<PAGE>


                          Page 1 of 23



                            FORM 10-Q



               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C.  20549





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




For Quarter Ended June 30, 1999


Commission File Number 1-3376-2





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




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



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





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

   At August 13, 1999, 22,385,000 shares of the Common Stock (no
par value) of the registrant were outstanding, all of which are
held by Allegheny Energy, Inc., the Company's parent.


<PAGE>


                              - 2 -



                   THE POTOMAC EDISON COMPANY

            Form 10-Q for Quarter Ended June 30, 1999



                              Index



                                                          Page
                                                           No.

PART I--FINANCIAL INFORMATION:

 Statement of Income - Three and six months ended
   June 30, 1999 and 1998                                   3


 Balance Sheet - June 30, 1999
   and December 31, 1998                                    4


 Statement of Cash Flows - Six months ended
   June 30, 1999 and 1998                                   5


 Notes to Financial Statements                             6-8


 Management's Discussion and Analysis of Financial
   Condition and Results of Operations                     9-21



PART II--OTHER INFORMATION:
                                                          22-23


<PAGE>


                                              - 3 -

                                   THE POTOMAC EDISON COMPANY
                                       Statement of Income
                                      (Thousands of Dollars)

<TABLE>
<CAPTION>


                                                       Three Months Ended            Six Months Ended
                                                             June 30                       June 30
                                                       1999           1998           1999           1998

ELECTRIC OPERATING REVENUES:
    <S>                                            <C>  <C>       <C>  <C>       <C> <C>        <C> <C>
    Residential                                    $    70,094    $    65,932    $   170,582    $   156,261
    Commercial                                          40,640         38,797         83,165         76,488
    Industrial                                          53,756         52,412        103,819        100,924
    Wholesale and other, including affiliates            3,893         10,365          9,656         21,349
    Bulk power transactions, net                         6,308         10,013         10,447         14,195
               Total Operating Revenues                174,691        177,519        377,669        369,217

OPERATING EXPENSES:
  Operation:
     Fuel                                               32,568         35,924         69,216         71,481
     Purchased power and exchanges, net                 28,655         29,518         61,504         65,443
     Deferred power costs, net                           5,490          5,655          8,894          5,688
     Other                                              24,595         22,521         47,279         43,699
  Maintenance                                           13,388         12,492         27,307         27,228
  Depreciation                                          19,151         18,720         38,108         37,365
  Taxes other than income taxes                         13,978         12,155         25,285         25,064
  Federal and state income taxes                         9,323         10,498         27,438         25,591
               Total Operating Expenses                147,148        147,483        305,031        301,559
               Operating Income                         27,543         30,036         72,638         67,658

OTHER INCOME AND DEDUCTIONS:
   Allowance for other than borrowed funds
      used during construction                             177             18            326            215
   Other income, net                                     1,882          2,346          3,703          4,562
               Total Other Income and Deductions         2,059          2,364          4,029          4,777

               Income Before Interest Charges           29,602         32,400         76,667         72,435

INTEREST CHARGES:
   Interest on long-term debt                           10,722         11,740         21,354         23,540
   Other interest                                          433            367          1,000            951
   Allowance for borrowed funds used during
      construction                                        (289)          (211)          (587)          (482)

               Total Interest Charges                   10,866         11,896         21,767         24,009


NET INCOME                                         $    18,736    $    20,504    $    54,900    $    48,426


</TABLE>


See accompanying notes to financial statements.


<PAGE>


                                               - 4 -

                                     THE POTOMAC EDISON COMPANY
                                           Balance Sheet
                                      (Thousands of Dollars)


<TABLE>
<CAPTION>


                                                                       June 30,     December 31,
ASSETS:                                                                  1999           1998
   Property, Plant, and Equipment:
        At original cost, including $48,670
           <S>                                                      <C>            <C>
           and $46,353 under construction                           $  2,266,770   $  2,249,716
        Accumulated depreciation                                        (953,860)      (926,840)
                                                                       1,312,910      1,322,876
   Investments:
        Allegheny Generating Company - common stock at equity             44,696         46,277
        Other                                                                446            473
                                                                          45,142         46,750
   Current Assets:
        Cash and temporary cash investments                                8,473          1,805
        Accounts receivable:
            Electric service                                              85,424         79,373
            Affiliated and other                                          37,199          7,091
            Allowance for uncollectible accounts                          (3,273)        (2,203)
        Notes receivable from affiliate                                   27,550          9,300
        Notes receivable from subsidiary                                  59,650         66,750
        Materials and supplies - at average cost:
            Operating and construction                                    29,944         29,922
            Fuel                                                          15,515         14,098
        Prepaid taxes                                                      9,991         15,727
        Other, including current portion of regulatory assets              6,329          1,092
                                                                         276,802        222,955

   Deferred Charges:
        Regulatory assets                                                 62,776         66,792
        Unamortized loss on reacquired debt                               18,491         19,012
        Other                                                             20,848         23,742
                                                                         102,115        109,546

              Total Assets                                          $  1,736,969   $  1,702,127

CAPITALIZATION AND LIABILITIES:
   Capitalization:
        Common stock                                                $    447,700   $    447,700
        Other paid-in capital                                              2,690          2,690
        Retained earnings                                                334,108        312,522
                                                                         784,498        762,912
        Preferred stock                                                   16,378         16,378
        Long-term debt and QUIDS                                         588,297        578,817
        Funds on deposit with trustees                                    (8,013)        -
                                                                       1,381,160      1,358,107
   Current Liabilities:
        Accounts payable                                                  29,929         35,572
        Accounts payable to affiliates                                    22,496         31,011
        Deferred income taxes                                             -              11,311
        Taxes accrued:
            Federal and state income                                      19,426          6,430
            Other                                                         11,490         18,922
        Interest accrued                                                   7,321          7,193
        Other                                                             13,365          8,770
                                                                         104,027        119,209
   Deferred Credits and Other Liabilities:
        Unamortized investment credit                                     18,656         19,592
        Deferred income taxes                                            181,557        170,349
        Regulatory liabilities                                            15,942         11,233
        Other                                                             35,627         23,637
                                                                         251,782        224,811

              Total Capitalization and Liabilities                  $  1,736,969   $  1,702,127

</TABLE>


See accompanying notes to financial statements.


