|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 of
 incorporation or organization)                                                                                                                                                                    
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|1900 Pennsylvania Avenue, N.W., Washington, D.C.(Address of principal executive office)                                                                                                                                                                             
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|202-872-2000
(Registrant's telephone number, including area code)                                                                                                                                                                                                   
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|Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the past 90 days.
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|Indicate the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.                                                                                                                                       
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|Class                                                                                                                                                                                                                                                               
|Common Stock, $1 par value                                                                                                                                                                                                                                          

TABLE OF CONTENTS



|PART I - Financial Information                                                                                               | Page
|---------------------------------------------------------------------------------------------------------------------------- | ----
|Item 1. - Consolidated Financial Statements                                                                                  |     
|Consolidated Statements of Earnings and Retained Income                                                                      | 3   
|Consolidated Balance Sheets                                                                                                  | 4   
|Consolidated Statements of Cash Flows                                                                                        | 5   
|Notes to Consolidated Financial Statements                                                                                   | 6   
|(1)  Organization and Segment Information                                                                                    | 6   
|(2)  Summary of Significant Accounting Policies                                                                              | 11  
|(3)  Treasury Stock Transactions                                                                                             | 13  
|(4)  Commitments and Contingencies                                                                                           | 14  
|Report of Independent Accountants on Review of Interim Financial Information                                                 | 16  
|Item 2. - Management's Discussion and Analysis of Consolidated Results of
                Operations and Financial Condition | 17  
|Safe Harbor Statements                                                                                                       | 17  
|Consolidated Results of Operations                                                                                           | 18  
|Capital Resources and Liquidity                                                                                              | 21  
|Item 3. - Quantitative and Qualitative Disclosures About Market Risk                                                         | 21  
|PART II - Other Information                                                                                                  |     
|Item 1. - Legal Proceedings                                                                                                  | 22  
|Item 4. - Submission of Matters to a Vote of Security Holders                                                                | 22  
|Item 5 - Other Information                                                                                                   | 24  
|Item 6. - Exhibits and Reports on Form 8-K                                                                                   | 25  
|Signatures                                                                                                                   | 26  
|Computation of Ratios - Utility Operations Only                                                                              | 27  
|Computation of Ratios - Consolidated Basis                                                                                   | 28  
|Independent Accountants Awareness Letter                                                                                     | 29  





|Part I     FINANCIAL INFORMATION                                                                                    |  |                             |  |                           |  |         |  |         
|------------------------------------------------------------------------------------------------------------------- |  | --------------------------- |  | ------------------------- |  | ------- |  | --------
|Item 1.    CONSOLIDATED FINANCIAL STATEMENTS                                                                        |  |                            
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|POTOMAC ELECTRIC POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED INCOME
(Unaudited)
|                                                                                                                    |  | Three Months Ended
June 30, |  | Six Months Ended
June 30,
|                                                                                                                    |  |                            
|                                                                                                                    |  | 2001                        |  | 2000                      |  | 2001    |  | 2000    
|(Millions, except per share data)                                                                                  
|Operating Revenue                                                                                                   |  |                             |  |                           |  |         |  |         
|Utility                                                                                                             |  | $468.0                      |  | $572.3                    |  | $864.7  |  | $1,012.4
|Competitive                                                                                                         |  | 154.5                       |  | 74.2                      |  | 318.6   |  | 159.2   
|Gain on divestiture of generation assets                                                                            |  | -                           |  | -                         |  | 50.2    |  | -       
|Total Operating Revenue                                                                                             |  | 622.5                       |  | 646.5                     |  | 1,233.5 |  | 1,171.6 
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Operating Expenses                                                                                                  |  |                             |  |                           |  |         |  |         
|Fuel and purchased energy                                                                                           |  | 340.4                       |  | 275.1                     |  | 632.2   |  | 523.8   
|Other operation and maintenance                                                                                     |  | 94.9                        |  | 103.7                     |  | 186.2   |  | 199.1   
|Depreciation and amortization                                                                                       |  | 42.0                        |  | 67.7                      |  | 83.9    |  | 134.9   
|Other taxes                                                                                                         |  | 45.7                        |  | 53.3                      |  | 90.8    |  | 99.1    
|Total Operating Expenses                                                                                            |  | 523.0                       |  | 499.8                     |  | 993.1   |  | 956.9   
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Operating Income                                                                                                    |  | 99.5                        |  | 146.7                     |  | 240.4   |  | 214.7   
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Other Income (Expenses)                                                                                             |  |                             |  |                           |  |         |  |         
|Interest and dividend income                                                                                        |  | 15.7                        |  | 4.7                       |  | 46.4    |  | 8.5     
|Interest expense                                                                                                    |  | (41.4)                      |  | (52.1)                    |  | (87.5)  |  | (103.7) 
|Loss from Equity Investments, Principally
      a Telecommunication Entity                                          |  | (4.2)                       |  | (4.1)                     |  | (10.5)  |  | (8.0)   
|Other income                                                                                                        |  | 1.5                         |  | 1.9                       |  | 4.1     |  | 2.2     
|Total Other Expenses                                                                                                |  | (28.4)                      |  | (49.6)                    |  | (47.5)  |  | (101.0) 
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Distributions on Preferred Securities of Subsidiary Trust                                                           |  | 2.3                         |  | 2.3                       |  | 4.6     |  | 4.6     
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Income Tax Expense                                                                                                  |  | 19.3                        |  | 36.8                      |  | 73.9    |  | 41.4    
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Net Income                                                                                                          |  | 49.5                        |  | 58.0                      |  | 114.4   |  | 67.7    
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Dividends on Preferred Stock                                                                                        |  | 1.3                         |  | 1.4                       |  | 2.5     |  | 2.8     
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Earnings Available for Common Stock                                                                                 |  | 48.2                        |  | 56.6                      |  | 111.9   |  | 64.9    
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Retained Income at Beginning of Period                                                                              |  | 946.4                       |  | 733.7                     |  | 929.7   |  | 779.3   
|Dividends on Common Stock                                                                                           |  | (26.9)                      |  | (49.1)                    |  | (72.7)  |  | (98.3)  
|Other Comprehensive Income, Net of Tax                                                                              |  | (2.4)                       |  | 2.1                       |  | (3.6)   |  | (2.6)   
|Retained Income at End of Period                                                                                    |  | $965.3                      |  | $743.3                    |  | $965.3  |  | $743.3  
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|Basic Average Common Shares Outstanding                                                                             |  | 108.3                       |  | 118.4                     |  | 109.4   |  | 118.5   
|Basic Earnings Per Share of Common Stock                                                                            |  | $0.45                       |  | $0.48                     |  | $1.02   |  | $0.55   
|Diluted Average Common Shares Outstanding                                                                           |  | 108.3                       |  | 121.8                     |  | 110.0   |  | 121.8   
|Diluted Earnings Per Share of Common Stock                                                                          |  | $0.45                       |  | $0.47                     |  | $1.02   |  | $0.55   
|Cash Dividends Per Share of Common Stock                                                                            |  | $0.25                       |  | $0.415                    |  | $0.665  |  | $0.83   
|                                                                                                                    |  |                             |  |                           |  |         |  |         
|The accompanying Notes are an integral part of these Consolidated Financial Statements.                            





