10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
		FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended								September 30, 2002
Commission File Number							1-1072
Potomac Electric Power Company (Exact name of registrant as specified in its charter)
District of Columbia and Virginia (State or other jurisdiction of incorporation or organization)								53-0127880 (I.R.S. Employer Identification No.)
701 Ninth Street, N.W., Washington, D.C. (Address of principal executive office)								20068 (Zip Code)
202-872-2000 (Registrant's telephone number, including area code)
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.
	Yes		[ X ]		No	[   ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class				Outstanding at September 30, 2002
Common Stock, $.01 par value				100
Guarantee by Potomac Electric   Power Company of the 7-3/8%   Trust Obligated Preferred   Securities issued by Potomac   Electric Power Company Trust I

POTOMAC ELECTRIC POWER COMPANY TABLE OF CONTENTS
	Page
PART I - Financial Information
Item 1. - Financial Statements
Consolidated Statements of Earnings and Retained Income for the three and nine months ended September 30, 2002, and September 30, 2001	1
Consolidated Balance Sheets as of September 30, 2002, and       December 31, 2001	2
Consolidated Statements of Cash Flows for the nine months       ended September 30, 2002, and September 30, 2001	3
Notes to Consolidated Financial Statements	4
Item 2. - Management's Discussion and Analysis of Financial               Condition and Results of Operations	9
Item 4. - Controls and Procedures	17
PART II - Other Information
Item 1. - Legal Proceedings	17
Item 6. - Exhibits and Reports on Form 8-K	19
Signatures and Certifications	20

Part I    FINANCIAL INFORMATION
Item 1.   CONSOLIDATED FINANCIAL STATEMENTS
POTOMAC ELECTRIC POWER COMPANY CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED INCOME (Unaudited)
	Three Months Ended September 30,		Nine Months Ended September 30,
	2002	2001	2002	2001
(Millions, except per share data)
Operating Revenue
Utility	$516.6	$  545.7	$1,223.5	$1,410.4
Competitive	91.0	192.7	454.1	476.5
Gain on divestiture of generation assets	-	(18.4)	-	31.8
Total Operating Revenue	607.6	720.0	1,677.6	1,918.7
Operating Expenses
Fuel and purchased energy	309.3	398.8	873.1	996.9
Other operation and maintenance	65.0	91.6	239.3	277.1
Depreciation and amortization	37.8	45.1	113.7	129.0
Other taxes	56.1	51.3	150.3	142.1
Total Operating Expenses	468.2	586.8	1,376.4	1,545.1
Operating Income	139.4	133.2	301.2	373.6
Other Income (Expenses)
Interest and dividend income	3.2	8.2	18.8	54.6
Interest expense	(23.6)	(27.7)	(87.0)	(115.2)
Loss from Equity Investments, principally      a Telecommunication Entity	(.9)	(6.5)	(2.1)	(17.0)
Other income	(.1)	.9	(.6)	5.0
Total Other Expenses	(21.4)	(25.1)	(70.9)	(72.6)
Distributions on Preferred Securities of Subsidiary Trust	2.3	2.3	6.9	6.9
Income Tax Expense	46.4	35.8	82.6	109.7
Net Income	69.3	70.0	140.8	184.4
Dividends on Preferred Stock	1.3	1.3	3.8	3.8
Earnings Available for Common Stock	$ 68.0	$   68.7	$  137.0	$  180.6
Retained Income at Beginning of Period	$981.8	$  965.3	$  967.4	$  929.7
Dividends on Common Stock	(9.0)	(26.9)	(62.6)	(99.7)
Dividends to Pepco Holdings	(413.8)	-	(413.8)	-
Merger Adjustments	(137.8)	-	(137.8)	-
Other Comprehensive Income (Loss), Net of Tax	1.0	3.1	-	(.4)
Retained Income, Net of Other Comprehensive    Income (Loss), Net of Tax, at End of Period	$490.2	$1,010.2	$  490.2	$1,010.2
The accompanying Notes are an integral part of these Consolidated Financial Statements.