<PAGE>


                                                    - 5 -

                                          THE POTOMAC EDISON COMPANY
                                            Statement of Cash Flows
                                             (Thousands of Dollars)

<TABLE>
<CAPTION>


                                                                             Six Months Ended
                                                                                  June 30

                                                                             1999         1998
CASH FLOWS FROM OPERATIONS:
          <S>                                                            <C> <C>      <C> <C>
          Net income                                                     $   54,900   $   48,426
          Depreciation                                                       38,108       37,365
          Deferred investment credit and income taxes, net                   (7,047)       2,045
          Deferred power costs, net                                           8,894        5,688
          Unconsolidated subsidiaries' dividends in excess of earnings        1,605       10,139
          Allowance for other than borrowed funds used
                 during construction                                           (326)        (215)
          Internal restructuring liability                                    -           (1,187)
          Changes in certain current assets and
                 liabilities:
                    Accounts receivable, net                                (35,089)      (6,887)
                    Materials and supplies                                   (1,439)      (3,073)
                    Accounts payable                                        (14,158)       5,209
                    Taxes accrued                                             5,564        2,231
                    Other deferred credits                                    7,181          218
          Other, net                                                         11,795        2,118
                                                                             69,988      102,077

CASH FLOWS FROM INVESTING:
          Construction expenditures (less allowance for other
               than borrowed funds used during construction)                (28,155)     (26,927)


CASH FLOWS FROM FINANCING:
          Issuance of long-term debt                                          9,300       33,200
          Retirement of long-term debt                                        -          (34,000)
          Notes receivable from affiliates                                  (18,250)     (47,100)
          Notes receivable from subsidiary                                    7,100        -
          Dividends on capital stock:
              Preferred stock                                                  (409)        (409)
              Common stock                                                  (32,906)     (27,534)
                                                                            (35,165)     (75,843)


NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS                             6,668         (693)
Cash at January 1                                                             1,805        2,319
Cash and temporary cash investments at June 30                           $    8,473   $    1,626


SUPPLEMENTAL CASH FLOW INFORMATION
          Cash paid during the period for:
                 Interest (net of amount capitalized)                       $20,920      $22,941
                 Income taxes                                                23,282       25,973

</TABLE>


See accompanying notes to financial statements.


<PAGE>


                              - 6 -


                   THE POTOMAC EDISON COMPANY

                  Notes to Financial Statements


1. The Potomac Edison Company (the Company) is a wholly-owned
   subsidiary of Allegheny Energy, Inc. (the Parent).  The
   Company's Notes to Financial Statements in its Annual Report
   on Form 10-K for the year ended December 31, 1998 should be
   read with the accompanying financial statements and the
   following notes.  With the exception of the December 31, 1998
   balance sheet in the aforementioned annual report on Form 10-
   K, the accompanying financial statements appearing on pages 3
   through 5 and these notes to financial statements are
   unaudited.  In the opinion of the Company, such financial
   statements together with these notes contain all adjustments
   (which consist only of normal recurring adjustments)
   necessary to present fairly the Company's financial position
   as of June 30, 1999, the results of operations for the three
   and six months ended June 30, 1999 and 1998, and cash flows
   for the six months ended June 30, 1999 and 1998.


2. Statement of Financial Accounting Standards (SFAS) No.
   130, "Reporting Comprehensive Income," established standards for
   reporting comprehensive income and its components (revenues,
   expenses, gains, and losses) in the financial statements.  The
   Company does not have any elements of other comprehensive income
   to report in accordance with SFAS No. 130.


3. For purposes of the Balance Sheet and Statement of Cash
   Flows, temporary cash investments with original maturities of
   three months or less, generally in the form of commercial paper,
   certificates of deposit, and repurchase agreements, are
   considered to be the equivalent of cash.


4. The Company owns 28% of the common stock of Allegheny
   Generating Company (AGC), and affiliates of the Company own
   the remainder.  AGC is reported by the Company in its
   financial statements using the equity method of accounting.
   AGC owns an undivided 40% interest, 840 megawatts (MW), in
   the 2,100 MW pumped-storage hydroelectric station in Bath
   County, Virginia, operated by the 60% owner, Virginia
   Electric and Power Company, a nonaffiliated utility.

   AGC recovers from the Company and its affiliates all of its
   operation and maintenance expenses, depreciation, taxes, and
   a return on its investment under a wholesale rate schedule
   approved by the FERC.  AGC's rates are set by a formula filed
   with and previously accepted by the FERC.  The only component
   which changes is the return on equity (ROE).  Pursuant to a
   settlement agreement filed April 4, 1996 with the FERC, AGC's
   ROE was set at 11% for 1996 and will continue until the time
   any affected party seeks renegotiation of the ROE.


<PAGE>


                              - 7 -


   Following is a summary of income statement information for
   AGC:

                                 Three Months Ended       Six Months Ended
                                       June 30                 June 30
                                  1999        1998        1999        1998
                                           (Thousands of Dollars)

   Electric operating revenues  $17,810     $19,126     $35,667     $37,730

   Operation and maintenance
     expense                      1,304       1,542       2,915       2,495
   Depreciation                   4,245       4,242       8,490       8,468
   Taxes other than income
     taxes                        1,129       1,177       2,261       2,337
   Federal income taxes           2,546       2,907       4,960       5,772
   Interest charges               3,285       3,298       6,688       6,811
   Other income, net                 (1)         (1)         (2)        (51)
     Net income                 $ 5,302     $ 5,961     $10,355     $11,898


   The Company's share of the equity in earnings above was $1.5
   million and $1.7 million for the three months ended June 30,
   1999 and 1998, respectively, and $2.9 million and $3.3
   million for the six months ended June 30, 1999 and 1998,
   respectively, and is included in other income, net, on the
   Company's Statement of Income.