|POTOMAC ELECTRIC POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited at June 30, 2001)                                  
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|ASSETS                                                                                                                                    
|CURRENT ASSETS                                                                                                                            
|Cash and cash equivalents                                                                                                                 
|Marketable securities                                                                                                                     
|Accounts receivable, less allowance for uncollectible 
       accounts of $10.7 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 $112.1 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                                                                                              
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|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
      (10,555,707 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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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|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 other investing activities                                                                   
|Net Cash From (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                                                          
|Other financing activities                                                                       
|Net Cash (Used By) From 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 
    $3.8 and $1.8) 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).
          Additionally, 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, 
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 will be accounted for as a purchase.  The acquisition has received 
approval from both Companies' shareholders and pending the receipt of various federal and state 
regulatory approvals, the transaction is expected to close in early 2002.  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.  Both companies will become subsidiaries of a new holding 
company to be named at a later date.  At June 30, 2001, the Company has deferred 
approximately $6.8 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 six months ended June 30, 2001 
and 2000, respectively.

|                                                                                          | Competitive Segment                
|----------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                          | Utility                            
|Three Months Ended:                                                                       | (Unaudited, In Millions of Dollars)
|June 30, 2001                                                                             |                                    
|Operating Revenue                                                                         | $ 468.0                            
|Operating Expenses                                                                        |                                    
|Fuel and Purchased Energy                                                                 | 235.8                              
|Other Operation and
       Maintenance                                                    | 53.6                               
|Depreciation and Amortization                                                             | 34.7                               
|Other Taxes                                                                               | 45.7                               
|Total Operating Expenses                                                                  | 369.8                              
|Operating Income                                                                          | 98.2                               
|Other (Expenses) Income                                                                   |                                    
|Interest and Dividend Income                                                              | 11.3                               
|Interest Expense                                                                          | (30.0)                             
|(Loss) Income from Equity
      Investments, Principally a
      Telecommunication Entity | -                                  
|Other Income                                                                              | 1.5                                
|Total Other (Expenses) Income                                                             | (17.2)                             
|Distributions on Preferred
   Securities of Subsidiary Trust                              | 2.3                                
|Income Tax Expense (Benefit)                                                              | 31.9                               
|Net Income                                                                                | $ 46.8                             
|                                                                                          |                                    
|(A)Includes dividend income from PCI's ongoing preferred stock investment portfolio.     



|                                                                                           | Competitive Segment                
|------------------------------------------------------------------------------------------ | -----------------------------------
|                                                                                           | Utility                            
|Three Months Ended:                                                                        | (Unaudited, In Millions of Dollars)
|June 30, 2000                                                                              |                                    
|Operating Revenue                                                                          | $572.3                             
|Operating Expenses                                                                         |                                    
|Fuel and Purchased Energy                                                                  | 238.9                              
|Other Operation and
       Maintenance                                                     | 78.1                               
|Depreciation and Amortization                                                              | 62.0                               
|Other Taxes                                                                                | 53.3                               
|Total Operating Expenses                                                                   | 432.3                              
|Operating Income (Loss)                                                                    | 140.0                              
|Other (Expenses) Income                                                                    |                                    
|Interest and Dividend Income                                                               | .4                                 
|Interest Expense                                                                           | (38.2)                             
|(Loss) Income from Equity
      Investments, Principally a 
      Telecommunication Entity | -                                  
|Other Income (Expenses)                                                                    | 2.2                                
|Total Other (Expenses) Income                                                              | (35.6)                             
|Distributions on Preferred 
    Securities of Subsidiary Trust                             | 2.3                                
|Income Tax Expense (Benefit)                                                               | 40.9                               
|Net Income (Loss)                                                                          | $  61.2                            
|                                                                                           |                                    
|(A)Includes dividend income from PCI's ongoing preferred stock investment portfolio.      



