|SECURITIES AND EXCHANGE
      COMMISSIONWASHINGTON, 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 ofincorporation 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
      preceding12 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 commonstock, as of the latest
      practicable date.                                                                                                                                                   
|                                                                                                                                                                                                                                                                                           
|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                                                                                        | 5   
|(1) Organization and Segment
      Information                                                                                          | 5   
|(2) Summary of Significant
      Accounting Policies                                                                                    | 10  
|(3) Derivative Instruments and Hedging
      Activities                                                                                 | 10  
|(4) Treasury Stock
      Transactions                                                                                                   | 12  
|(5) Commitments and Contingencies                                                                                                       | 13  
|Report
      of Independent Accountants on Review of Interim Financial
      Information                                                | 14  
|Item 2. - Management's
      Discussion and Analysis of Consolidated Results
      of                Operations and Financial Condition | 15  
|Safe
      Harbor Statements                                                                                                            | 15  
|Consolidated Results of
      Operations                                                                                                | 16  
|Capital Resources and
      Liquidity                                                                                                   | 19  
|Item 3. -
      Quantitative and Qualitative Disclosures About Market Risk                                                              | 19  
|PART II - Other Information                                                                                                             |     
|Item 1. - Legal
      Proceedings                                                                                                       | 19  
|Item 5 - Other
      Information                                                                                                        | 19  
|Item 6. -
      Exhibits and Reports on Form 8-K                                                                                        | 22  
|Signatures                                                                                                                              | 23  
|Computation of
      Ratios - Utility Operations Only                                                                                   | 24  
|Computation of
      Ratios - Consolidated Basis                                                                                        | 25  
|Independent
      Accountants Awareness Letter                                                                                          | 26  





|Part I FINANCIAL INFORMATION                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------
|Item 1. CONSOLIDATED FINANCIAL STATEMENTS                                                                                    
|POTOMAC ELECTRIC POWER COMPANY AND
      SUBSIDIARIESCONSOLIDATED 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, 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
      SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited at September 30,
      2001)                                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                
|                                                                                                                                                                
|ASSETS                                                                                                                                                          
|CURRENT ASSETS                                                                                                                                                  
|Cash and cash equivalents                                                                                                                                       
|Marketable securities                                                                                                                                           
|Accounts receivable, less allowance for uncollectible
           accounts of $10.8 and $9.1                                                                     
|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 $119.3 and
      $135.4, respectively                                                  
|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                                                                                                                                                
|Regulatory liabilities, net                                                                                                                                     
|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 and
      118,530,802 shares, respectively                             
|Premium on stock and other capital
      contributions                                                                                                          
|Capital stock expense                                                                                                                                           
|Accumulated other comprehensive loss                                                                                                                            
|Retained income                                                                                                                                                 
|Total
      Shareholders' Equity                                                                                                                                
|                                                                                                                                                                
|Less cost of shares of common stock in
      treasury      (11,122,007 shares and
      7,792,907 shares, respectively)                                         
|                                                                                                                                                                
|                                                                                                                                                                
|                                                                                                                                                                
|TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                
|The accompanying Notes are an integral part of these
      Consolidated Financial Statements.                                                                   





|POTOMAC ELECTRIC POWER COMPANY AND
      SUBSIDIARIESCONSOLIDATED 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                                                             
|Customer sharing
      commitment                                                                          
|Prepaid expenses                                                                                           
|Accounts payable and accrued
      payroll                                                                 
|Interest and taxes
      accrued                                                                           
|Net other operating
      activities                                                                       
|Net Cash (Used By) From 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                                                     
|Purchases of other investments, net of
      sales                                                         
|Net Cash Used By 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, net of issuances                                                                    
|Proceeds from sale of aircraft                                                                             
|Other financing activities                                                                                 
|Net Cash 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 $2.6 and $2.8)
      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 2000 Form 10-K.(1)     Organization and Segment
InformationOrganization          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, (2) the
supply of telecommunications services including local and long distance
telephone, high speed Internet and cable television, 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 telecommunications services and
competitive energy activities are referred to herein as "Competitive
Operations." Competitive Operations are derived from Pepco Holdings, Inc.
(PHI), a wholly owned subsidiary of the Company, and PHI's wholly owned
subsidiaries, Potomac Capital Investment Corporation (PCI) and Pepco Energy
Services, Inc. (Pepco Energy Services). The Company also has a wholly owned
Delaware statutory business trust, Potomac Electric Power Company Trust I
(Trust) and a wholly owned Delaware Investment Holding Company, Edison
Capital Reserves Corporation
(Edison).          On
February 12, 2001, the Company and Conectiv announced that each company's boards
of directors approved an agreement for a strategic transaction whereby the
Company will effectively acquire Conectiv for a combination of cash and
stock valued at approximately $2.2 billion. The combination, which will be
accounted for as a purchase, has received approval from both companies'
shareholders, from the Pennsylvania and Virginia commissions, and from the Federal Energy
Regulatory Commission (FERC). Additionally, antitrust clearance has been 
received under the Hart-Scott-Rodino Antitrust Improvements Act (HSR)
effective August 7, 2001. HSR provides the Federal Trade Commission and the
Justice Department the opportunity  to review the proposed transaction prior
to its completion to ensure it will not violate antitrust laws. Pending the
receipt of various other regulatory approvals, the transaction is expected to 
close in early 2002. Both companies will become subsidiaries of a new
holding company to be named at a later date. At September 30, 2001, the
Company has deferred approximately $10.1 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 and nine months ended September 30, 2001 and 2000,
respectively.