5. As previously reported, on March 11, 1999, the United States
   Court of Appeals for the Third Circuit vacated the United
   States District Court for the Western District of
   Pennsylvania's denial of the Company's parent, Allegheny
   Energy, Inc. (Allegheny Energy) motion for preliminary
   injunction, enjoining DQE, Inc. (DQE), parent company of
   Duquesne Light Company in Pittsburgh, Pa., from taking
   actions prohibited by the Merger Agreement.  The Circuit
   Court stated that if DQE breached the Merger Agreement,
   Allegheny Energy may be entitled to specific performance of
   the Merger Agreement.  The Circuit Court also stated that
   Allegheny Energy could be irreparably harmed if DQE took
   actions that would prevent Allegheny Energy from receiving
   the specific performance remedy.  The Circuit Court remanded
   the case to the District Court for further proceedings
   consistent with its opinion.

   In the District Court, DQE has filed a motion for summary
   judgment which Allegheny Energy has opposed.  The court has
   not yet ruled.  Allegheny Energy cannot predict the outcome
   of this litigation.  However, Allegheny Energy believes that
   DQE's basis for seeking to terminate the merger is without
   merit.  Accordingly, Allegheny Energy continues to seek the
   remaining regulatory approvals from the Department of Justice
   and the Securities and Exchange Commission.  It is not likely
   either agency will act on the requests unless Allegheny
   Energy obtains judicial relief requiring DQE to move forward.

   The $5.2 million deferred incremental costs of the merger
   process recorded by the Company through March 31, 1999 were
   transferred to the Parent company in the second quarter of
   1999.  The accumulated merger costs will be written off by
   the Parent company when the merger occurs or if it is
   determined that the merger will not occur.


<PAGE>


                              - 8 -


6. SFAS No. 131, "Disclosures about Segments of an Enterprise
   and Related Information," established standards for reporting
   information about operating segments in financial statements.
   The Company's principal business segment is utility
   operations which includes the generation, purchase,
   transmission, distribution, and sale of electricity.


<PAGE>


                              - 9 -

                   THE POTOMAC EDISON COMPANY

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


 COMPARISON OF SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1999
     WITH SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1998


        The Notes to Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 should be read with the following
Management's Discussion and Analysis information.


Factors That May Affect Future Results

        This management's discussion and analysis of financial
condition and results of operations contains forecast information
items that are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995.  These include
statements with respect to deregulation activities and movements
toward competition in states served by The Potomac Edison Company
(the Company), the proposed merger of Allegheny Energy, Inc.
(Allegheny Energy) and related litigation against DQE, Inc.
(DQE), parent company of Duquesne Light Company in Pittsburgh,
Pa., Year 2000 readiness disclosure, and results of operations.
All such forward-looking information is necessarily only
estimated.  There can be no assurance that actual results will
not materially differ from expectations.  Actual results have
varied materially and unpredictably from past expectations.

        Factors that could cause actual results to differ
materially include, among other matters, electric utility
restructuring, including the ongoing state and federal
activities; potential Year 2000 operation problems; developments
in the legislative, regulatory, and competitive environments in
which the Company operates, including regulatory proceedings
affecting rates charged by the Company; environmental,
legislative, and regulatory changes; future economic conditions;
developments relating to the proposed merger of Allegheny Energy
with DQE, including expenses that may be incurred in litigation;
and other circumstances that could affect anticipated revenues
and costs such as significant volatility in the market price of
wholesale power, unscheduled maintenance or repair requirements,
weather, and compliance with laws and regulations.


Significant Events in the First Six Months of 1999

*    Merger with DQE

        See Note 5 to the financial statements for information
about the proposed merger of Allegheny Energy, Inc., the
Company's parent, with DQE, Inc. (DQE), parent company of
Duquesne Light Company in Pittsburgh, Pa., and related
litigation.


<PAGE>


                             - 10 -


*    Virginia Rate Settlement and Agreement

        On February 25, 1999, the Virginia State Corporation
Commission (Virginia SCC) approved the Company's rate reduction
request which will decrease the fuel portion of Virginia
customers' bills by approximately 7.6% from 1.278 cents per
kilowatt-hour (kWh) to 1.181 cents per kWh (a decrease in annual
fuel revenue of about $2.2 million).  The decrease is primarily
due to refunding a prior overrecovery of fuel costs, coupled with
a small decrease in projected energy costs.  The new rates were
effective with bills rendered on or after March 9, 1999.

        On May 21, 1999, the Virginia SCC approved an agreement
reached between the Company and the staff of the Virginia SCC
which reduced base rates for Virginia customers effective June 1,
1999 by about $3 million annually.  The review of rates is
required by an annual information filing in Virginia.

*    West Virginia Fuel Review

        On February 26, 1999, the Public Service Commission of
West Virginia (W.Va. PSC) entered an Order to initiate a fuel
review proceeding to establish a fuel increment in rates for the
Company to be effective July 1, 1999 through June 30, 2000.  On
June 29, 1999, the W.Va. PSC approved a joint stipulation and
agreement between the Company and the intervenors.  Under the
agreement, the parties are to negotiate further in an effort to
more closely align the Company's West Virginia rate schedules
with the West Virginia rate schedules of Monongahela Power
Company, an affiliate, and to petition to reopen this case if
they are successful.  Absent such agreement by October 15, 1999,
the rates will revert to the originally proposed rates in this
case.  This change would be effective November 1, 1999 and would
decrease the Company's fuel rates by $8.0 million. These changes,
if implemented, will have no effect on the companies' net income.

