or "part of the 
Registration Statement" within the meaning of Sections 7 and 11 of the 
Securities Act of 1933 and the liability provisions of Section 11(a) of such 
Act do not apply.





Report of Independent Accountants

To the Board of Directors
and Shareholders of
Potomac Electric Power Company

We have reviewed the accompanying consolidated balance sheet of Potomac 
Electric Power Company and its subsidiaries (the Company) as of March 31, 
2002 and 2001, and the related consolidated statements of earnings and 
retained income and the consolidated statement of cash flows for the three 
month periods ended March 31, 2002 and 2001.  These financial statements are 
the responsibility of the Company's management.

We conducted our review in accordance with standards established by the 
American Institute of Certified Public Accountants.  A review of interim 
financial information consists principally of applying analytical procedures 
to financial data and making inquiries of persons responsible for financial 
and accounting matters. It is substantially less in scope than an audit 
conducted in accordance with auditing standards generally accepted in the 
United States of America, the objective of which is the expression of an 
opinion regarding the financial statements taken as a whole.  Accordingly, we 
do not express such an opinion.

Based on our review, we are not aware of any material modifications that 
should be made to the accompanying consolidated interim financial statements 
for them to be in conformity with accounting principles generally accepted in 
the United States of America.

We previously audited, in accordance with auditing standards generally 
accepted in the United States of America, the consolidated balance sheet as 
of December 31, 2001, and the related consolidated statements of earnings and 
retained income, and consolidated statement of cash flows for the year then 
ended (not presented herein), and in our report dated January 18, 2002, we 
expressed an unqualified opinion on those consolidated financial statements.  
In our opinion, the information set forth in the accompanying consolidated 
balance sheet as of March 31, 2002, is fairly stated, in all material 
respects, in relation to the consolidated balance sheet from which it has 
been derived.

PricewaterhouseCoopers LLP 
May 10, 2002

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED 
           RESULTS OF OPERATIONS AND FINANCIAL CONDITION

For additional information, other than the information disclosed in the 
Management's Discussion and Analysis of Consolidated Results of Operations 
and Financial Condition section herein, refer to Item 7. Management's 
Discussion and Analysis of Financial Condition and Results of Operations of 
the Company's 2001 Form 10-K.

Safe Harbor Statements

In connection with the safe harbor provisions of the Private Securities 
Litigation Reform Act of 1995 (Reform Act), the Company is hereby filing 
cautionary statements identifying important factors that could cause actual 
results to differ materially from those projected in forward-looking 
statements (as such term is defined in the Reform Act) made in this report on 
Form 10-Q.  Any statements that express, or involve discussions as to 
expectations, beliefs, plans, objectives, assumptions or future events or 
performance are not statements of historical facts and may be forward-
looking.

Forward-looking statements involve estimates, assumptions and 
uncertainties and are qualified in their entirety by reference to, and are 
accompanied by, the following important factors, which are difficult to 
predict, contain uncertainties, are beyond the control of the Company and may 
cause actual results to differ materially from those contained in 
forward-looking statements:

|- | Prevailing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC) and the Maryland and D.C. Commissions, with respect to allowed rates of return, industry and rate structure, acquisition and disposal of assets and facilities, operation and construction of plant facilities, recovery of purchased power expenses, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs);
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Changes in and compliance with environmental and safety laws and policies;                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | Weather conditions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|- | Population growth rates and demographic patterns;                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | Competition for retail and wholesale customers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | The potential negative impact resulting from the economic downturn on competition;                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | Growth in demand, sales and capacity to fulfill demand;                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | Changes in tax rates or policies or in rates of inflation;                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | Changes in projects costs;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | Unanticipated changes in operating expenses and capital expenditures;                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | Capital market conditions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | Competition for new energy development opportunities and other opportunities;                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | Legal and administrative proceedings (whether civil or criminal) and settlements that influence the business and profitability of the Company;                                                                                                                                                                                                                                                                                                                                                                      
|- | Pace of entry into new markets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | Time and expense required for building out the planned Starpower network;                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | Success in marketing services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | Possible development of alternative telecommunication technologies; and                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | The ability to secure electric and natural gas supply to fulfill sales commitments at favorable prices.                                                                                                                                                                                                                                                                                                                                                                                                             

Any forward-looking statements speak only as of May 10, 2002, and the 
Company undertakes no obligation to update any forward-looking statement to 
reflect events or circumstances after the date on which such statement is 
made or to reflect the occurrence of unanticipated events.  New factors 
emerge from time to time and it is not possible for management to predict all 
of such factors, nor can it assess the impact of any such factor on the 
business or the extent to which any factor, or combination of factors, may 
cause results to differ materially from those contained in any forward-
looking statement.