|                                                                                                     |                                                                                                                                                                              | Competitive
      Segment |                      |         
|---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------- | --------
|                                                                                                     | UtilitySegment                                                                                                                                                               | PCI                       | Pepco EnergyServices | TotalPHI
|Three Months Ended:                                                                                  | (Unaudited, In Millions of Dollars)                                                                                                                                         
|September 30, 2001                                                                                   |                                                                                                                                                                              |                           |                      |         
|Operating Revenue                                                                                    | $ 527.3(B)                                                                                                                                                                   | $ 29.7                    | $ 212.1              | $241.8  
|Operating Expenses                                                                                   |                                                                                                                                                                              |                           |                      |         
|Fuel and Purchased Energy                                                                            | 274.5                                                                                                                                                                        | -                         | 170.8                | 170.8   
|Other Operation and
             Maintenance                                                         | 51.7                                                                                                                                                                         | 13.7                      | 28.8                 | 42.5    
|Depreciation and Amortization                                                                        | 35.8                                                                                                                                                                         | 7.6                       | 1.7                  | 9.3     
|Other Taxes                                                                                          | 51.3                                                                                                                                                                         | -                         | -                    | -       
|Total Operating Expenses                                                                             | 413.3                                                                                                                                                                        | 21.3                      | 201.3                | 222.6   
|Operating Income                                                                                     | 114.0                                                                                                                                                                        | 8.4                       | 10.8                 | 19.2    
|Other Expenses                                                                                       |                                                                                                                                                                              |                           |                      |         
|Interest and Dividend Income                                                                         | 6.5                                                                                                                                                                          | 2.6(C)                    | (.9)                 | 1.7     
|Interest Expense                                                                                     | (15.8)                                                                                                                                                                       | (11.8)                    | (.1)                 | (11.9)  
|Loss from Equity
             Investments, Principally a
             Telecommunication
      Entity | -                                                                                                                                                                            | (4.9)                     | (1.6)                | (6.5)   
|Other Income (Expenses)                                                                              | 1.2                                                                                                                                                                          | (.3)                      | -                    | (.3)    
|Total Other Expenses                                                                                 | (8.1)                                                                                                                                                                        | (14.4)                    | (2.6)                | (17.0)  
|Distributions on Preferred    Securities of
      Subsidiary Trust                                   | 2.3                                                                                                                                                                          | -                         | -                    | -       
|Income Tax Expense (Benefit)                                                                         | 42.0                                                                                                                                                                         | (10.2)                    | 4.0                  | (6.2)   
|Net Income                                                                                           | $ 61.6(D)                                                                                                                                                                    | $  4.2                    | $   4.2              | $  8.4  
|                                                                                                     |                                                                                                                                                                              |                           |                      |         
|(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.
|(B)                                                                                                  | Includes pre-tax loss of $18.4 million from an adjustment to the
      previously reported gain on the sale of the Company's generating
      plants.                       
|(C)                                                                                                  | Includes dividend income from PCI's ongoing preferred stock investment
      portfolio.                                                                                     
|(D)                                                                                                  | Includes after-tax loss of $11.0 million from an adjustment to the
      previously reported gain on the sale of the Company's generating
      plants.                     



|                                                                                                     | Competitive
      Segment          
|---------------------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                                     | UtilitySegment                     
|Three Months Ended:                                                                                  | (Unaudited, In Millions of Dollars)
|September 30, 2000                                                                                   |                                    
|Operating Revenue                                                                                    | $745.0                             
|Operating Expenses                                                                                   |                                    
|Fuel and Purchased Energy                                                                            | 320.0                              
|Other Operation
      and       Maintenance                                                          | 73.7                               
|Depreciation and Amortization                                                                        | 51.1                               
|Other Taxes                                                                                          | 55.8                               
|Total Operating Expenses                                                                             | 500.6                              
|Operating Income (Loss)                                                                              | 244.4                              
|Other (Expenses) Income                                                                              |                                    
|Interest and Dividend Income                                                                         | .5                                 
|Interest Expense (Benefit)                                                                           | (40.8)                             
|(Loss) Income from
      Equity      Investments, Principally a
            Telecommunication Entity | -                                  
|Other Income                                                                                         | 4.3                                
|Total Other (Expenses) Income                                                                        | (36.0)                             
|Distributions on Preferred     Securities of
      Subsidiary Trust                                  | 2.3                                
|Income Tax Expense (Benefit)                                                                         | 83.5                               
|Net Income (Loss)                                                                                    | $ 122.6                            
|                                                                                                     |                                    
|(A)Includes dividend income from PCI's
      ongoing preferred stock investment portfolio.          