*    Maryland,  Virginia, and West Virginia Deregulation

        See Electric Energy Competition starting on page 18 for
ongoing information regarding restructuring in Maryland,
Virginia, and West Virginia.

*    Toxics Release Inventory (TRI)

        On Earth Day 1997, President Clinton announced the
expansion of Right-to-Know TRI reporting to include electric
utilities, limited to facilities that combust coal and/or oil for
the purpose of generating power for distribution in commerce.
The purpose of TRI is to provide site-specific information on
chemical releases to the air, land, and water.  On June 4, 1999,
the Allegheny Energy companies (the System) joined with other
members of the Edison Electric Institute in reporting power
station releases to the public.  Packets of information about the
System's releases were provided to media in the System's area and
posted on the Parent Company's web site.  The System filed its
first TRI report with the Environmental Protection Agency prior
to the July 1, 1999 deadline date, reporting 18 million pounds of
total releases for calendar year 1998.


<PAGE>


                             - 11 -


Review of Operations

EARNINGS SUMMARY

        Net income in the second quarter of 1999 was $18.7
million compared with $20.5 million in the corresponding 1998
period.  For the first six months of 1999, net income was $54.9
million compared with $48.4 million for the corresponding 1998
period.  The decrease in net income for the second quarter of
1999 was due primarily to increased operation and maintenance
expenses, reductions in revenues due to a provision to share
earnings above a return on equity of 11.4% per the settlement
agreement discussed on page 13, and renegotiated contracts with
some wholesale customers.

        The increase in year-to-date net income was due primarily
to colder winter weather that led to increased kilowatt-hour
(kWh) sales to retail customers and, to a lesser extent, to
reduced interest expenses.  The 1999 first quarter winter weather
was 19% cooler than the relatively warm winter of 1998, as
measured by heating degree days, but was still 7% warmer than
normal.


SALES AND REVENUES

        Percentage changes in revenues and kWh sales by major
retail customer classes were:

                                   Change from Prior Periods
                           Three Months Ended     Six Months Ended
                                 June 30               June 30
                           Revenues       kWh     Revenues     kWh

Residential                  6.3%         4.8%      9.2%       7.7%
Commercial                   4.8          5.0       8.7        8.4
Industrial                   2.6         (2.5)      2.9       (1.3)
  Total                      4.7%         1.2%      7.2%       3.7%


        The increases in residential kWh sales, which are more
weather sensitive than the other classes, were due primarily to
changes in customer usage because of weather conditions and, to a
lesser extent, growth in the number of customers.  Commercial kWh
sales are also affected by weather but to a lesser extent than
residential.  The increase in commercial kWh sales for the three
and six months ended periods reflects increased usage and growth
in the number of customers.  The decrease in industrial kWh sales
in both periods results primarily from decreased sales to primary
metal industry customers.

        The changes in revenues from retail customers resulted
from the following:

                               Change from Prior Periods
                       Three Months Ended     Six Months Ended
                             June 30               June 30
                                 (Millions of Dollars)

Fuel clauses                 $4.1                  $10.8
All other                     3.3                   13.1
  Net change in retail
    revenues                 $7.4                  $23.9


<PAGE>


                             - 12 -


        Revenues reflect not only the changes in kWh sales and
base rate changes, but also any changes in revenues from fuel and
energy cost adjustment clauses (fuel clauses) which have little
effect on net income because increases and decreases in fuel and
purchased power costs and sales of transmission services and bulk
power are passed on to customers by adjustment of customer bills
through fuel clauses.

        All other is the net effect of kWh sales changes due to
changes in customer usage (primarily weather for residential
customers), growth in the number of customers, and changes in
pricing other than changes in general tariff and fuel clause
rates.  The increase in all other retail revenues in the second
quarter was primarily due to increased kWh sales due to customer
growth, and the increase in the six months ended period was due
to increased kWh sales resulting from first quarter winter
weather that was cooler than the 1998 period and customer growth.

        Wholesale and other revenues were as follows:

                                  Three Months Ended     Six Months Ended
                                        June 30               June 30
                                   1999        1998      1999        1998
                                           (Millions of Dollars)

Wholesale customers                $4.8       $ 5.8     $10.6       $12.7
Affiliated companies                2.8         2.7       6.0         5.3
Street lighting and other            .8         1.8       2.1         3.3
Settlement agreement reduction     (4.5)                 (9.0)
  Total wholesale and other
    revenues                       $3.9       $10.3     $ 9.7       $21.3


        Wholesale customers are cooperatives and municipalities
that own their own distribution systems and buy all or part of
their bulk power needs from the Company under Federal Energy
Regulatory Commission (FERC) regulation. Competition in the
wholesale market for electricity was initiated by the National
Energy Policy Act of 1992 which permits wholesale generators,
utility-owned and otherwise, and wholesale customers to request
from owners of bulk power transmission facilities a commitment to
supply transmission services.  The decrease in wholesale revenues
in the 1999 periods was primarily due to renegotiated contracts
with some wholesale customers.

        Revenues from affiliated companies represent sales of
energy and intercompany allocations of generating capacity,
generation spinning reserves, and transmission services pursuant
to a power supply agreement among the Company and the other
regulated utility subsidiaries of Allegheny Energy.