CONSOLIDATED RESULTS OF OPERATIONS

OPERATING REVENUE

Utility

The decrease in Utility operating revenue for the three month period 
ended March 31, 2002, compared to the corresponding period in 2001, is 
primarily attributable to milder weather during 2002.  Heating degree days 
were 14% below normal during the period and, in addition, measures of 
temperature below 35 degrees Fahrenheit were 40% below the same period last 
year.  With normalized sales, Utility earnings per share for the 2002 quarter 
would have been approximately 7 cents higher.

The decrease in operating revenue during the 2002 quarter also results 
from the fact that a gain of $50.2 million was recorded in January 2001 on 
the sale of the Company's 9.72 percent interest in the Conemaugh Generating 
Station (Conemaugh).

Competitive Operations

Competitive operating revenue increased for the three month period ended 
March 31, 2002 primarily due to the continued growth of Pepco Energy 
Services' commodity businesses.

OPERATING EXPENSES

Consolidated operating expenses decreased during the three months ended 
March 31, 2002, compared to the corresponding period in 2001, primarily due 
to a decrease in the Utility's fuel and purchased energy expense as a result 
of the sale of its interest in Conemaugh in January 2001, partially offset by 
an increase in Pepco Energy Services' fuel and purchased energy expense over 
this period.  Additionally, decreases in other operation and maintenance 
expense and depreciation expenses at PCI and PES were partially offset by 
increases in these expenses at the Utility.

OTHER INCOME (EXPENSES)

Interest and Dividend Income

The decrease in interest and dividend income during the three month 
period ended March 31, 2002, compared to the corresponding period last year, 
primarily resulted from the fact that there were less divestiture proceeds 
invested in 2002.  These proceeds, which were invested during the first 
quarter of last year, were subsequently used during 2001 and into 2002 to pay 
income taxes associated with the divestitures, to reduce long-term debt, to 
buy back common stock, and to satisfy divestiture customer sharing 
commitments.

Interest Expense

The decrease in interest expense in the three month period ended 
March 31, 2002, compared to the corresponding prior period, primarily 
resulted from a reduction in the level of the Company's debt outstanding. 
A portion of the proceeds from the divestiture of the generation assets 
in December 2000 was used to retire debt.

Loss from Equity Investments, Principally a Telecommunication Entity

This amount represents the Company's share of the pre-tax income or loss 
from entities in which it has a 20% to 50% equity investment.  The Company's 
most significant equity investment is the joint venture known as Starpower 
Communications, LLC (Starpower) that was formed in 1997 between wholly owned 
subsidiaries of PCI and RCN Corporation.  Additionally, this line item 
includes income from Pepco Energy Services' 50% share of the operations of 
Viron/Pepco Services, Inc. that was created to provide energy-savings 
performance contracting services to the Military District of Washington.

Through March 31, 2002, Starpower has built sufficient advanced fiber-
optic network to cumulatively reach approximately 193,000 On-network 
households which is unchanged since December 31, 2001. The customer 
subscriber services base is composed of customers served by Starpower's 
advanced fiber-optic network (On-network) and off of other networks ahead of 
Starpower's build-out (Off-network).  The On-network customer subscriber 
services include cable television, local and long distance telephone and 
high-speed Internet customer services and totaled approximately 80,000 as of 
March 31, 2002, compared to approximately 72,000 at December 31, 2001. The 
Off-network customer subscriber services include dial-up Internet and resale 
local and long distance telephone and totaled approximately 175,000 as of 
March 31, 2002, compared to approximately 184,000 at December 31, 2001. The 
decline in off-network customer subscriber services over the past year is 
principally due to the loss of dial-up Internet customers as a result of 
competition from free dial-up Internet service providers. Total customer 
subscriber services including cable television, local and long distance 
telephone and Internet subscribers were approximately 255,000 as of March 31, 
2002, compared to approximately 256,000 as of December 31, 2001.