POTOMAC ELECTRIC POWER COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
	September 30, 2002	December 31, 2001
ASSETS	(Millions of Dollars)
CURRENT ASSETS
Cash and cash equivalents	$   21.7	$  515.5
Marketable securities	-	161.2
Accounts receivable, less allowance for uncollectible      accounts of $4.1 and $9.5	461.1	401.2
Fuel, materials and supplies - at average cost	38.4	37.8
Prepaid expenses and other	11.6	24.2
Total Current Assets	532.8	1,139.9
INVESTMENTS AND OTHER ASSETS
Investment in finance leases	-	736.0
Operating lease equipment - net of accumulated      depreciation of $- and $123.6, respectively	-	4.6
Regulatory assets, net	-	14.3
Prepaid pension expense	149.3	152.4
Other	114.7	485.3
Total Investments and Other Assets	264.0	1,392.6
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	4,506.3	4,361.9
Accumulated depreciation	(1,715.3)	(1,608.5)
Net Property, Plant and Equipment	2,791.0	2,753.4
TOTAL ASSETS	$3,587.8	$5,285.9
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt	$   58.4	$  458.2
Accounts payable and accrued payroll	177.9	224.1
Capital lease obligations due within one year	15.6	15.2
Interest and taxes accrued	88.0	92.6
Other	134.0	175.3
Total Current Liabilities	473.9	965.4
DEFERRED CREDITS
Regulatory liabilities, net	19.8	-
Income taxes	591.1	501.6
Investment tax credits	23.2	24.7
Other	30.5	38.8
Total Deferred Credits	664.6	565.1
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS	1,252.9	1,722.4
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES    OF SUBSIDIARY TRUST WHICH HOLDS SOLELY PARENT JUNIOR    SUBORDINATED DEBENTURES	125.0	125.0
PREFERRED STOCK
Serial preferred stock	35.3	35.3
Redeemable serial preferred stock	47.5	49.5
Total Preferred Stock	82.8	84.8
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 and $1 par value, respectively - issued       100 shares and 118,544,883 shares, respectively	-	118.5
Premium on stock and other capital contributions	499.5	1,028.3
Capital stock expense	(1.1)	(12.9)
Accumulated other comprehensive loss	-	(6.7)
Retained income	490.2	974.1
	988.6	2,101.3
Less cost of shares of common stock in treasury       (none and 11,323,707 shares, respectively)	-	(278.1)
Total Shareholders' Equity	988.6	1,823.2
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$3,587.8	$5,285.9
The accompanying Notes are an integral part of these Consolidated Financial Statements.

POTOMAC ELECTRIC POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended September 30,
	2002	2001
	(Millions of Dollars)
OPERATING ACTIVITIES
Net income	$   140.8	$   184.4
Adjustments to reconcile net income to net cash    from (used by) operating activities:
Depreciation and amortization	113.7	129.0
Gain on divestiture of generation assets	-	(31.8)
Changes in:
Accounts receivable	(78.4)	(41.9)
Regulatory assets, net	90.2	(182.2)
Prepaid expenses	12.7	409.4
Accounts payable and accrued payroll	23.0	(20.8)
Interest and taxes accrued, including Federal income          tax refund of $135.4 million in 2002	104.2	(704.0)
Net other operating activities	(18.0)	18.6
Net Cash From (Used By) Operating Activities	388.2	(239.3)
INVESTING ACTIVITIES
Net investment in property, plant and equipment	(146.9)	(177.1)
Proceeds from/changes in:
Divestiture of generation assets	-	156.2
Purchase of leveraged leases	(111.6)	-
Sales of marketable securities, net of purchases	2.2	52.7
Purchases of other investments, net of sales	(15.4)	(59.7)
Net other investing activities, including $8.9 million       in POM cash transferred to Pepco Holdings	(4.8)	(5.4)
Net Cash Used By Investing Activities	(276.5)	(33.3)
FINANCING ACTIVITIES
Dividend to Pepco Holdings	(395.3)	-
Contribution to Pepco Holdings common stock dividend	(18.5)	-
Dividends paid on Pepco preferred and common stock	(66.3)	(103.5)
Redemption of preferred stock	(2.0)	(5.5)
Reacquisition of Pepco's common stock	(2.2)	(73.9)
Issuances of debt, net of reacquisitions	(118.9)	(725.7)
Net other financing activities	(2.3)	9.4
Net Cash Used By Financing Activities	(605.5)	(899.2)
Net Decrease In Cash and Cash Equivalents	(493.8)	(1,171.8)
Cash and Cash Equivalents at Beginning of Period	515.5	1,864.6
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$    21.7	$   692.8
The accompanying Notes are an integral part of these Consolidated Financial Statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