|                                                                                                                                                                                                                                                                                    | Competitive Segment                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                                                                                                                                                                                                                    | Utility                            
|Six Months Ended:                                                                                                                                                                                                                                                                   | (Unaudited, In Millions of Dollars)
|June 30, 2001                                                                                                                                                                                                                                                                       |                                    
|Operating Revenue                                                                                                                                                                                                                                                                   | $ 914.9(A)                         
|Operating Expenses                                                                                                                                                                                                                                                                  |                                    
|Fuel and Purchased Energy                                                                                                                                                                                                                                                           | 424.7                              
|Other Operation and
        Maintenance                                                                                                                                                                                                                                             | 104.4                              
|Depreciation and Amortization                                                                                                                                                                                                                                                       | 69.0                               
|Other Taxes                                                                                                                                                                                                                                                                         | 90.8                               
|Total Operating Expenses                                                                                                                                                                                                                                                            | 688.9                              
|Operating Income                                                                                                                                                                                                                                                                    | 226.0                              
|Other (Expenses) Income                                                                                                                                                                                                                                                             |                                    
|Interest and Dividend Income                                                                                                                                                                                                                                                        | 37.5                               
|Interest Expense                                                                                                                                                                                                                                                                    | (64.7)                             
|(Loss) Income from Equity
      Investments, Principally a
      Telecommunication Entity                                                                                                                                                                                           | -                                  
|Other Income                                                                                                                                                                                                                                                                        | 3.9                                
|Total Other (Expenses) Income                                                                                                                                                                                                                                                       | (23.3)                             
|Distributions on Preferred
   Securities of Subsidiary Trust                                                                                                                                                                                                                        | 4.6                                
|Income Tax Expense (Benefit)                                                                                                                                                                                                                                                        | 87.5                               
|Net Income (Loss)                                                                                                                                                                                                                                                                   | $110.6(C)                          
|                                                                                                                                                                                                                                                                                    |                                    
|(A)Includes a pre-tax gain of $50.2 million from the sale of the Conemaugh Generating Station.(B)Includes dividend income from PCI's ongoing preferred stock investment portfolio.(C)Includes an after-tax gain of $22.4 million from the sale of the Conemaugh Generating Station.



|                                                                                                                                                                                                                                        | Competitive Segment                
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                                                                                                                                                                        | Utility                            
|Six Months Ended:                                                                                                                                                                                                                       | (Unaudited, In Millions of Dollars)
|June 30, 2000                                                                                                                                                                                                                           |                                    
|Operating Revenue                                                                                                                                                                                                                       | $1,012.4                           
|Operating Expenses                                                                                                                                                                                                                      |                                    
|Fuel and Purchased Energy                                                                                                                                                                                                               | 450.9                              
|Other Operation and
        Maintenance                                                                                                                                                                                                 | 155.5                              
|Depreciation and Amortization                                                                                                                                                                                                           | 123.7                              
|Other Taxes                                                                                                                                                                                                                             | 99.1                               
|Total Operating Expenses                                                                                                                                                                                                                | 829.2                              
|Operating Income (Loss)                                                                                                                                                                                                                 | 183.2                              
|Other (Expenses) Income                                                                                                                                                                                                                 |                                    
|Interest and Dividend Income                                                                                                                                                                                                            | 1.0                                
|Interest Expense                                                                                                                                                                                                                        | (74.9)                             
|(Loss) Income from Equity
      Investments, Principally a
      Telecommunication Entity                                                                                                                                               | -                                  
|Other Income                                                                                                                                                                                                                            | 2.6                                
|Total Other (Expenses) Income                                                                                                                                                                                                           | (71.3)                             
|Distributions on Preferred     Securities of Subsidiary Trust                                                                                                                                                                           | 4.6                                
|Income Tax Expense (Benefit)                                                                                                                                                                                                            | 42.8                               
|Net Income (Loss)                                                                                                                                                                                                                       | $    64.5                          
|                                                                                                                                                                                                                                        |                                    
|(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.