For the three months ended March 31, 2002, the Loss from Equity 
Investments amount decreased compared to the corresponding period last year 
primarily due to the fact that Starpower's business continued to grow and 
mature from a startup operation.  PCI anticipates that Starpower will 
continue to incur losses for at least the remainder of 2002 as it further 
expands its customer base. At March 31, 2002, PCI has a net investment of 
$149.5 million in Starpower.

INCOME TAX EXPENSE

Income tax expense decreased for the three months ended March 31, 2002, 
compared to the corresponding period in 2001, primarily due to the fact that 
the prior year quarter includes taxes associated with the gain on the 
divestiture of Conemaugh.  The Utility's decrease in operating income over 
the period also contributed to the decrease.

CAPITAL RESOURCES AND LIQUIDITY

Construction Expenditures

Construction expenditures totaled $54.5 million for the three months 
ended March 31, 2002 and are projected to total $169.8 million for the year 
ended December 31, 2002.  For the five-year period 2002-2006, Utility 
construction expenditures are projected to total $833.7 million.  These 
expenditures will be funded through cash provided from operations or through 
funds received from the issuance of short term debt.

Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Item 7A. Quantitative and Qualitative Disclosures About Market 
Risk of the Company's 2001 Form 10-K.

PART II    OTHER INFORMATION

Item 1.    LEGAL PROCEEDINGS

Refer to Item 3. Legal Proceedings of the Company's 2001 Form 10-K.

Item 5.    OTHER INFORMATION

Customer Migration

As discussed in Item 7. Management's Discussion and Analysis of 
Consolidated Results of Operations and Financial Condition of the Company's 
2001 Form 10-K, retail access to a competitive market for generation services 
was made available to all Maryland customers on July 1, 2000 and to D.C. 
customers on January 1, 2001.  At March 31, 2002, 13% of the Utility's 
Maryland customers and 6% of its D.C. customers have chosen alternate 
suppliers.  These customers accounted for 1,048 megawatts of load in Maryland 
and 1,117 megawatts of load in D.C.  At March 31, 2002, a portion of these 
Maryland and D.C. customers were provided service by Pepco Energy 
Services, as Pepco Energy Services signed up 278 megawatts (8.3%) of the 
Maryland load and 533 megawatts (22.9%) of load in D.C.

Item 5.    OTHER INFORMATION - Continued

|Statistical Data                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                        
|                                                                                                                                                                                        
|Operating Revenue                                                                                                                                                                       
|Electric Revenue *                                                                                                                                                                      
|Other                                                                                                                                                                                   
|Total Utility Operating Revenue                                                                                                                                                         
|Competitive Operating Revenue                                                                                                                                                           
|Gain on Divestiture of Generation Assets                                                                                                                                                
|Total Operating Revenue                                                                                                                                                                 
|Distribution Deliveries by Class of Service                                                                                                                                             
|Residential                                                                                                                                                                             
|General Service                                                                                                                                                                         
|Large Power Service **                                                                                                                                                                  
|Street Lighting                                                                                                                                                                         
|Metro                                                                                                                                                                                   
|Wholesale                                                                                                                                                                               
|System                                                                                                                                                                                  
|Distribution Deliveries Sales    (Millions of KWH)                                                                                                                                      
|Residential                                                                                                                                                                             
|General Service                                                                                                                                                                         
|Large Power Service **                                                                                                                                                                  
|Street Lighting                                                                                                                                                                         
|Metro                                                                                                                                                                                   
|Wholesale                                                                                                                                                                               
|System                                                                                                                                                                                  
|Average System Revenue   per KWH (Cts./KWH)                                                                                                                                             
|Delivered                                                                                                                                                                               
|                                                                                                                                                                                        
|Equity Per Common Share:  
$17.00 and $16.89 at March 31, 2002 and 2001,
              