|                                                                                                            |                                                                                                                    | Competitive
      Segment |                      |         
|----------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------------------- | -------------------- | --------
|                                                                                                            | Utility Segment                                                                                                    | PCI                       | Pepco EnergyServices | TotalPHI
|Nine Months Ended:                                                                                          | (Unaudited, In Millions of Dollars)                                                                               
|September 30, 2001                                                                                          |                                                                                                                    |                           |                      |         
|Operating Revenue                                                                                           | $1,442.2(B)                                                                                                        | $ 79.2                    | $ 481.2              | $560.4  
|Operating Expenses                                                                                          |                                                                                                                    |                           |                      |         
|Fuel and Purchased Energy                                                                                   | 699.1                                                                                                              | -                         | 378.3                | 378.3   
|Other Operation
      and       Maintenance                                                                 | 156.1                                                                                                              | 42.9                      | 81.5                 | 124.4   
|Depreciation and Amortization                                                                               | 104.8                                                                                                              | 19.3                      | 4.9                  | 24.2    
|Other Taxes                                                                                                 | 142.1                                                                                                              | -                         | -                    | -       
|Total Operating Expenses                                                                                    | 1,102.1                                                                                                            | 62.2                      | 464.7                | 526.9   
|Operating Income                                                                                            | 340.1                                                                                                              | 17.0                      | 16.5                 | 33.5    
|Other Expenses (Expenses)                                                                                   |                                                                                                                    |                           |                      |         
|Interest and Dividend Income                                                                                | 43.9                                                                                                               | 10.7(C)                   | -                    | 10.7    
|Interest Expense                                                                                            | (80.5)                                                                                                             | (34.4)                    | (.3)                 | (34.7)  
|(Loss) Income from Equity
             Investments, Principally
      a      Telecommunication
      Entity | -                                                                                                                  | (16.1)                    | (.9)                 | (17.0)  
|Other Income (Expenses)                                                                                     | 5.1                                                                                                                | (.1)                      | -                    | (.1)    
|Total Other Expenses                                                                                        | (31.5)                                                                                                             | (39.9)                    | (1.2)                | (41.1)  
|Distributions on Preferred   Securities of
      Subsidiary Trust                                           | 6.9                                                                                                                | -                         | -                    | -       
|Income Tax Expense    (Benefit)                                                                             | 129.5                                                                                                              | (26.9)                    | 7.1                  | (19.8)  
|Net Income                                                                                                  | $172.2(D)                                                                                                          | $ 4.0                     | $   8.2              | $ 12.2  
|                                                                                                            |                                                                                                                    |                           |                      |         
|(A)                                                                                                         | Represents the elimination of rent paid to PCI by Pepco (starting in
      June 2001) for its lease of PCI office.
|(B)                                                                                                         | Includes a pre-tax gain of $31.8 million from the sale of the Conemaugh
      Generating Station.                 
|(C)                                                                                                         | Includes dividend income from PCI's ongoing preferred stock investment
      portfolio.                           
|(D)                                                                                                         | Includes an after-tax gain of $11.4 million from the sale of the
      Conemaugh Generating Station.              





|                                                                                                                                                                                                                                                          | Competitive
      Segment          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                                                                                                                                                                                          | Utility Segment                    
|Nine Months Ended:                                                                                                                                                                                                                                        | (Unaudited, In Millions of Dollars)
|September 30, 2000                                                                                                                                                                                                                                        |                                    
|Operating Revenue                                                                                                                                                                                                                                         | $1,757.3                           
|Operating Expenses                                                                                                                                                                                                                                        |                                    
|Fuel and Purchased Energy                                                                                                                                                                                                                                 | 770.9                              
|Other Operation
      and        Maintenance                                                                                                                                                                                                              | 229.1                              
|Depreciation and Amortization                                                                                                                                                                                                                             | 174.8                              
|Other Taxes                                                                                                                                                                                                                                               | 155.0                              
|Total Operating Expenses                                                                                                                                                                                                                                  | 1,329.8                            
|Operating Income (Loss)                                                                                                                                                                                                                                   | 427.5                              
|Other (Expenses) Income                                                                                                                                                                                                                                   |                                    
|Interest and Dividend Income                                                                                                                                                                                                                              | 1.5                                
|Interest Expense                                                                                                                                                                                                                                          | (115.7)                            
|(Loss) Income from
      Equity      Investments, Principally
      a      Telecommunication Entity                                                                                                                                                       | -                                  
|Other Income (Expenses)                                                                                                                                                                                                                                   | 7.0                                
|Total Other (Expenses) Income                                                                                                                                                                                                                             | (107.2)                            
|Distributions on Preferred     Securities of
      Subsidiary Trust                                                                                                                                                                                       | 6.9                                
|Income Tax Expense (Benefit)                                                                                                                                                                                                                              | 126.3                              
|Net Income (Loss)                                                                                                                                                                                                                                         | $   187.1                          
|                                                                                                                                                                                                                                                          |                                    
|(A)Includes a pre-tax gain of $19.7 million
      from the sale of Cove Point.(B)Includes dividend income from PCI's
      ongoing preferred stock investment portfolio.(C)Includes an after-tax gain of $11.8
      million from the sale of Cove Point.