1. Summary of Significant Accounting PoliciesBasis of Presentation
          The information furnished in the accompanying consolidated financial statements
reflects all adjustments (which consist only of normal recurring accruals) which are, in the 
opinion of management, necessary for a fair presentation of the Company's results of 
operations for the interim periods presented.  The accompanying consolidated financial 
statements and notes thereto should be read in conjunction with the Company's 2000 Form 
10-K. Certain prior period amounts have been reclassified in order to conform to the
 current period presentation.Derivative Instruments and Hedging Activities
          On January 1, 2001, the Company adopted the provisions of Statement of Financial 
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging 
Activities" (SFAS 133).  Although the Utility is not directly impacted by SFAS 133, the 
competitive subsidiaries have entered into several agreements that are subject to the 
provisions of SFAS 133.  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;
and Pepco Energy Services has entered into two fuel oil price swap agreements for the 
purpose of hedging the variability of fuel oil costs for electric power generation.  Pepco 
Energy Services hedges 50% to 100% of its oil needs which are determined based on 
forward sales, forward price expectations and the condition of the electric power 
generation plants.  In accordance with the terms of the swap agreements, both PCI and 
Pepco Energy Services receive or pay the net difference between variable interest 
payments/market prices and the fixed rates/prices due from its swap counterparties, thereby 
fixing its interest expense and fuel cost, respectively.  In June 2001, Pepco Energy Services 
sold electric call options which give the buyer the right but not the obligation 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 2001.  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.
          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.  As cash 
flow hedges, the effective portion of the change in the fair value of the interest rate and oil 
price swaps and the electric call options are reported as a component of Accumulated 
Other Comprehensive Income (AOCI).  As a yield adjustment is realized, the related 
amounts reflected in AOCI are subsequently reclassified into interest expense, fuel and 
purchased energy, or revenues.
          The Company's management assesses interest rate, fuel oil 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 purposes of recognizing the fair value of interest rate swaps designated as cash flow 
hedges.A similar adjustment was not required for the oil price swaps as they did not exist 
at that date.  AOCI is adjusted monthly for changes in the fair value of the interest rate and 
fuel oil swaps.  During the three and six months ended June 30, 2001, PCI recorded $48 
thousand in losses and $5 thousand in income, respectively, as a result of the change in the 
fair value of the interest rate swap agreements.  As of June 30, 2001, PCI recorded $425 
thousand as an interest rate swap liability classified in other liabilities and Pepco Energy 
Services recorded $240 thousand as purchase commitments included in accounts payable 
and other liabilities, respectively.
          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' fuel oil swaps and electric call options expire 
in August 2001, which coincides with the planned fuel requirements for electric power 
generation.
          Through the twelve months ended June 30, 2002, approximately $46 thousand of 
losses in AOCI related to the oil price and interest rate swaps and the electric call options 
are expected to be reclassified into income as a yield or fuel cost 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 June 30, | For the Six Months Ended June 30,
|------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------
|                                                                                           | 2001                                | 2000                             
|                                                                                           | (Millions of Dollars)              
|Net Income                                                                                 | $ 49.5                              | $ 58.0                           
|Other Comprehensive Income:                                                                |                                     |                                  
|Unrealized gains (losses) on cash flow hedges:                                             |                                     |                                  
|Net unrealized gains (losses) on cash flow        hedges                                   | .5                                  | -                                
|Unrealized (losses) gains on marketable     securities:                                    |                                     |                                  
|Unrealized holding (losses) gains arising        during period                             | (4.2)                               | 2.8                              
|Less: reclassification adjustment for (losses)              gains included in net earnings | -                                   | (.3)                             
|Net unrealized (losses) gains on marketable        securities                              | (4.2)                               | 3.1                              
|Other comprehensive (losses) income, before tax                                            | (3.7)                               | 3.1                              
|Income tax (benefit) expense                                                               | (1.3)                               | 1.0                              
|Other comprehensive (losses) income, net of        tax                                     | (2.4)                               | 2.1                              
|Comprehensive income                                                                       | $ 47.1                              | $ 60.1                           

(3)     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 six-month period ended June 30, 
2001, the Company has acquired 2,762,800 shares in connection with this repurchase plan at a 
cost of approximately $61.7 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.
(4)     Commitments and ContingenciesInvestments
          As of June 30, 2001, the carrying value of PCI's marketable securities and investment 
grade commercial paper, which consisted primarily of preferred stocks with mandatory 
redemption features, was $209.5 million. This total included preferred stock from Southern 
California Edison and Pacific Gas & Electric (PG&E) with carrying values at June 30, 2001, of 
$5.9 million and $6.9 million (including net unrealized losses of $4.7 million and $10.8 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
          In June 2001, the Maryland Public Service Commission approved the Company's plan to 
distribute $188.6 million to Maryland customers as their portion of divestiture gainsharing.  The 
Company distributed approximately $112 million to Maryland customers in June 2001 and the 
remainder was distributed in July 2001.  Hearings will be held to determine whether additional 
bill credits should be provided to Maryland customers.  No date has been set for these hearings.
          On May 8, 2001, the Company filed an application with the District of Columbia Public 
Service Commission to approve the Company's plan to distribute $50.1 million to D.C. 
customers as their portion of divestiture gainsharing.  As of August 10, 2001, the D.C. 
Commission has taken no action on the Company's application.Reconstruction Project
          The Company has developed a plan to perform major reconstruction work along one of 
Washington, D. C.'s main business corridors.  This plan follows the recent completion of an 11-
month engineering assessment of the area which reviewed the Company's system designs, 
construction standards, and maintenance practices along the corridor.  The Company estimates 
that these upgrades, which will be conducted in stages and timed to minimize disruption, could 
take from two to four years and $30 million in capital expenditures to complete.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 
          This Quarterly Report on Form 10-Q, including the report of PricewaterhouseCoopers LLP 
on review of unaudited interim financial information dated August 10, 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 Accountants
To the Board of Directors
and Shareholders of
Potomac Electric Power Company
We have reviewed the accompanying consolidated balance sheets of Potomac Electric Power 
Company and its consolidated subsidiaries (the Company) as of June 30, 2001 and 2000, and the 
related consolidated statements of earnings and retained income for the three and six month 
periods then ended and the consolidated statements of cash flows for the six month periods then 
ended.  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.
August 10, 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | 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 fulfil sales commitments at favorable prices, and                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | The cost of fuel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Any forward-looking statements speak only as of August10, 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 OPERATIONS
OPERATING REVENUEUtility          	The decreases in Utility operating revenue during the three and six month periods ended 
June 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.  The decreases in revenue during the three and six month 2001 periods also resulted 
from base rate reductions of 1.5 percent for District of Columbia residential and non-residential 
customers, and 3 percent residential and $3 million non-residential base rate reductions for 
Maryland customers.  Another factor that caused the decrease in Utility revenue for the three-
month period in 2001 was 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).Competitive Operations          Competitive operating revenue is derived from the operations of PCI and Pepco Energy 
Services.  PCI classifies its revenue as "financial investments" and "utility industry services" and 
Pepco Energy Services classifies its revenue as "energy services."
          	Competitive operating revenue increased for the three and six month periods ended 
June 30, 2001 principally due to the growth in Pepco Energy Services' gas and electric 
businesses.  Revenues also increased as a result of sales of electricity and capacity from the two 
generating stations that were transferred from Pepco to Pepco Energy Services in December 
2000.  The increase in operating revenue for both periods was partially offset by a reduction in 
PCI's financial investment revenue which resulted from the timing of its investment transactions.  
Additionally, the increase in revenue for the six months ended June 30, 2001, compared to the 
prior period, was partially offset by the fact that revenue in the 2000 period 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.Gain on Divestiture of Generation Assets
          This amount represents the pre-tax gain that was recorded as a result of the January 2001 
sale of the Company's 9.72 percent interest in the Conemaugh Generating Station (Conemaugh), 
located near Johnstown, Pennsylvania.  Conemaugh consists of two baseload units totaling 
approximately 1,700 megawatts of capacity. 
OPERATING EXPENSES          	Consolidated operating expenses increased during the three and six months ended 
June 30, 2001, compared to the corresponding periods in 2000, primarily due to an increase in 
Pepco Energy Services' fuel and purchased energy expense as a result of the growth in its gas 
and electric businesses over the periods.  This increase was partially offset by a reduction in 
Utility's operation and maintenance and depreciation expenses as a result of the divestiture of its 
generation assets in December 2000.