(1)     Organization and Segment Information

Organization

     On August 1, 2002, Potomac Electric Power Company (Pepco or the Company) closed on its acquisition of Conectiv for a combination of cash and stock valued at approximately $2.2 billion. In accordance with the terms of the merger agreement, both Pepco and Conectiv became subsidiaries of Pepco Holdings, Inc. (Pepco Holdings, formerly New RC, Inc.) a registered holding company under the Public Utility Holding Company Act of 1935. Pepco Holdings was incorporated under the laws of Delaware on February 9, 2001 for the purpose of effecting the merger. As part of the merger transaction, holders of Pepco's common stock immediately prior to the August 1, 2002 merger received in exchange for their Pepco shares approximately 107,125,976 shares of Pepco Holdings common stock, par value $.01 per share. Additionally, Pepco issued 100 shares of common stock, par value $.01, all of which is owned by Pepco Holdings.

     Since August 1, 2002, Pepco is engaged solely in the provision of regulated electric utility transmission and distribution services in the Washington, D.C. (D.C.) metropolitan area (the Utility). Until August 1, 2002, Pepco was also engaged in the management of a diversified financial investments portfolio and the supply of energy products and services in competitive retail markets. These activities were performed through the Company's wholly owned unregulated subsidiary at that time, POM Holdings, Inc. (POM) which until August 1, 2002, was the parent company of two wholly owned subsidiaries, Potomac Capital Investment Corporation (PCI) and Pepco Energy Services, Inc. (Pepco Energy Services). PCI managed the Company's financial investment portfolio and Pepco Energy Services provided competitive energy products and services. PCI's investment in Starpower Communications, LLC, which provides cable and telecommunication services in the Washington, D.C. area, was owned by its wholly owned subsidiary Pepco Communications, Inc. (Pepcom). After the merger, the stock of PCI, Pepco Energy Services, and Pepcom was distributed as a dividend to Pepco Holdings, which resulted in Pepco Holdings becoming the new parent company of PCI, Pepco Energy Services, and Pepcom. Additionally, the Company has a wholly owned Delaware statutory business trust, Potomac Electric Power Company Trust I, and a wholly owned Delaware Investment Holding Company, Edison Capital Reserves Corporation.

Segment Information

     As a result of the merger transaction on August 1, 2002, the Company has determined that its regulated utility operations represent its only reportable segment under the provisions of Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). Accordingly, the Company's 2002 three and nine month ended September 30, 2002 segment disclosure presents its reportable utility segment information, with PCI and Pepco Energy Services' pre-merger July 2002 and seven months ended July 2002 operations, respectively, included as "Other Operations." Prior to the August 1, 2002 merger the Company identified two reportable segments: its utility operations and POM's operations (Competitive Segment). Based on this current period change in reportable segments the Company has restated its three and nine month ended September 30, 2001 segment disclosure to conform to the 2002 presentation. The information presented is unaudited and in millions of dollars.