(2)      Summary of
Significant Accounting PoliciesBasis of
Presentation          The
information furnished in the accompanying consolidated financial
statementsreflects 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 2000 Form 10-K.
Certain prior period amounts have been reclassified in order to conform to
thecurrent period presentation.New Accounting
StandardsIn
June 2001, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 141 entitled "Business
Combinations," which applies to all business combinations initiated after
June 30, 2001. This statement requires that the purchase method of
accounting be used for all business combinations. Additionally, identifiable
intangible assets must be recognized as assets apart from goodwill if certain
criteria are met.The Company believes that
the implementation of SFAS 141 will not have a material impact on its
financial position or results of
operations.           In
June 2001, the FASB issued SFAS 142 "Goodwill and Other Intangible Assets,"
which is required to be applied starting with fiscal years beginning after
December 15, 2001. This statement establishes the accounting and reporting
standards for goodwill and other intangible assets and requires that
goodwill no longer be amortized but rather tested for impairment based on
the criteria prescribed in the statement. The Company believes that the
implementation of SFAS 142 will not have a material impact on its financial
position or results of
operations.          In
June 2001, the FASB issued SFAS 143 "Accounting for Asset Retirement
Obligations," which is required to be adopted for financial statements
issued for fiscal years beginning after June 15, 2002. This statement
establishes the accounting and reporting standards for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company is in the process of
assessing the provisions of SFAS 143 in order to determine its impact on the
Company's financial position and results of
operations.          In
August 2001, the FASB issued SFAS 144 entitled "Accounting for the Impairment or
Disposal of Long-Lived Assets," which is required to be adopted for
financial statements issued for fiscal years beginning after December 15,
2001. This statement establishes a single accounting model for long-lived
assets to be disposed of by sale and resolves significant implementation
issues related to SFAS 121 entitled "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The Company
believes that the implementation of SFAS 144 will not have a material impact
on its financial position or results of
operations.(3)     Derivative Instruments and Hedging
Activities          On
January 1, 2001, the Company adopted the provisions of SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities". Although the Utility is not
directly impacted by SFAS 133, the competitive subsidiaries have entered
into several agreements that are subject to its provisions. Specifically,
PCI has entered into two interest rate swap agreements for the purposes of
hedging 100% of its variable interest rate debt obligations that were issued
under its Medium Term Note (MTN) program for fixed interest rate debt. In
accordance with the terms of the swap agreements, PCI receives or pays the
net difference between variable interest payments and the fixed rates due
from its swap counterparties, thereby fixing its interest expense. In August
2001, Pepco Energy Services sold electric call options which give the buyer the
right to call on Pepco Energy Services to supply up to 150 megawatts per
hour of electricity at a fixed price for on peak days during the months of
July and August 2002. These call options serve to hedge the potential
variability of the operating results of Pepco Energy Services' electric power
generation plants that result from prevailing electric prices. Pepco Energy
Services accounts for these call options as cash flow hedges of forecasted
transactions. As a yield adjustment is realized, the related amounts
reflected in Accumulated Other Comprehensive Income (AOCI) are subsequently
reclassified into revenue.On the
date of adoption, PHI formally designated its interest rate swap agreements as
cash flow 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 the fair value of the
interest rate swaps and the electric call options are reported as a
component of AOCI. As a yield adjustment is realized, the related amounts
reflected in AOCI are subsequently reclassified into interest
expense.          PHI's
management assesses interest rate and electric 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, PCI recorded an after-tax adjustment of $33 thousand to AOCI
for the purpose of recognizing the fair value of interest rate swaps
designated as cash flow hedges.A similar adjustment was not required
for the call options, as they did not exist at that date. AOCI is adjusted
monthly for changes in the fair value of the interest rate swaps and
electric call options. During the three and nine months ended September 30,
2001, PCI recorded $46 thousand and $41 thousand in losses, respectively, as
a result of the change in the fair value of the interest rate swap
agreements. As of September 30, 2001, PCI recorded $1.7 million as an
interest rate swap liability classified in other liabilities and Pepco
Energy Services recorded no gain/loss on the call
options.          PCI's
interest rate swaps expire on March 24, 2004 and August 22, 2005, which
coincides with the maturity date of these MTNs, to which the swaps relate
for hedging purposes. Pepco Energy Services' electric call options expire in
August 2002, which coincides with the planned electric power
generation.          Through
the twelve months ended September 30, 2002, approximately $422 thousand of
losses in AOCI related to the interest rate swaps and the electric call
options 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 Months Ended September 30, | For the Nine Months Ended September 30,
|-------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|                                                                                                               | 2001                                     | 2000                                   
|                                                                                                               | (Unaudited, In Millions of Dollars)     
|Net Income                                                                                                     | $ 70.0                                   | $120.8                                 
|                                                                                                               |                                          |                                        
|Other Comprehensive Income:                                                                                    |                                          |                                        
|Unrealized losses on cash flow hedges:                                                                         |                                          |                                        
|Net unrealized losses on cash flow
               hedges                                                       | (1.0)                                    | -                                      
|Unrealized gains (losses) on marketable
               securities:                                             |                                          |                                        
|Unrealized holding gains (losses)
      arising          during
      period                                   | 5.6                                      | 2.1                                    
|Less: reclassification adjustment
      for (losses)
                     gains
      included in net earnings | (.2)                                     | .3                                     
|Net unrealized gains (losses) on
      marketable
               securities                                    | 5.8                                      | 1.8                                    
|Other comprehensive income (loss), before
               tax                                                   | 4.8                                      | 1.8                                    
|Income tax expense (benefit)                                                                                   | 1.7                                      | .6                                     
|Other comprehensive income (loss),
      net of
         tax                                                   | 3.1                                      | 1.2                                    
|Comprehensive Income                                                                                           | $ 73.1                                   | $122.0                                 