OTHER INCOME (EXPENSES)Interest and Dividend Income          The increase in interest and dividend income during the three and six month periods ended 
June 30, 2001, compared to the corresponding prior periods, primarily resulted from an increase 
in interest income earned on the proceeds received from the divestiture of the Company's 
generation assets in December 2000. Interest Expense
          The decrease in interest expense over the three and six month periods ended June 30, 
2001, compared to the corresponding prior periods results from a reduction in the level of the 
Company's debt over the periods as a portion of the proceeds from its divestiture in December 
2000 was used to retire debt.(Loss) Income 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 from 
Viron/Pepco Services, Inc., which was created in 1999 to provide energy-savings performance 
contracting services to the Military District of Washington.
          Through June 30, 2001, Starpower has built sufficient advanced fiber-optic network to 
cumulatively reach approximately 190,000 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 53,000 as of June 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 209,000 as of June 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 262,000 as of June 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 quarter ended June 30, 2001, the Loss from Equity Investments, Principally a 
Telecommunication Entity, remained constant with the prior year's quarter.  The loss increased 
over the six-month period ended June 30, 2001, compared to the prior period, due to increased 
expenses incurred in 2001 in connection with the Starpower build-out.  PCI anticipates that 
Starpower will continue to incur losses for the remainder of 2001 as it further develops and 
expands its network and customer base.  As of June 30, 2001, PCI has cumulatively invested 
$189 million in Starpower.
INCOME TAX EXPENSE
           Income tax expense decreased for the three months ended June 30, 2001, compared to the 
corresponding period in 2000, primarily due to an increase in tax benefits recorded by PCI in the 
2001 quarter related to the timing of new investments.  Income tax expense increased for the six 
month period ended June 30, 2001, compared to the corresponding period in 2000, primarily as a 
result of taxes incurred in connection with the divestiture of Conemaugh in January 2001, and 
taxes incurred on the interest income earned on the proceeds of the divestiture of the Company's 
generation assets in December 2000.CAPITAL RESOURCES AND LIQUIDITYDividends on Common Stock
          On July 26, 2001, a quarterly dividend of 25 cents per share was declared payable 
September 28, 2001, to shareholders of record of the Company's common stock on 
September 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, excluding the Allowance for Funds Used During Construction 
and Capital Cost Recovery Factor, totaled $108 million for the six months ended June 30, 2001 
and are projected to total $190.5 million for the year 2001.  For the five-year period 2001-2005, 
construction expenditures are projected to total $761 million.Mortgage Bond Repurchases
          On June 1, 2001, the Company redeemed at 103.61% of principal amount, plus accrued 
interest to the redemption date, the entire $100 million outstanding principal amount of its 9% 
First Mortgage Bonds.  These bonds were issued in 1991 and due June 1, 2021.  The repurchase 
totaled approximately $108.1 million.
          On June 26, 2001, the Company redeemed its portion of the $62.3 million development 
loan due June 1, 2027.  The redemption, which included accrued interest, totaled approximately $8.1 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 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a)  Joint Annual Meeting of Common Shareholders and Special Meeting of Preferred 
      Shareholders held on July 18, 2001.  
(b)  (1)     Directors who were elected at the annual meeting:

| | For Term Expiring in 2004: |                                 |                       
| | -------------------------- | ------------------------------- | ----------------------
| | John M. Derrick, Jr.       | Votes cast for:
Votes withheld: | 94,831,024
  3,081,693
| | Peter F. O'Malley          | Votes cast for:
Votes withheld: | 94,796,703
  3,116,014
| | Dennis R. Wraase           | Votes cast for:
Votes withheld: | 94,848,444
  3,064,273

| | For Term Expiring in 2002: |                                 |                       
| | -------------------------- | ------------------------------- | ----------------------
| | Pauline A. Schneider       | Votes cast for:
Votes withheld: | 94,385,320
  3,527,397
| | For Term Expiring in 2003: |                                 |                       
| | Lawrence C. Nussdorf       | Votes cast for:
Votes withheld: | 94,604,285
  3,308,432