	Reportable Utility    Segment	(A) Other Operations	(B) Elim.	Total  Pepco
Three Months Ended:
September 30, 2002
Operating Revenue	$516.6	$91.9	$(.9)	$607.6
Operating Expenses	381.7	87.4	(.9)	468.2
Operating Income	134.9	4.5	-	139.4
Other Expenses	(17.6)	(3.8)	-	(21.4)
Distributions on Preferred Securities   of Subsidiary Trust	2.3	-	-	2.3
Income Tax Expense (Benefit)	46.8	(.4)	-	46.4
Net Income	$ 68.2	$ 1.1	-	$69.3
Total Assets (at 9/30/02)	$3,587.8	-	-	$3,587.8

		Reportable  Utility     Segment	Other    Operations	(B) Elim.	Total    Pepco
Three Months Ended:
September 30, 2001
Operating Revenue		$527.3	$195.3	$(2.6)	$720.0
Operating Expenses		413.3	176.1	(2.6)	586.8
Operating Income		114.0	19.2	-	133.2
Other Expenses		(8.1)	(17.0)	-	(25.1)
Distributions on Preferred Securities   of Subsidiary Trust		2.3	-	-	2.3
Income Tax Expense (Benefit)		42.0	(6.2)	-	35.8
Net Income		$ 61.6	$ 8.4	-	$ 70.0
Total Assets (at 9/30/01)		$5,172.9	$1,436.0	$(1,191.8)	$5,417.1
(A)	Represents PCI and Pepco Energy Services operations for the month of July 2002.
(B)	Represents the elimination of rent paid to PCI for Pepco's lease of office space in PCI's 10-story commercial office building. The lease commenced in June 2001.

	Reportable Utility   Segment	(A)        Other    Operations	(B) Elim.	Total    Pepco
Nine Months Ended:
September 30, 2002
Operating Revenue	$1,223.5	$460.2	$(6.1)	$1,677.6
Operating Expenses	954.8	427.7	(6.1)	1,376.4
Operating Income	268.7	32.5	-	301.2
Other Expenses	(52.1)	(18.8)	-	(70.9)
Distributions on Preferred Securities   of Subsidiary Trust	6.9	-	-	6.9
Income Tax Expense (Benefit)	84.0	(1.4)	-	82.6
Net Income	$ 125.7	$ 15.1	-	$  140.8
Total Assets (at 9/30/02)	$3,587.8	-	-	$3,587.8

		Reportable  Utility    Segment	Other    Operations	(B) Elim.	Total   Pepco
Nine Months Ended:
September 30, 2001
Operating Revenue		$1,442.2	$  479.9	$  (3.4)	$1,918.7
Operating Expenses		1,102.1	446.4	(3.4)	1,545.1
Operating Income		340.1	33.5	-	373.6
Other Expenses		(31.5)	(41.1)		(72.6)
Distributions on Preferred Securities of Subsidiary Trust		6.9	-	-	6.9
Income Tax Expense (Benefit)		129.5	(19.8)	-	109.7
Net Income		$  172.2	$ 12.2	-	$  184.4
Total Assets (at 9/30/01)		$5,172.9	$1,436.0	$(1,191.8)	$5,417.1
(A)	Represents PCI and Pepco Energy Services' operations for the seven months ended July 2002.
(B)	Represents the elimination of rent paid to PCI for Pepco's lease of office space in PCI's 10-story commercial office building. The lease commenced in June 2001.