<PAGE>


                             - 13 -


        Settlement agreement reductions in the three and six
months ended June 30, 1999 of $4.5 million and $9.0 million,
respectively, reflect a settlement agreement by the Company
settling the Maryland Office of People's Counsel's petition for a
reduction in the Company's Maryland rates.  Of that amount in the
three and six months ended June 30, 1999, $1.9 million and $3.8
million, respectively, are related to the Company creating a
provision to share earnings above a return on equity of 11.4% in
Maryland as discussed below, and in the three and six months
ended June 30, 1999, $2.6 million and $5.2 million, respectively,
are related to a deferral of 1999 revenues per the settlement
agreement.  The agreement, which includes recognition of costs to
be incurred from the AES Warrior Run cogeneration project being
developed under the Public Utility Regulatory Policies Act of
1978 (PURPA), was approved by the Maryland Public Service
Commission (Maryland PSC) on October 27, 1998.  Under the terms
of that agreement, the Company will increase its rates about 4%
($13 million) in each of the years 1999, 2000, and 2001 (a $39
million annual effect in 2001).  The increases are designed to
recover additional costs of about $131 million over the period
1999-2001 for capacity purchases from the AES Warrior Run
cogeneration project, net of alleged over-earnings of $52 million
for the same period.  The net effect of these changes over the
1999-2001 time frame results in a pre-tax income reduction of $12
million in 1999, $18 million in 2000, and $22 million in 2001.
In addition, the settlement requires that the Company share, on a
50% customer, 50% shareholder basis, earnings above a return on
equity of 11.4% in Maryland for 1999-2001.  This sharing will
occur through an annual true-up.

        Revenues from bulk power transactions include sales of
bulk power and transmission services to power marketers and other
utilities.  Revenues from bulk power transactions consist of the
following items:

                                Three Months Ended     Six Months Ended
                                      June 30               June 30
                                 1999        1998      1999        1998
                                          (Millions of Dollars)
Revenues:
  Transmission services to
    nonaffiliated companies      $4.1       $ 3.5     $ 7.0       $ 6.3
  Bulk power                      2.2         6.5       3.4         7.9
    Total bulk power trans-
      actions, net               $6.3       $10.0     $10.4       $14.2


        Revenues from bulk power transactions decreased in the
second quarter of 1999 and in the first six months of 1999.
Revenues from bulk power transactions in the second quarter and
first six months of 1998 were high due to increased sales of
energy which occurred primarily in the month of June 1998 as a
result of a heat wave which increased the demand and prices for
electricity.  The costs of purchased power and revenues from
sales to power marketers and other utilities, including
transmission services, are currently recovered from or credited
to customers under fuel and energy cost recovery procedures.  The
impact to the fuel and energy cost recovery clauses, either
positively or negatively, depends on whether the Company is a net
buyer or seller of electricity during such periods.


<PAGE>


                             - 14 -


OPERATING EXPENSES

        Fuel expenses for the three and six months ended June 30,
1999 decreased 9% and 3%, respectively, primarily due to a
decrease in average fuel prices.  Fuel expenses are primarily
subject to deferred power cost accounting procedures with the
result that changes in fuel expenses have little effect on net
income.

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

                                Three Months Ended     Six Months Ended
                                      June 30               June 30
                                 1999        1998      1999        1998
                                        (Millions of Dollars)

Nonaffiliated transactions:
  Purchased power               $ 3.1       $ 2.1     $ 6.0       $ 4.8
  Power exchanges, net           (1.3)        (.6)      (.2)         .7
Affiliated transactions:
  AGC capacity charges            5.0         6.1      10.0        12.3
  Other affiliated capacity
    charges                       9.7        10.9      19.8        22.8
  Energy and spinning
    reserve charges              12.2        11.0      25.9        24.8
      Purchased power and
        exchanges, net          $28.7       $29.5     $61.5       $65.4


        The AES Warrior Run Public Utility Regulatory Policies
Act of 1978 (PURPA) cogeneration contract in the Company's
Maryland service territory, scheduled to commence operation in
October 1999, will increase the cost of power purchases $60
million or more annually.  In 1999, utility revenues will reflect
a reduction for a settlement agreement with various parties on
the Maryland Office of People's Counsel's for a reduction in the
Company's Maryland rates.  The net effect of changes related to
the settlement results in a pre-tax income reduction of $12
million in 1999.  See Sales and Revenues starting on page 11 for
more information on the settlement agreement.

        The increase in other operation expenses for the second
quarter of $2.1 million was due primarily to costs associated
with certain PURPA regulations and Year 2000 expenses.  These
increases were offset in part by a prior period adjustment
related to FICA taxes and lower transmission and distribution
operations expenses.  The increase in total other operations
expenses in the six months ended June 30, 1999 of $3.6 million
was due primarily to costs associated with certain PURPA
regulations and Year 2000 expenses.  These increases were offset
in part by lower transmission and distribution operations
expenses.


<PAGE>


                             - 15 -


        Maintenance expenses represent costs incurred to
maintain the power stations, the transmission and distribution
(T&D) system, and general plant, and reflect routine maintenance
of equipment and rights-of-way, as well as planned major repairs
and unplanned expenditures, primarily from forced outages at the
power stations and periodic storm damage on the T&D system.
Variations in maintenance expense result primarily from unplanned
events and planned major projects, which vary in timing and
magnitude depending upon the length of time equipment has been in
service without a major overhaul and the amount of work found
necessary when the equipment is dismantled.

        Depreciation expense in the three and six months ended
June 30, 1999 increased due to increased investment.

        Taxes other than income taxes increased $1.8 million in
the second quarter of 1999 due primarily to an adjustment of a
prior period to include FICA taxes in taxes other than income
taxes.

        The decrease in federal and state income taxes in the
second quarter of 1999 was primarily due to decreased income
before taxes, and the increase for the six months ended period
was primarily due to increased income before taxes.

        The decrease in interest on long-term debt in the second
quarter and six months ended June 30, 1999 of $1.0 million and
$2.2 million, respectively, resulted primarily from reduced long-
term debt.


Financial Condition and Requirements

        The Company's discussion on Financial Condition,
Requirements, and Resources and Significant Continuing Issues in
its Annual Report on Form 10-K for the year ended December 31,
1998 should be read with the following information.

        In the normal course of business, the Company is subject
to various contingencies and uncertainties relating to its
operations and construction programs, including legal actions and
regulations and uncertainties related to environmental matters.
See Note 5 to the Financial Statements for information about
merger activities.