(2)     Directors whose terms of office continued after the annual meeting:

| | Edmund B. Cronin, Jr. | Floretta D. McKenzie
| | --------------------- | --------------------
| | Terence C. Golden     | Edward F. Mitchell  
| | Judith A. McHale      | A. Thomas Young     

1. Approval of Agreement and Plan of Merger:

The proposal passed.  The class of common stock vote was as follows:  76,684,876 votes cast in 
favor of the proposal, 6,716,566 votes cast against the proposal, 1,376,557 votes abstaining and 
13,134,718 broker nonvotes.  The class of common stock and preferred stock vote was as 
follows:  77,414,755 votes cast in favor of the proposal,  6,876,381 votes cast against the 
proposal, 1,382,945 votes abstaining and 13,133,101 broker nonvotes.
(d)  Approval of Long-Term Incentive Plan of New RC, Inc.:
The proposal passed.  There were 68,528,318 votes cast in favor of the proposal, 10,383,715 
votes cast against the proposal, 5,867,583 votes abstaining and 13,133,101 broker nonvotes.
(e)  The following shareholder proposal was introduced:

|"RESOLVED:  That the stockholders of Pepco recommend that the Board of Directors take the necessary steps to reinstate the election of directors ANNUALLY, instead of the staggered system which was recently adopted."
     The following statement has been supplied by the stockholder submitting this proposal:
     "REASONS:  Until recently, directors of Pepco were elected annually by all shareholders."
     "The great majority of New York Stock Exchange listed corporations elect all their directors each year."
     "This insures that ALL directors will be more accountable to ALL shareholders each year and to a certain extent prevents the self-perpetuation of the Board."
     "Last year the owners of 27,997,551 shares, representing approximately 28.1% of shares voting, voted FOR this proposal."
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The shareholder proposal was defeated.  There were 46,146,280 votes cast against the 
proposal, 30,144,902 votes cast in support of the proposal, 8,485,312 votes abstaining and 
13,136,223 broker nonvotes.