(4)     Treasury Stock
Transactions          On
February 12, 2001, the Company announced its plan to repurchase up to $450
million of its common stock in the open market or in privately negotiated
transactions over the next twelve months. The actual amount of stock to be
repurchased will be determined by management depending on market conditions.
Through the nine-month period ended September 30, 2001, the Company has
acquired 3,329,100 shares in connection with this repurchase plan at a total
cost of approximately $73.9 million, which is reflected as a reduction to
shareholders' equity on the accompanying consolidated balance sheets. At
December 31, 2000, Pepco had 7,792,907 shares held in treasury at a cost of
approximately $200 million in connection with a previous stock repurchase
plan.(5)     Commitments
and
ContingenciesInvestments          At
September 30, 2001, the carrying value of PCI's marketable securities, which
consisted primarily of preferred stocks with mandatory redemption features
and investment grade commercial paper, was $184.3 million. This total
includes preferred stock from Southern California Edison and Pacific Gas
& Electric (PG&E) with carrying values at September 30, 2001, of
$6.2 million and $12.6 million (including net unrealized losses of $4.4 million
and $5.1 million, respectively). On April 6, 2001, PG&E filed for
Chapter 11 bankruptcy protection. Due to the numerous political and economic
factors influencing the California utility market, the full extent of
PG&E's filing and subsequent potential impact on PCI's investment, if any,
is uncertain.Regulatory
Contingencies          As
of September 30, 2001, the Company credited approximately $188.6 million to
Maryland customers as their portion of divestiture gainsharing. Hearings are
expected to be held on January 10 and 11, 2002 in order to determine whether
additional bill credits should be provided to the Maryland
customers.          On
May 8, 2001, the Company filed an application with the District of Columbia
Public Service Commission to approve the Company's plan to credit $50.1
million to D.C. customers as their portion of divestiture gainsharing. On
September 19, 2001, the D.C. Commission approved the Company's plan.
The Company has commenced with its plans to credit D.C. customers bills and
expects to complete the process by the end of November 2001.* * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * *           This
Quarterly Report on Form 10-Q, including the report of PricewaterhouseCoopers
LLP on review of unaudited interim financial information dated November 9,
2001 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 New RC, Inc.'s 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 AccountantsTo the
Board of Directorsand Shareholders ofPotomac Electric Power
CompanyWe have reviewed the accompanying consolidated balance sheets of
Potomac Electric Power Company and its subsidiaries (the
Company) as of September 30, 2001 and 2000, and the related consolidated
statements of earnings and retained income for the three and nine month
periods ended September 30, 2001 and 2000 and the consolidated statements
of cash flows for the nine month periods ended September 30, 2001 and
2000. 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 information for it to be in
conformity with accounting principles generally accepted in the United
States of America.We have previously audited, in accordance with
auditing standards generally accepted in the United States of America, the
consolidated balance sheet as of December 31, 2000, and the related
consolidated statements of earnings and retained income and the consolidated
statement of cash flows for the year then ended (not presented herein); and
in our report dated January 19, 2001, 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
December 31, 2000, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.PricewaterhouseCoopers LLP Washington,
D.C.November 9, 2001