(2)   Summary of Significant Accounting Policies Basis of Presentation      The information furnished in the accompanying consolidated financial statements reflects all adjustments (which consist only of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the Company's results of operations for the interim periods presented. The accompanying consolidated financial statements present the financial results of the Company as described above. All intercompany balances and transactions have been eliminated. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the Company's 2001 Form 10-K. Certain prior period amounts have been reclassified in order to conform to the current period presentation.      As discussed in Note (1) Organization and Segment Information, on August 1, 2002, in accordance with the terms of the merger agreement Pepco transferred its ownership of PCI and Pepco Energy Services to Pepco Holdings. Accordingly, the accompanying unaudited consolidated balance sheet as of September 30, 2002 includes the accounts of Pepco's utility operations only. The consolidated balance sheet as of December 31, 2001 includes the consolidated accounts of Pepco and its pre-merger wholly owned subsidiaries, PCI and Pepco Energy Services.      The accompanying unaudited consolidated statements of earnings and retained income for the three and nine months ended September 30, 2002 include Pepco's utility operations for the entire periods presented consolidated with its pre-merger subsidiaries operations for July 2002 and the seven months ended July 2002, respectively. The 2001 operating amounts reflect the consolidated operations for Pepco and its pre-merger subsidiaries, for the entire periods presented, as previously reported by Pepco. Accordingly, the 2002 and 2001 balances included in the accompanying unaudited consolidated financial statements are not comparable. Revenue Recognition      The Utility's revenue for services rendered but unbilled as of the end of each month is accrued and included in the accounts receivable balance on the accompanying consolidated balance sheets. Accounting For Certain Types of Regulation      Based on the regulatory framework in which it has operated, the Company has historically applied, and in connection with its transmission and distribution business continues to apply, the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71) "Accounting for the Effects of Certain Types of Regulation." SFAS 71 allows regulated entities, in appropriate circumstances, to establish regulatory assets and to defer the income statement impact of certain costs that are expected to be recovered in future rates. Management's assessment of the probability of recovery of regulatory assets requires judgment and interpretation of laws, regulatory commission orders, and other factors. Should existing facts or circumstances change in the future to indicate that a regulatory asset is not probable of recovery, then the regulatory asset would be charged to earnings. Energy Trading Reclassifications      In 2002, the Emerging Issues Task Force issued a pronouncement entitled EITF Issue No. 02-3 (EITF 02-3) "Accounting for Contracts Involved in Energy Trading and Risk Management Activities," which addresses the presentation of revenue and expense associated with "energy trading book" contracts on a gross vs. net basis. Previously, the EITF concluded that gross presentation was acceptable, but with the issuance of EITF 02-3 and the subsequent guidance provided by the EITF, net presentation is required. Pepco does not enter into trading activities that are subject to the provisions of the pronouncement, however, its pre-merger subsidiary Pepco Energy Services did enter into such transactions and historically classified these contracts on a gross basis.      Pepco Energy Services has completed its evaluation of the extent of the revenue and expense reclassifications required by EITF 02-3. Beginning with July 2002, all trades were recorded net and therefore no reclassification was required for the three months ended September 30, 2002. The impact of the implementation of EITF 02-3, because of financial statement line item changes, decreases Pepco Energy Services gross revenues for the nine months ended September 30, 2002 (consisting of the six months ended June 30, 2002) from approximately $423.6 million to $401 million. For the three and nine months ended September 30, 2001 gross revenues decreased from $212.1 million to $165.6 million and approximately $481.2 million to $400.7 million, respectively. There is no impact on Pepco's overall financial position or net results of operations as a result of the implementation of EITF 02-3. (3)   Commitments and Contingencies Regulatory Contingencies      Final briefs on Pepco's District of Columbia divestiture proceeds sharing application were filed on July 31, 2002 following an evidentiary hearing in June 2002. That application was filed to implement a provision of the Company's D.C. Commission approved divestiture settlement that provided for a sharing of any net proceeds from the sale of its generation related assets. A principal issue in the case is whether a sharing between customers and shareholders of the excess deferred income taxes and accumulated deferred investment tax credits associated with the sold assets would violate the normalization provisions of the Internal Revenue Code and implementing regulations. Other issues deal with the inclusion of internal costs and cost allocations, with respect to which Pepco believes its calculations are correct. Accordingly, Pepco is of the strong belief that its calculation of the customers' share of divestiture proceeds is correct and that its position should p revail before the D.C. Commission or upon judicial review. The potential exists that Pepco could be required to make additional gain sharing payments to D.C. customers. Such additional payments, which cannot be estimated, would be charged to expense and could have a material adverse effect on results of operations in the quarter and year in which a decision is rendered; however, Pepco does not believe that additional payments, if any, will have a material adverse impact on its financial position. It is impossible to predict when the D.C. Commission will issue a decision.      