*    Market Risk

        The Company supplies power in the bulk power markets.
At June 30, 1999, the marketing books for such operations
consisted primarily of fixed-priced, forward-purchase and/or sale
contracts which require settlement by physical delivery of
electricity.  These transactions result in market risk, which
occurs when the market price of a particular obligation or
entitlement varies from the contract price.

*    Issuance of Notes

        In April 1999, the Company issued $9.3 million of 5.50%
30-year pollution control revenue notes to Pleasants County, West
Virginia.


<PAGE>



                             - 16 -


*    Year 2000 Readiness Disclosure

        The transition from 1999 into the Year 2000 (Y2K) has the
potential to cause serious problems to most organizations,
including the Company, related to software and various equipment
with embedded chips which may not properly recognize calendar
dates.  To minimize such problems, the Company and its affiliates
in the System have been working under a comprehensive Y2K program
to identify and remediate the problem areas in order to continue
operations without significant problems in 2000 and beyond.  An
Executive Task Force is coordinating the efforts of 24 separate
Y2K Teams, representing all business and support units in the
System.

        In May 1998, the North American Electric Reliability
Council (NERC), of which the System is a member, accepted a
request from the United States Department of Energy to coordinate
the industry's Y2K efforts.  The electric utility industry and
the System have segmented the Y2K problem into the following
components:

*    Computer hardware and software;
*    Embedded chips in various equipment; and
*    Vendors and other organizations on which the System
     relies for critical materials and services.

        The industry's and the System's efforts for each of these
three components include inventory, assessment and, where
possible, remediation of the problem areas by repair, replacement
or removal, supplemented by confirmation testing and contingency
plans.  Contingency plans include alternate methods of certain
operations to help avoid electric service or business
interruptions, and the review and update of restoration of
service plans to mitigate the severity and length of
interruptions in the unlikely event that any should occur.

        Based on this work, the Company has determined that as of
June 30, 1999 all of its critical components and systems related
to safety and the production and distribution of electricity and
nearly all of its important business systems (accounting,
billing, etc.) are Y2K ready.  The Company anticipates that the
remediation and testing work on the remaining business and non-
critical systems will be completed by September 30, 1999.  The
Company has defined Y2K Ready to mean that a determination has
been made by testing or other means that a component or system
will be able to perform its critical functions, or that
contingency plans are in place to overcome any inability to do
so.

        The Company's readiness program has been conducted in
accordance with time schedules recommended by state regulatory
commissions and by NERC.  As is the case of most electric
utilities, the System is interconnected with neighboring
utilities, which provides added strength of supply diversity and
flexibility.  But the interconnections also mean that any one
utility's Y2K readiness is related to the readiness of the group.
Integrated electric utilities are uniquely reliant on each other
to avoid, in a worst case situation, a cascading failure of the
entire electrical system.  The System is working with the Edison
Electric Institute, the Electric Power Research Institute, the
NERC, and the East Central Area Reliability Agreement group
(ECAR) to capitalize on industry-wide experiences and to
participate in industry-wide testing and contingency planning.
Since the Company and its neighboring utilities in the ECAR group
are all participants in the NERC Y2K


<PAGE>


                             - 17 -


effort (which had a target completion date of June 30 for
critical systems related to production and delivery of
electricity), the Company believes that this worst case
possibility has been reduced to an unlikely event.  The Company
has recently re-tested its existing contingency plans for
restoration of service even if this unlikely event were to occur.

        As part of the on-going NERC program, the Company
participated in an industry-wide Y2K drill on April 9, 1999 and
will participate in a more extensive industry-wide drill planned
for September 9, 1999.  While the electric utility industry is
aware of the extensive Y2K programs of the major
telecommunications companies, the industry has determined that
telecommunication facilities are so important to continued
operations that we must have contingency plans just in case some
of those facilities may not be available.  The drills are dry
runs designed to test the ability of utilities to continue to
operate with less than normal telecommunication facilities.
During the April test, the Company was able to maintain adequate
communications under a simulated failure of selected systems, and
obtained valuable information for improvement of its plans.  NERC
has reported that the industry-wide tests produced similar
results.  On December 31, 1999, the Company will have extra staff
in critical areas of the system to implement these and other
contingency plans if they are required.

        The Securities and Exchange Commission requires that each
company disclose its estimate of the "most reasonably likely
worst case scenario" of a negative Y2K event.  Since the Company
and the industry are working diligently to avoid any disruption
of electric service, the Company believes its customers will not
experience any significant long-term disruptions of electric
service.  It is the Company's opinion that the "most reasonably
likely worst case scenario" is a Y2K event or series of events at
Company facilities or at the facilities of neighboring utilities
that escaped discovery that may cause isolated disruptions of
service.  All utilities, including the Company, have experience
in the implementation of existing restoration of service plans.
As stated above, the Company's Y2K program includes a review and
update of these plans to respond quickly to any such events.

        The Company is aware of the importance of electricity to
its customers and is using its best efforts to avoid any serious
Y2K problems.  Despite the Company's best efforts, including
working with internal resources, external vendors, and industry
associations, the Company cannot guarantee that it will be able
to conduct all of its operations without Y2K interruptions.  To
the extent that any Y2K problem may be encountered, the Company
is committed to resolution as expeditiously as possible to
minimize the effect of any such event.

        Expenditures for Y2K readiness are not expected to have a
material effect on the Company's results of operations or
financial position primarily because of the significant time and
money expended over the past several years on upgrading and
replacing its large mainframe computer systems and software.
While the Y2K work has been and continues to be significant, it
primarily represents a labor-intensive effort of remediation,
component testing, multiple systems testing, documentation, and
contingency planning.  While outside contractors and equipment
vendors have been employed for some of the work, the Company has
used its own employees for most of the effort because of their
experience with the Company's systems and equipment.  The Company
currently estimates that its total incremental expenditures for
the Y2K effort


<PAGE>


                             - 18 -


since it began identification of Y2K costs will be within a range
of $4 to $5 million of which about $4 million has been incurred
through June 30, 1999.  These expenditures are financed by
internal sources and primarily result from the purchase of
external expert assistance by the Generation and Information
Services departments.  The expenditures have not required a
material reduction in the normal budgets and work efforts of
these departments.