|Item 5.   Other Information                       |                              |      |                            |      |          |  |          |      |          |      |         
|------------------------------------------------- | ---------------------------- | ---- | -------------------------- | ---- | -------- |  | -------- | ---- | -------- | ---- | --------
|                                                  | Three Months Ended
 June 30, |      | Six Months Ended 
June 30,
|                                                  | 2001                         |      | 2000                       |      | % Change |  | 2001     |      | 2000     |      | % Change
|Operating Revenue                                 | (Millions of Dollars)       
|Electric Revenue                                  | $465.9                       |      | $570.4                     |      | (18.3)   |  | $856.7   |      | $1,005.9 |      | (14.8)  
|Other                                             | 2.1                          |      | 1.9                        |      | 10.5     |  | 8.0      |      | 6.5      |      | 23.1    
|Total Utility Operating Revenue                   | 468.0                        |      | 572.3                      |      | (18.2)   |  | 864.7    |      | 1,012.4  |      | (14.6)  
|Competitive Operating Revenue                     | 154.5                        |      | 74.2                       |      | 100.0+   |  | 318.6    |      | 159.2    |      | 100.0+  
|Gain on Divestiture of Generating Assets          | -                            |      | -                          |      | -        |  | 50.2     |      | -        |      | -       
|Total Operating Revenue                           | $622.5                       |      | $646.5                     |      |          |  | $1,233.5 |      | $1,171.6 |      |         
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Distribution and Transmission by Class of Service |                              |      |                            |      |          |  |          |      |          |      |         
|Residential                                       | $61.5                        |      | $64.4                      |      | (4.5)    |  | $127.4   |      | $126.3   |      | 0.9     
|General Service                                   | 123.1                        |      | 118.7                      |      | 3.7      |  | 226.5    |      | 217.0    |      | 4.4     
|Large Power Service *                             | 1.7                          |      | 2.2                        |      | (22.7)   |  | 3.0      |      | 4.0      |      | (25.0)  
|Street Lighting                                   | 2.3                          |      | 2.1                        |      | 9.5      |  | 4.7      |      | 4.4      |      | 6.8     
|Metro                                             | 2.1                          |      | 2.7                        |      | (22.2)   |  | 4.4      |      | 5.2      |      | (15.4)  
|Network Transmission Services                     | 26.8                         |      | 41.3                       |      | (35.1)   |  | 53.5     |      | 79.3     |      | (32.5)  
|Wholesale                                         | 0.1                          |      | 3.5                        |      | (97.1)   |  | 0.3      |      | 7.1      |      | (95.8)  
|Total Revenue                                     | 217.6                        |      | 234.9                      |      | (7.4)    |  | 419.8    |      | 443.3    |      | (5.3)   
|Network Transmission Expenses                     | (20.4)                       |      | (27.8)                     |      | 26.6     |  | (41.7)   |      | (55.5)   |      | 24.9    
|System                                            | $197.2                       |      | $207.1                     |      | (4.8)    |  | $378.1   |      | $387.8   |      | (2.5)   
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Generation Services (SOS) by Class of Service     |                              |      |                            |      |          |  |          |      |          |      |         
|Residential                                       | $77.5                        |      | $80.3                      |      | (3.5)    |  | $146.1   |      | $140.3   |      | 4.1     
|General Service                                   | 163.1                        |      | 191.4                      |      | (14.8)   |  | 274.3    |      | 310.0    |      | (11.5)  
|Large Power Service *                             | 3.2                          |      | 7.6                        |      | (57.9)   |  | 5.1      |      | 12.9     |      | (60.5)  
|Street Lighting                                   | 0.9                          |      | 1.1                        |      | (18.2)   |  | 2.0      |      | 2.4      |      | (16.7)  
|Metro                                             | -                            |      | 5.2                        |      | (100.0)  |  | 2.6      |      | 9.8      |      | (73.5)  
|Wholesale                                         | -                            |      | 27.6                       |      | (100.0)  |  | -        |      | 56.9     |      | (100.0) 
|Subtotal                                          | 244.7                        |      | 313.2                      |      | (21.9)   |  | 430.1    |      | 532.3    |      | (19.2)  
|EUM Capacity/Energy                               | 3.6                          |      | 22.3                       |      | (83.9)   |  | 6.8      |      | 30.3     |      | (77.6)  
|System                                            | $248.3                       |      | $335.5                     |      | (26.0)   |  | $436.9   |      | $562.6   |      | (22.3)  
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Distribution and Transmission Sales               |                              |      |                            |      |          |  |          |      |          |      |         
|(Millions of KWH)                                 |                              |      |                            |      |          |  |          |      |          |      |         
|Residential                                       | 1,630                        |      | 1,589                      |      | 2.6      |  | 3,787    |      | 3,412    |      | 11.0    
|General Service                                   | 4,188                        |      | 4,090                      |      | 2.4      |  | 7,991    |      | 7,891    |      | 1.3     
|Large Power Service *                             | 181                          |      | 180                        |      | 0.6      |  | 315      |      | 350      |      | (10.0)  
|Street Lighting                                   | 38                           |      | 35                         |      | 8.6      |  | 87       |      | 82       |      | 6.1     
|Metro                                             | 101                          |      | 113                        |      | (10.6)   |  | 200      |      | 221      |      | (9.5)   
|Wholesale                                         | 2                            |      | 654                        |      | (99.7)   |  | 3        |      | 1,410    |      | (99.8)  
|System                                            | 6,140                        |      | 6,661                      |      | (7.8)    |  | 12,383   |      | 13,366   |      | (7.4)   
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Generation Services (SOS) Sales                   |                              |      |                            |      |          |  |          |      |          |      |         
|(Millions of KWH)                                 |                              |      |                            |      |          |  |          |      |          |      |         
|Residential                                       | 1,531                        |      | 1,589                      |      | (3.7)    |  | 3,650    |      | 3,412    |      | 7.0     
|General Service                                   | 3,838                        |      | 4,090                      |      | (6.2)    |  | 7,537    |      | 7,891    |      | (4.5)   
|Large Power Service *                             | 89                           |      | 180                        |      | (50.6)   |  | 154      |      | 350      |      | (56.0)  
|Street Lighting                                   | 31                           |      | 35                         |      | (11.4)   |  | 71       |      | 82       |      | (13.4)  
|Metro                                             | -                            |      | 113                        |      | (100.0)  |  | 62       |      | 221      |      | (71.9)  
|Wholesale                                         | 2                            |      | 654                        |      | (99.7)   |  | 3        |      | 1,410    |      | (99.8)  
|System                                            | 5,491                        |      | 6,661                      |      | (17.6)   |  | 11,477   |      | 13,366   |      | (14.1)  
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Average System Revenue                            |                              |      |                            |      |          |  |          |      |          |      |         
|Per KWH (Cts./KWH)                                |                              |      |                            |      |          |  |          |      |          |      |         
|Delivered                                         | 3.21                         | Cts. | 3.11                       | Cts. | 3.2      |  | 3.05     | Cts. | 2.90     | Cts. | 5.2     
|Generation Services (SOS)                         | 4.46                         | Cts. | 4.70                       | Cts. | (5.1)    |  | 3.75     | Cts. | 3.98     | Cts. | (5.8)   
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         
|Weather Data                                      |                              |      |                            |      |          |  |          |      |          |      |         
|Heating Degree Days                               | 304                          |      | 328                        |      |          |  | 2,542    |      | 2,281    |      |         
|20 Year Average                                   | 344                          |      |                            |      |          |  | 2,512    |      |          |      |         
|Cooling Degree Hours                              | 2,554                        |      | 2,805                      |      |          |  | 2,554    |      | 2,822    |      |         
|20 Year Average                                   | 2,409                        |      |                            |      |          |  | 2,421    |      |          |      |         
|                                                  |                              |      |                            |      |          |  |          |      |          |      |         



Item 6.      EXHIBITS AND REPORTS ON FORM 8-K

|(a) | Exhibits                                                                                                                                                                                                                                                          |   |                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------------------------------------------------
|    | Exhibit 12                                                                                                                                                                                                                                                        | - | Computation of ratios - filed herewith.                             
|    | Exhibit 15                                                                                                                                                                                                                                                        | - | Letter re: unaudited interim financial information - filed herewith.
|(b) | Reports on Form 8-K                                                                                                                                                                                                                                               |   |                                                                     
|    | A Current Report on Form 8-K was filed by the Company on April 24, 2001, which included the Company's Press Release dated as of April 24, 2001.  The items reported on such Form 8-K were Item 5. (Other Events) and Item 7. (Financial Statements and Exhibits).