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
2000 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, including the potential
      impact of 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 technologies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | The ability to secure electric and gas supply to fulfill sales
      commitments at favorable prices, and                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Any
forward-looking statements speak only as of November 9, 2001, 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
OPERATIONSOPERATING
REVENUEUtility          
The decreases in Utility operating revenue for the three and nine month periods
ended September 30, 2001, compared to the corresponding periods in 2000, are
primarily attributable to the anticipated more level seasonal pattern of
revenue being realized under an energy buyback contract with Mirant Corp.,
compared with the revenue and earnings pattern related to production income
in the corresponding periods last year when the Company's production-related
revenue varied significantly by quarter due to seasonal rate differentials.
While still seasonal, the favorable contract with Mirant more evenly spreads
the earnings impact over all quarters. These decreases also resulted from
base rate reductions effective with the implementation of customer choice,
and from the termination on December 31, 2000 of the previously existing
contract to provide full-requirements energy to SMECO (a new
full-requirements agreement commenced between Pepco Energy Services and
SMECO on January 1, 2001). The decreases over the three and nine month
periods in 2001 were partially offset by an increase in delivered kilowatt
hour sales of 5.6% and 4.3% for the three and nine months ended September
30, 2001, respectively. Additionally, the Company estimates that milder than
normal weather in 2001 negatively impacted earnings by 3 cents per share for
the nine months ended September 30, 2001; and higher than expected customer
migration negatively affected earnings by 5 cents per share over the same
nine month period.Competitive
Operations          
Competitive operating revenue increased for the three and nine month periods
ended September 30, 2001 primarily due to the continued growth of Pepco
Energy Services'commodity and service businesses and due to the favorable
operating results of the two generating stations that were transferred from
the Utility to Pepco Energy Services in December 2000. The increase in
Competitive operating revenue for the nine months ended September 30, 2001,
was partially offset by the fact that revenue in the corresponding period last
year included a one-time pre-tax gain of $19.7 million from the sale of
PCI's 50% interest in the Cove Point liquefied natural gas storage facility
and
pipeline.          On
October 18, 2001, PCI sold several properties from its real estate portfolio for
approximately $23 million. The proceeds were comprised of approximately $15
million in cash and a note received in the amount of $8 million. The note is
secured by the properties sold and is personally guaranteed by the
purchaser. This transaction resulted in an after-tax gain of approximately
$3.8 million that will be recorded in October 2001. Additionally, on October 23,
2001, PCI sold its 45.45% interest in a B747-300 aircraft. Total proceeds
from the sale amounted to $13.9 million in cash, of which PCI received
approximately $6 million for its interests. PCI will record the sale and the
related $.4 million after-tax gain in October 2001.Gain on
Divestiture of Generation
Assets          This
amount represents the pre-tax gain that was recorded in January 2001 on the sale
of the Company's 9.72 percent interest in the Conemaugh Generating Station
(Conemaugh), located near Johnstown, Pennsylvania. The reduction of $18.4
million in the gain during the three month period ended September 30, 2001
resulted principally from certain adjustments that were recorded in
connection with the previously reported gain in 2000 on the sale of the
Company's generation assets to Mirant Corporation.OPERATING
EXPENSES          
Consolidated operating expenses increased during the three and nine months ended
September 30, 2001, compared to the corresponding periods in 2000, primarily
due to increases in Pepco Energy Services' fuel and purchased energy
expenses as a result of the continued growth in its commodity and service
businesses over the periods. These increases were partially offset by
reductions in the Utility's operation and maintenance and depreciation expenses
as a direct result of the divestiture of its generation assets in December
2000.OTHER INCOME (EXPENSES)Interest and Dividend
Income          The
increases in interest and dividend income during the three and nine month
periods ended September 30, 2001, compared to the corresponding periods last
year, primarily resulted from interest income earned during 2001 on the
proceeds received from the divestiture of the Company's generation assets in
December 2000. Interest
Expense          The
decreases in interest expense over the three and nine month periods ended
September 30, 2001, compared to the corresponding prior periods, primarily
resulted from a reduction in the level of the Company's debt outstanding
over the periods. 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          These
amounts represent 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., which was created in 1999 to provide
energy-savings performance contracting services to the Military District of
Washington.          Through
September 30, 2001, Starpower has built sufficient advanced fiber-optic network
to cumulatively reach approximately 193,000 On-network households as
compared to approximately 175,000 such households at December 31, 2000. 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 64,000 as of September 30, 2001, compared to approximately
35,000 at December 31, 2000. The Off-network customer subscriber services
include dial-up Internet and resale local and long distance telephone and
totaled approximately 195,000 as of September 30, 2001, compared to
approximately 240,000 at December 31, 2000. Total customer subscriber
services including cable television, local and long distance telephone and
Internet subscribers were approximately 259,000 as of September 30, 2001,
compared to approximately 275,000 as of December 31, 2000. The decline in total
customer subscriber services over the past year is principally due to the
loss of dial-up Internet customers due to competition from free dial-up
Internet service
providers.          For
the three and nine months ended September 30, 2001, the Loss from Equity
Investments, Principally a Telecommunication Entity, increased compared to
the correspondingperiods last year. This was due to increased expenses
incurred in 2001 in connection with the Starpower build-out. PCI anticipates
that Starpower will continue to incur losses for at least the remainder of
2001 as it further develops and expands its network and customer base.
AtSeptember 30, 2001, PCI has cumulatively invested $202.5 million in
Starpower.INCOME TAX
EXPENSE          
Income tax expense decreased for the three months ended September 30, 2001,
compared to the corresponding period in 2000, primarily as a result of the
Utility's decrease in operating income over the period. The decrease in
income tax expense during the nine months ended September 30, 2001, compared
to the corresponding period last year, was primarily the result of an
increase in income tax benefits recorded by PCI in the second quarter of 2001,
which were generated due to the timing of new investments. CAPITAL RESOURCES AND LIQUIDITYDividends
on Common
Stock          On
October 25, 2001, a quarterly dividend of 25 cents per share was declared
payable December 31, 2001, to shareholders of record of the Company's common
stock on December 10, 2001. This results in a current annual dividend rate
on common stock of $1 per share. The Company's annual dividend rate on its
common stock is determined by its Board of Directors on a quarterly basis
and takes into consideration, among other factors, current and possible
future developments which may affect the Company's income and cash
flows.Construction
Expenditures          Construction
expenditures totaled $177.1 million for the nine months ended September 30,
2001 and are projected to total $190.5 million for the year ended December 31,
2001. For the five-year period 2001-2005, construction expenditures are
projected to total $761 million. These expenditures will be funded through
funds provided from operations.Reacquisition of First Mortgage
BondsOn
October 31, 2001 the Company reacquired on the open market at 105.38% of
principal amount, plus accrued interest to the reacquisition date, $7.3
million of the 8-1/2% First Mortgage Bonds due May 15, 2027. The
reacquisition totaled approximately $8 million.Item
3.      QUANTITATIVE AND QUALITATIVE
DISCLOSURES
ABOUT                     MARKET RISK          Refer
to Item 7A. Quantitative and Qualitative Disclosures About Market Risk of
the Company's 2000 Form 10-K.PART
II   OTHER INFORMATIONItem 1.      LEGAL
PROCEEDINGS          Refer
to Item 3. Legal Proceedings of the Company's 2000 Form 10-K.Item
5.      OTHER INFORMATIONCustomer
Migration          As
discussed in Item 7. Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition of the Company's 2000 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 September 30, 2001, 51,993 of the Utility's Maryland
customers and 5,699 of its D.C. customers have chosen alternate suppliers.
These customers accounted for 610 megawatts of load in Maryland and 912
megawatts of load in D.CMerger Regulatory
Schedules          In
Delaware, the Public Service Commission held three meetings in September 2001 to
hear public comment on the merger. The Delaware Public Service Commission
is scheduled to  hold its hearings on the merger on November 28 and 29, 2001. In
Maryland, the Public Service Commission held hearings from October 15
through October 17, 2001. The New Jersey Board of Public Utilities has
scheduled hearings between November 13 and November 20, 2001. In D.C.,
hearings will be held on January 4, 2002.  The merger has
been approved in Pennsylvania and Virginia and by FERC.