        The descriptions herein of the Company's Y2K effort are
made pursuant to the Year 2000 Information and Readiness
Disclosure Act.  Forward-looking statements herein are made
pursuant to the Private Securities Litigation Reform Act of 1995.
There can be no assurance that actual results will not materially
differ from expectations.

*    Electric Energy Competition

        The electricity supply segment of the electric utility
industry in the United States is in the midst of becoming
competitive.  The Energy Policy Act of 1992 began the process of
deregulating the wholesale exchange of power within the electric
industry by permitting the FERC to compel electric utilities to
allow third parties to sell electricity to wholesale customers
over their transmission systems.  Since 1992, the wholesale
electricity market has become increasingly competitive as
companies began to engage in nationwide power trading.  In
addition, an increasing number of states have taken active steps
toward allowing retail customers the right to choose their
electricity supplier.  All of the states served by the utility
subsidiaries of Allegheny Energy have investigated or implemented
retail access to alternate electricity suppliers.  The Company
has been an advocate of federal legislation to create competition
in the retail electricity markets to avoid regional dislocations
and ensure level playing fields.

        In the absence of federal legislation, state-by-state
implementation has begun.  All of the states served by the
utility subsidiaries of Allegheny Energy are at various stages of
implementation or investigation of programs that allow customers
to choose their electric supplier.  Maryland and Virginia passed
legislation this year to implement retail choice.  West Virginia
continues to actively study this issue.  The Company has
franchised regulated customers in Maryland, Virginia, and West
Virginia.


Activities at the Federal Level

        The System is an advocate of federal legislation to
mandate competition in retail electricity markets nationwide to
avoid regional dislocations and ensure level playing fields.  The
System continues to seek enactment of federal legislation to
bring choice to all retail electric customers, deregulate the
generation and sale of electricity on a national level, and
create a more liquid, free market for electric power.  Fully
meeting challenges in the emerging competitive environment will
be difficult for the System unless certain outmoded and anti-
competitive laws, specifically the Public Utility Holding Company
Act of 1935 (PUHCA) and Section 210 of the Public Utility
Regulatory Policies Act of 1978 (PURPA), are repealed or
significantly revised.  The System continues to advocate the
repeal of PUHCA and PURPA, on the grounds that they are obsolete
and anti-competitive, and that PURPA results in utility customers
paying above-market prices for power. In the U.S. Congress, a
series of hearings on the competition issue in both the House and
Senate recently have been completed, and committee staffs in


<PAGE>


                             - 19 -


both chambers are writing comprehensive competition bills.
Consensus remains elusive, however, with significant hurdles
remaining in both houses of Congress.  While it is too early to
tell whether initial momentum on the issue will result in
legislation in the current Congress, the competition issue has
received more attention this year than ever before.


Virginia

        The Virginia Electric Utility Restructuring Act (the
"Restructuring Act") was passed by the Virginia General Assembly
on March 25, 1999 and was signed by the Governor of
Virginia on March 29, 1999.  The Legislative Transition Task
Force on Electric Utility Restructuring, which was established by
the Restructuring Act, is holding hearings this summer on a
number of issues concerning the implementation of retail
competition in Virginia.  Working groups also continue to meet
with State Corporation Commission staff, comments were filed and
Commission hearings have been held to discuss the proposed retail
pilot programs of other utilities in the state.  Recommended
interim rules for retail pilot programs were issued August 6,
1999, subject to final approval by the Commission.  It is
anticipated that these interim rules will provide a framework for
rules and regulations applicable to full implementation of retail
choice beginning in 2002.  The Commission is seeking comments on
issues relating to the development of and participation in
regional transmission entities required by the Restructuring Act
to facilitate access to electric transmission systems.


Maryland

        The Maryland General Assembly passed legislation to
restructure the electric utility industry on April 2, 1999, and
on April 8, 1999, the Governor of Maryland signed the legislation
that will bring competition to Maryland's electric generation
market.  The Maryland Public Service Commission (Maryland PSC) is
in the process of implementing the new law.  Final Electric
Restructuring Roundtable reports were filed with the Commission
on May 3, 1999.  Legislative style hearings have been scheduled
this summer with the commission expected to issue decisions by
the end of the year.

        As previously reported, the Company filed testimony in
Maryland's investigation into transition costs, price protection,
and unbundled rates.  The filing requested recovery of transition
costs and a surcharge to recover the cost of the AES Warrior Run
cogeneration project beyond 2001.  The staff of the Maryland PSC
advised the commission that a tentative settlement agreement was
achieved with the majority of the parties participating in the
negotiations.  The parties are in the process of finalizing the
agreement, which should be filed by August 20, 1999.


<PAGE>


                             - 20 -


West Virginia

        In December 1996, the Public Service Commission of West
Virginia (W.Va. PSC) issued an Order initiating a general
investigation regarding the restructuring of the electric utility
industry.  A Task Force was established to further investigate
restructuring issues.  In December 1997, the Task Force approved
legislative language that would have given the W.Va. PSC broad
authority to implement retail choice.  The proposed legislation
was substantially modified by the West Virginia Legislature and
passed in March 1998.  The legislation directed the W.Va. PSC to
meet with all interested parties to develop a restructuring plan
which would meet the dictates and goals of the legislation.
Interested parties formed a new Task Force that met during 1998,
but the Task Force was unable to reach a consensus on a model for
restructuring.  The W.Va. PSC issued an Order on December 23,
1998 setting hearings to begin on August 17, 1999 and August 24,
1999.  The August 17 hearing will address certification,
licensing, bonding, reliability, universal service, consumer
protection, and code of conduct.  The August 24 hearing will
address subsidies and stranded costs.  Following these hearings,
the W.Va. PSC will make a determination whether restructuring is
in the public interest.