Pepco filed its divestiture proceeds plan application in Maryland in April 2001. Reply briefs were filed in May 2002 and Pepco is awaiting a Proposed Order from the Hearing Examiner. It is a certainty that some party or parties will appeal the Hearing Examiner's Proposed Order to the Maryland Commission. The principal issue in the case is the same normalization issue that was raised in the D.C. case. Other issues deal with the inclusion of internal costs and cost allocations, with respect to which Pepco believes its calculations are correct. Accordingly, Pepco is of the strong belief that its calculation of the customers' share of divestiture proceeds is correct and that its position should prevail before the Maryland Commission or upon judicial review. The potential also exists that Pepco would be required to make additional gain sharing payments to Maryland customers. Such additional payments, which cannot be estimated, would be charged to expense and could ha ve a material adverse effect on results of operations in the quarter and year in which a decision is rendered; however, Pepco does not believe that additional payments, if any, will have a material adverse impact on its financial position. It is impossible to predict when the Hearing Examiner or the Maryland Commission will issue their decisions. Oil Spill at the Chalk Point Generating Station      On April 7, 2000, approximately 139,000 gallons of oil leaked from a pipeline at a generation station which was owned at the time by the Company at Chalk Point in Aquasco, Maryland. As of September 30, 2002, approximately $75 million in clean-up costs had been incurred in connection with the oil spill. For the year ended December 31, 2000, the Company recorded the net amount of $1 million in operating expense as a result of the oil spill, which represents an accrual of $75 million in total estimated oil spill related clean-up costs, net of $5 million in insurance proceeds received through June 30, 2000, (the date the amount was recorded by the Company) and an additional $69 million in probable recoveries (recorded as a receivable) from its insurance carriers. Through September 30, 2002, approximately $56 million has been received from insurance carriers and approximately $3.7 million has been received from other parties. The Company believes that the remainin g receivable balance at September 30, 2002 will be recovered from its insurance carrier or other parties.      Additionally the State of Maryland Department of Environment executed a settlement agreement that reflects the full and final settlement of all claims and penalties against the Company for its violation of state laws in regards to the oil spill. The settlement agreement resulted in a total expense of $950,000, which was recorded in the third quarter of 2002. Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION            AND RESULTS OF OPERATIONS      For additional information, other than the information disclosed in the Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition section herein, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's 2001 Form 10-K. OVERVIEW      On August 1, 2002, Potomac Electric Power Company (Pepco or the Company) closed on its acquisition of Conectiv for a combination of cash and stock valued at approximately $2.2 billion. In accordance with the terms of the merger agreement, both Pepco and Conectiv became subsidiaries of Pepco Holdings, Inc. (Pepco Holdings, formerly New RC, Inc.) a registered holding company under the Public Utility Holding Company Act of 1935. Pepco Holdings was incorporated under the laws of Delaware on February 9, 2001 for the purpose of effecting the merger. As part of the merger transaction, holders of Pepco's common stock immediately prior to the August 1, 2002 merger received in exchange for their Pepco shares approximately 107,125,976 shares of Pepco Holdings common stock, par value $.01 per share. Additionally, Pepco issued 100 shares of common stock, par value $.01, all of which is owned by Pepco Holdings.      