            respectively.                                                                       
|Weather Data                                                                                                                                                                            
|Heating Degree Days                                                                                                                                                                     
|20 Year Average                                                                                                                                                                         
|Cooling Degree Hours                                                                                                                                                                    
|20 Year Average                                                                                                                                                                         
|Heating Degree Days - The daily difference in degrees by which the mean temperature is below 65 degrees Fahrenheit (dry bulb).                                                          
|Cooling Degree Hours - The daily sum of the differences, by hours, by which the temperature (effective temperature) for each hour exceeds 71 degrees Fahrenheit (effective temperature).
|* Consists of Distribution, Transmission, and SOS revenue.                                                                                                                              
|** Large Power Service customers are served at high voltage of 66KV or higher.                                                                                                          



Item 6

|(a) | Exhibits                                                                                                                                                                                                                                                                        |   |                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------------------------------------------------
|    | Exhibit 12                                                                                                                                                                                                                                                                      | - | Computation of ratios - filed herewith.                             
|    | Exhibit 15                                                                                                                                                                                                                                                                      | - | Letter re: unaudited interim financial information - filed herewith.
|(b) | Reports on Form 8-K                                                                                                                                                                                                                                                             |   |                                                                     
|    | A Current Report on Form 8-K was filed by the Company on January 24, 2002, which included the Company's Press Release dated as of January 24, 2002.  The items reported on such Form 8-K were Item 5. (Other Events) and Item 7. (Financial Statements and Exhibits).          
|    | A Current Report on Form 8-K was filed by the Company on January 25, 2002, providing detailed financial information and audited consolidated financial statements of the Company. The item reported on such Form 8-K was Item 7. (Financial Statements and Exhibits).          
|    | A Current Report on Form 8-K was filed by the Company on January 25, 2002, which included the Company's corrected Press Release dated as of January 25, 2002.  The items reported on such Form 8-K were Item 5. (Other Events) and Item 7. (Financial Statements and Exhibits).



SIGNATURES

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.

| | Potomac Electric Power Company
           Registrant
By  A.W. WILLIAMS         A. W. Williams
  Senior Vice President and
   Chief Financial Officer
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

May 10, 2002
    Date



|                                                                |        |        |        |        |        |       
|--------------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------
|Net income                                                      | $148.5 | $194.2 | $348.9 | $228.0 | $211.2 | $164.7
|Taxes based on income                                           | 88.0   | 130.9  | 352.9  | 142.6  | 131.0  | 97.5  
|                                                                |        |        |        |        |        |       
|Income before taxes                                             | 236.5  | 325.1  | 701.8  | 370.6  | 342.2  | 262.2 
|                                                                |        |        |        |        |        |       
|Fixed charges:                                                  |        |        |        |        |        |       
|Interest charges                                                | 98.6   | 112.5  | 170.1  | 156.1  | 151.8  | 146.7 
|Interest factor in rentals                                      | 24.1   | 23.4   | 23.2   | 23.4   | 23.8   | 23.6  
|                                                                |        |        |        |        |        |       
|Total fixed charges                                             | 122.7  | 135.9  | 193.3  | 179.5  | 175.6  | 170.3 
|                                                                |        |        |        |        |        |       
|Income before income taxes and 
  fixed charges                 | $359.2 | $461.0 | $895.1 | $550.1 | $517.8 | $432.5
|                                                                |        |        |        |        |        |       
|Coverage of fixed charges                                       | 2.93   | 3.39   | 4.63   | 3.06   | 2.95   | 2.54  
|                                                                |        |        |        |        |        |       
|                                                                |        |        |        |        |        |       
|Preferred dividend 
  requirements                              | $5.0   | $5.0   | $5.5   | $8.9   | $18.0  | $16.5 
|                                                                |        |        |        |        |        |       
|Ratio of pre-tax income to 
  net income                        | 1.59   | 1.67   | 2.01   | 1.63   | 1.62   | 1.59  
|                                                                |        |        |        |        |        |       
|Preferred dividend factor                                       | $  8.0 | $  8.4 | $ 11.1 | $ 14.5 | $ 29.2 | $ 26.2
|                                                                |        |        |        |        |        |       
|Total fixed charges and 
  preferred dividends                  | $130.7 | $144.3 | $204.4 | $194.0 | $204.8 | $196.5
|                                                                |        |        |        |        |        |       
|Coverage of combined fixed 
  charges and preferred   dividends | 2.75   | 3.20   | 4.38   | 2.84   | 2.53   | 2.20  





Exhibit 12    Statements Re. Computation of Ratios

The computations of the coverage of fixed charges before income taxes, and the coverage 
of combined fixed charges and preferred dividends for the twelve months ended March 31, 
2002, and for each of the years 2001 through 1997, on a consolidated basis, are as follows.