|Statistical Data                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                 
|                                                                                                                                                                                                                 
|Operating Revenue                                                                                                                                                                                                
|Electric Revenue                                                                                                                                                                                                 
|Other                                                                                                                                                                                                            
|Total Utility Operating Revenue                                                                                                                                                                                  
|Competitive Operating Revenue                                                                                                                                                                                    
|Gain on Divestiture of Generating Assets                                                                                                                                                                         
|Total Operating Revenue                                                                                                                                                                                          
|Distribution and Transmission by Class of Service                                                                                                                                                                
|Residential                                                                                                                                                                                                      
|General Service                                                                                                                                                                                                  
|Large Power Service *                                                                                                                                                                                            
|Street Lighting                                                                                                                                                                                                  
|Metro                                                                                                                                                                                                            
|Network Transmission Services                                                                                                                                                                                    
|Wholesale                                                                                                                                                                                                        
|Total Revenue                                                                                                                                                                                                    
|Network Transmission Expenses                                                                                                                                                                                    
|System                                                                                                                                                                                                           
|Generation Services (SOS) by Class of Service                                                                                                                                                                    
|Residential                                                                                                                                                                                                      
|General Service                                                                                                                                                                                                  
|Large Power Service *                                                                                                                                                                                            
|Street Lighting                                                                                                                                                                                                  
|Metro                                                                                                                                                                                                            
|Wholesale                                                                                                                                                                                                        
|Subtotal                                                                                                                                                                                                         
|ALM Capacity/Energy                                                                                                                                                                                              
|System                                                                                                                                                                                                           
|Distribution and Transmission Sales    (Millions
      of KWH)                                                                                                                                                   
|Residential                                                                                                                                                                                                      
|General Service                                                                                                                                                                                                  
|Large Power Service *                                                                                                                                                                                            
|Street Lighting                                                                                                                                                                                                  
|Metro                                                                                                                                                                                                            
|Wholesale                                                                                                                                                                                                        
|System                                                                                                                                                                                                           
|Generation Services (SOS) Sales   (Millions of
      KWH)                                                                                                                                                        
|Residential                                                                                                                                                                                                      
|General Service                                                                                                                                                                                                  
|Large Power Service *                                                                                                                                                                                            
|Street Lighting                                                                                                                                                                                                  
|Metro                                                                                                                                                                                                            
|Wholesale                                                                                                                                                                                                        
|System                                                                                                                                                                                                           
|Average System Revenue   per KWH
      (Cts./KCW)                                                                                                                                                                
|Delivered                                                                                                                                                                                                        
|Generation Services (SOS)                                                                                                                                                                                        
|                                                                                                                                                                                                                 
|Equity Per Common Share:                                                                                                                                                                                         
|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).
|* Large Power Service customers are served at high voltage of 66KV or
      higher.                                                                                                                              