Accounting for the Effects of Price Deregulation

        In July 1997, the Emerging Issues Task Force (EITF) of
the Financial Accounting Standards Board (FASB) released Issue
No. 97-4, "Deregulation of the Pricing of Electricity - Issues
Related to the Application of FASB Statement Nos. 71 and 101,"
which concluded that utilities should discontinue application of
Statement of Financial Accounting Standards (SFAS) No. 71 for the
generation portion of their business when a deregulation plan is
in place and its terms are known.  Because Maryland and Virginia
have passed legislation for a deregulation plan, the Company has
determined that it will be required to discontinue use of SFAS
No. 71 for the generation portion of its business (the Maryland
and Virginia portion only) on an uncertain future date.  One of
the conclusions of the EITF is that after discontinuing SFAS No.
71, utilities should continue to carry on their books the assets
and liabilities recorded under SFAS No. 71 if the regulatory cash
flows to settle them will be derived from the continuing
regulated transmission and distribution business.  Additionally,
continuing costs and obligations of the deregulated generation
business which are similarly covered by the cash flows from the
continuing regulated business will meet the criteria as
regulatory assets and liabilities.  The Maryland and Virginia
legislations establish definitive processes for transition to
deregulation and market-based pricing for electric generation.
Until relevant regulatory proceedings are complete and final
orders are received, the Company is unable to predict the effect
of discontinuing SFAS No. 71, but it may be required to write off
significant unrecoverable regulatory assets, impaired assets, and
uneconomic commitments.

        The status of electric energy competition in
Pennsylvania and Ohio in which affiliates of the Company serve
are as follows.


<PAGE>


                             - 21 -


Ohio

        The Ohio General Assembly passed legislation on June 22,
1999 to restructure the electric utility industry.  Governor Taft
signed the bill soon thereafter, and all of the state's customers
will be able to choose their electricity supplier starting
January 1, 2001, beginning with a five-year transition to market
rates.  Total electric rates will be frozen over that period, and
residential customers are guaranteed a 5% cut in the generation
portion of their rate.  The determination of stranded cost
recovery will be handled by The Public Utilities Commission of
Ohio.  The bill stipulates that no entity shall own or control
transmission facilities after the start of competitive retail
electric service unless that entity is a member of and transfers
control of those facilities to one or more qualifying independent
transmission entities.  The legislation provides for consumer
education, universal service, consolidation of Ohio's low income
customer assistance programs as well as incentives for
development of renewable resources and disclosure of the
environmental characteristics of power supplies.


Pennsylvania

        As previously disclosed, beginning in January 1999, two-
thirds of the customers of the Company's Pennsylvania affiliate,
West Penn Power Company, were permitted to choose an alternate
electricity supplier.  Remaining customers can do so in January
2000.


<PAGE>


                             - 22 -


                   THE POTOMAC EDISON COMPANY

            Part II - Other Information to Form 10-Q
                for Quarter Ended June 30, 1999



ITEM 1.  LEGAL PROCEEDINGS

         The MidAtlantic case, previously reported as an ongoing
litigation matter, has been settled and an Order was entered on
July 9, 1999 dismissing the case with prejudice.

         As of August 9, 1999, Monongahela Power Company, an
affiliate of the Company, has been named as a defendant, along
with multiple other defendants in a total of approximately 8,000
asbestos cases.  The Company and West Penn Power Company, also an
affiliate of the Company, were named as defendants along with
multiple other defendants in approximately one-half of those
cases. As of June 30, 1999, a total of 721 cases have been
settled and/or dismissed against the Company, Monongahela Power
Company, and West Penn Power Company for reasonable settlement
amounts.  While the Company, Monongahela Power Company, and West
Penn Power Company believe that all of the cases are without
merit, they cannot predict the outcome nor are they able to
determine whether additional cases will be filed.

         As previously reported, on March 11, 1999, the United
States Court of Appeals for the Third Circuit vacated the United
States District Court for the Western District of Pennsylvania's
denial of the Company's parent, Allegheny Energy, Inc. (Allegheny
Energy) motion for preliminary injunction, enjoining DQE, Inc.
(DQE), parent company of Duquesne Light Company in Pittsburgh,
Pa., from taking actions prohibited by the Merger Agreement.  The
Circuit Court stated that if DQE breached the Merger Agreement,
Allegheny Energy may be entitled to specific performance of the
Merger Agreement.  The Circuit Court also stated that Allegheny
Energy could be irreparably harmed if DQE took actions that would
prevent Allegheny Energy from receiving the specific performance
remedy.  The Circuit Court remanded the case to the District
Court for further proceedings consistent with its opinion.

         In the District Court, DQE has filed a motion for summary
judgment which Allegheny Energy has opposed.  The court has not
yet ruled.  Allegheny Energy cannot predict the outcome of this
litigation.  However, Allegheny Energy believes that DQE's basis
for seeking to terminate the merger is without merit.
Accordingly, Allegheny Energy continues to seek the remaining
regulatory approvals from the Department of Justice and the
Securities and Exchange Commission.  It is not likely either
agency will act on the requests unless the Allegheny Energy
obtains judicial relief requiring DQE to move forward.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits:
         (27)  Financial Data Schedule

    (b)  No reports on Form 8-K were filed on behalf of
         the Company for the quarter ended June 30, 1999.


<PAGE>


                             - 23 -



                           Signature


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


                                        THE POTOMAC EDISON COMPANY

                                        /s/   T. J. KLOC
                                        T. J. Kloc, Controller
                                       (Chief Accounting Officer)




August 16, 1999