            
           
       Twelve
           
           
     Months Ended    For the Year Ended December 31,
                  
  
     March 31, 2002   2001    2000    1999    1998    1997
             
             
          
         (Dollar Amounts in Millions)

|Net income*                                                                   | $146.1 | $192.3 | $369.1 | $256.7 | $234.8 | $179.8
|----------------------------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------
|Taxes based on income                                                         | 40.0   | 83.5   | 341.2  | 114.5  | 122.3  | 65.6  
|                                                                              |        |        |        |        |        |       
|Income before taxes                                                           | 186.1  | 275.8  | 710.3  | 371.2  | 357.1  | 245.4 
|                                                                              |        |        |        |        |        |       
|Fixed charges:                                                                |        |        |        |        |        |       
|Interest charges                                                              | 150.7  | 166.4  | 230.7  | 208.7  | 208.6  | 216.1 
|Interest factor in   
  rentals                                               | 24.4   | 23.8   | 23.6   | 23.8   | 24.0   | 23.7  
|                                                                              |        |        |        |        |        |       
|Total fixed charges                                                           | 175.1  | 190.2  | 254.3  | 232.5  | 232.6  | 239.8 
|                                                                              |        |        |        |        |        |       
|Competitive subsidiary   capitalized interest                                 | (1.4)  | (2.7)  | (3.9)  | (1.8)  | (0.6)  | (0.5) 
|                                                                              |        |        |        |        |        |       
|Income before income taxes   and fixed charges                                | $359.8 | $463.3 | $960.7 | $601.9 | $589.1 | $484.7
|                                                                              |        |        |        |        |        |       
|Coverage of fixed charges                                                     | 2.05   | 2.44   | 3.78   | 2.59   | 2.53   | 2.02  
|                                                                              |        |        |        |        |        |       
|Preferred dividend   requirements                                             | $  5.0 | $  5.0 | $  5.5 | $  8.9 | $ 18.0 | $ 16.5
|                                                                              |        |        |        |        |        |       
|Ratio of pre-tax income   to net income                                       | 1.27   | 1.43   | 1.92   | 1.45   | 1.52   | 1.36  
|                                                                              |        |        |        |        |        |       
|Preferred dividend factor                                                     | $  6.4 | $  7.2 | $10.6  | $12.9  | $27.4  | $22.4 
|                                                                              |        |        |        |        |        |       
|Total fixed charges and   preferred dividends                                 | $181.5 | $197.4 | $264.9 | $245.4 | $260.0 | $262.2
|                                                                              |        |        |        |        |        |       
|Coverage of combined fixed   charges and preferred   dividends                | 1.98   | 2.35   | 3.63   | 2.45   | 2.27   | 1.85  
|* Adjusted to remove the impact of POM's loss from equity investment amounts.







Exhibit 15





Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC  20549

Commissioners:

We are aware that our report dated May 10, 2002 on our review of interim 
financial information of the Potomac Electric Power Company (the "Company") 
as of and for the period ended March 31, 2002 and included in the Company's 
quarterly report on Form 10-Q for the quarter then ended is incorporated by 
reference in the Prospectuses constituting parts of the Registration 
Statements on Forms S-8 (Numbers 33-36798, 33-53685, 33-54197, 333-56683, and 
333-57221) dated September 12, 1990, May 18, 1994, June 17, 1994, June 12, 
1998 and June 19, 1998, respectively, on Form S-3 (Number 33-58810) dated 
February 26, 1993 of Potomac Electric Power Company and on Form S-4 (Number 
333-57042) of Pepco Holdings, Inc. (formerly New RC, Inc.) dated March 14, 
2001.

Very truly yours,



PricewaterhouseCoopers LLP