Item
6.      EXHIBITS AND REPORTS ON FORM
8-K

|(a) | Exhibits                                                                                                                                                                                                                                                                         |   |                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Exhibit 10                                                                                                                                                                                                                                                                       | - | 2001 General Memorandum of Understanding, dated August 14, 2001,
      between the Company and Local 1900 of the International Brotherhood of
      Electrical Workers -filed herewith.
|    | 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 July 19, 2001,
      which included the Company's Press Release dated as of July 18, 2001. 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 for the Company on August 27,
      2001, which included the Company's 2001 Mid-Year Report. 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                     RegistrantBy  A.W. WILLIAMS                A.
      W.
      Williams          Senior
      Vice President
      and             Chief
      Financial Officer
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

November 9,
2001            Date



|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 September 30, 2001, and for each of the years 2000
      through 1996, on the basis of Utility operations only, are as
      follows:
|                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                       
|Net income                                                                                                                                                                                                                                                                                                             
|Taxes based on income                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                       
|Income before taxes                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                       
|Fixed charges:                                                                                                                                                                                                                                                                                                         
|Interest charges                                                                                                                                                                                                                                                                                                       
|Interest factor in rentals                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                       
|Total fixed charges                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                       
|Income before income taxes and fixed charges                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                       
|Coverage of fixed charges                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                       
|Preferred dividend requirements                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                       
|Ratio of pre-tax income to net income                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                       
|Preferred dividend factor                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                       
|Total fixed charges and preferred dividends                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                       
|Coverage of combined fixed charges and   preferred
      dividends                                                                                                                                                                                                                                                     





|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 September 30, 2001, and for each of the years 2000
      through 1996, on a consolidated basis, are as follows.
|                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                 
|Net income                                                                                                                                                                                                                                                                                       
|Taxes based on income                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                 
|Income before taxes                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                 
|Fixed charges:                                                                                                                                                                                                                                                                                   
|Interest charges                                                                                                                                                                                                                                                                                 
|Interest factor in rentals                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                 
|Total fixed charges                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                 
|Competitive subsidiary capitalized interest                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                 
|Income before income taxes and fixed charges                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                 
|Coverage of fixed charges                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                 
|Preferred dividend requirements                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                 
|Ratio of pre-tax income to net income                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                 
|Preferred dividend factor                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                 
|Total fixed charges and preferred dividends                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                 
|Coverage of combined fixed charges and   preferred
      dividends                                                                                                                                                                                                                               



Exhibit
15Securities and Exchange Commission450 Fifth
Street, N.W.Washington, D.C.   20549Ladies and
Gentlemen:We are aware that our report dated November 9, 2001 on our
review of interim financial information of Potomac Electric Power Company
for the period ended September 30, 2001 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) filed on September 12, 1990, May 18, 1994,
June 17, 1994, June 12, 1998 and June 19, 1998, respectively,
on Form S-3 (Number 33-58810) filed on February 26, 1993 of Potomac
Electric Power Company and on Form S-4 (Number 333-57042) of New RC, Inc.
filed on March 14, 2001. Very truly
yours,PricewaterhouseCoopers LLPWashington,
D.C.November 9, 2001