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

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

August 10, 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 June 30, 2001, and each of the years 2000 through 1996, on the basis of Utility operations only, are as follows:
|
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                                       | Twelve
Months Ended | For the Year Ended December 31,
|                                                                                                                                                                                                                                                                                       | June 30, 2001       | 2000                            | 1999   | 1998   | 1997  
|                                                                                                                                                                                                                                                                                       |                     | (Dollar Amounts in Millions)   
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Net income                                                                                                                                                                                                                                                                             | $395.0              | $348.9                          | $228.0 | $211.2 | $164.7
|Taxes based on income                                                                                                                                                                                                                                                                  | 385.5               | 352.9                           | 142.6  | 131.0  | 97.5  
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Income before taxes                                                                                                                                                                                                                                                                    | 780.5               | 701.8                           | 370.6  | 342.2  | 262.2 
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Fixed charges:                                                                                                                                                                                                                                                                         |                     |                                 |        |        |       
|Interest charges                                                                                                                                                                                                                                                                       | 154.6               | 170.1                           | 156.1  | 151.8  | 146.7 
|Interest factor in rentals                                                                                                                                                                                                                                                             | 21.9                | 23.2                            | 23.4   | 23.8   | 23.6  
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Total fixed charges                                                                                                                                                                                                                                                                    | 176.5               | 193.3                           | 179.5  | 175.6  | 170.3 
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Income before income taxes and fixed
   charges                                                                                                                                                                                                                                        | $957.0              | $895.1                          | $550.1 | $517.8 | $432.5
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Coverage of fixed charges                                                                                                                                                                                                                                                              | 5.42                | 4.63                            | 3.06   | 2.95   | 2.54  
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Preferred dividend requirements                                                                                                                                                                                                                                                        | $5.2                | $5.5                            | $8.9   | $18.0  | $16.5 
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Ratio of pre-tax income to net income                                                                                                                                                                                                                                                  | 1.98                | 2.01                            | 1.63   | 1.62   | 1.59  
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Preferred dividend factor                                                                                                                                                                                                                                                              | $10.3               | $11.1                           | $14.5  | $29.2  | $26.2 
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Total fixed charges and preferred 
   dividends                                                                                                                                                                                                                                        | $186.8              | $204.4                          | $194.0 | $204.8 | $196.5
|                                                                                                                                                                                                                                                                                       |                     |                                 |        |        |       
|Coverage of combined fixed charges 
   and preferred dividends                                                                                                                                                                                                                         | 5.12                | 4.38                            | 2.84   | 2.53   | 2.20  



|Exhibit 12    Statements Re. Computation of Ratios                                                                                                                                                                                                                         |                     |                                 |        |        |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------- | ------ | ------ | ------
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|The computations of the coverage of fixed charges before income taxes, and the coverage of combined fixed charges and preferred Dividends for the twelve months ended June 30, 2001, and for each of the years 2000 through 1996, on a consolidated basis, are as follows.
|
|
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                           | Twelve
Months Ended | For the Year Ended December 31,
|                                                                                                                                                                                                                                                                           | June 30, 2001       | 2000                            | 1999   | 1998   | 1997  
|                                                                                                                                                                                                                                                                           |                     | (Dollar Amounts in Millions)   
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Net income                                                                                                                                                                                                                                                                 | $419.8              | $369.1                          | $256.7 | $234.8 | $179.8
|Taxes based on income                                                                                                                                                                                                                                                      | 361.7               | 341.2                           | 114.5  | 122.3  | 65.6  
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Income before taxes                                                                                                                                                                                                                                                        | 781.5               | 710.3                           | 371.2  | 357.1  | 245.4 
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Fixed charges:                                                                                                                                                                                                                                                             |                     |                                 |        |        |       
|Interest charges                                                                                                                                                                                                                                                           | 213.5               | 230.7                           | 208.7  | 208.6  | 216.1 
|Interest factor in rentals                                                                                                                                                                                                                                                 | 22.3                | 23.6                            | 23.8   | 24.0   | 23.7  
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Total fixed charges                                                                                                                                                                                                                                                        | 235.8               | 254.3                           | 232.5  | 232.6  | 239.8 
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Competitive subsidiary capitalized interest                                                                                                                                                                                                                                | (4.5)               | (3.9)                           | (1.8)  | (0.6)  | (0.5) 
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Income before income taxes and fixed
   charges                                                                                                                                                                                                                            | $1,012.8            | $960.7                          | $601.9 | $589.1 | $484.7
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Coverage of fixed charges                                                                                                                                                                                                                                                  | 4.30                | 3.78                            | 2.59   | 2.53   | 2.02  
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Preferred dividend requirements                                                                                                                                                                                                                                            | $5.2                | $5.5                            | $8.9   | $18.0  | $16.5 
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Ratio of pre-tax income to net income                                                                                                                                                                                                                                      | 1.86                | 1.92                            | 1.45   | 1.52   | 1.36  
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Preferred dividend factor                                                                                                                                                                                                                                                  | $9.7                | $10.5                           | $12.8  | $27.4  | $22.4 
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Total fixed charges and preferred 
   dividends                                                                                                                                                                                                                            | $245.5              | $264.8                          | $245.3 | $260.0 | $262.2
|                                                                                                                                                                                                                                                                           |                     |                                 |        |        |       
|Coverage of combined fixed charges 
   and preferred dividends                                                                                                                                                                                                             | 4.13                | 3.63                            | 2.45   | 2.27   | 1.85