Since August 1, 2002, Pepco is engaged solely in the provision of regulated electric utility transmission and distribution services in the Washington, D.C. (D.C.) metropolitan area (the Utility). Until August 1, 2002, Pepco was also engaged in the management of a diversified financial investments portfolio and the supply of energy products and services in competitive retail markets. These activities were performed through the Company's wholly owned unregulated subsidiary at that time, POM Holdings, Inc. (POM) which until August 1, 2002, was the parent company of two wholly owned subsidiaries, Potomac Capital Investment Corporation (PCI) and Pepco Energy Services, Inc. (Pepco Energy Services). PCI managed the Company's financial investment portfolio and Pepco Energy Services provided competitive energy products and services. PCI's investment in Starpower Communications, LLC, which provides cable and telecommunication services in the Washington, D.C. area, was owned by its wholly owned subsidiary Pepco Communications, Inc. (Pepcom). After the merger, the stock of PCI, Pepco Energy Services, and Pepcom was distributed as a dividend to Pepco Holdings, which resulted in Pepco Holdings becoming the new parent company of PCI, Pepco Energy Services, and Pepcom. Additionally, the Company has a wholly owned Delaware statutory business trust, Potomac Electric Power Company Trust I, and a wholly owned Delaware Investment Holding Company, Edison Capital Reserves Corporation. CRITICAL ACCOUNTING POLICIES      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liability, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The U.S. Securities and Exchange Commission (SEC) has defined a company's most critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, Pepco has identified the critical accounting policies and judgments addressed below. Although Pepco's management believes that its estimates and assumptions are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions or conditions. Revenue Recognition      The Utility's revenue for services rendered but unbilled as of the end of each month is accrued and included in the accounts receivable balance on the accompanying consolidated balance sheets. Accounting For Certain Types of Regulation      Based on the regulatory framework in which it has operated, the Company has historically applied, and in connection with its transmission and distribution business continues to apply, the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71) "Accounting for the Effects of Certain Types of Regulation." SFAS 71 allows regulated entities, in appropriate circumstances, to establish regulatory assets and to defer the income statement impact of certain costs that are expected to be recovered in future rates. Management's assessment of the probability of recovery of regulatory assets requires judgment and interpretation of laws, regulatory commission orders, and other factors. Should existing facts or circumstances change in the future to indicate that a regulatory asset is not probable of recovery, then the regulatory asset would be charged to earnings. CONSOLIDATED RESULTS OF OPERATIONS LACK OF COMPARABILITY OF OPERATING RESULTS WITH PRIOR PERIODS      As discussed in the "Overview" section herein, on August 1, 2002, in accordance with the terms of the merger agreement, Pepco transferred its ownership of PCI and Pepco Energy Services to Pepco Holdings. Accordingly, the accompanying unaudited consolidated balance sheet as of September 30, 2002 includes the accounts of Pepco's utility operations only. The consolidated balance sheet as of December 31, 2001 includes the consolidated accounts of Pepco and its pre-merger wholly owned subsidiaries, PCI and Pepco Energy Services.      The accompanying unaudited consolidated statements of earnings and retained income for the three and nine months ended September 30, 2002 include Pepco's utility operations for the entire periods presented consolidated with its pre-merger subsidiaries operations for July 2002 and the seven months ended July 2002, respectively. The 2001 operating amounts reflect the consolidated operations for Pepco and its pre-merger subsidiaries, for the entire periods presented, as previously reported by Pepco. Accordingly, the 2002 and 2001 balances included in the accompanying unaudited consolidated financial statements are not comparable. OPERATING REVENUE Three Months Ended      Total consolidated operating revenue decreased by $112.4 million ($607.6 million vs. $720 million) for the three months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $29.1 million decrease in Utility operating revenue and a $101.7 million decrease in operating revenues for PCI and PES. Additionally, the 2001 quarter included a loss of $18.4 million that resulted from the settlement of certain disputes with Mirant Corporation in connection with the December 2000 sale of Pepco's generating plants.      The decrease in Utility operating revenue during the 2002 quarter primarily results from a decrease of $43.7 million in standard offer service revenue due to increased migration to alternate suppliers during the 2002 quarter. Retail access to a competitive market for generation services was made available to all Maryland customers on July 1, 2000 and to D.C. customers on January 1, 2001. At September 30, 2002, 14% of the Utility's Maryland customers and 12% of its D.C. customers have chosen alternate suppliers. These customers accounted for 1,134 megawatts of load in Maryland (of our total load of 3,369) and 1,195 megawatts of load in D.C. (of our total load of 2,326). The decrease in standard offer service revenue was partially offset by a $20.5 million increase in delivery revenue due to higher delivered kilowatt hour sales (11% increase) from hotter than normal summer weather. Cooling degree hours were approximately 42% above normal during the 2002 quarter .      The decrease in PCI and PES' operating revenue during the 2002 quarter results from the fact that Pepco's consolidated three months ended September 30, 2002 results include the operating results from PCI and PES for only the pre-merger month of July 2002, compared to a full three months during the corresponding period last year. Nine Months Ended      Total consolidated operating revenue decreased by $241.1 million ($1,677.6 million vs. $1,918.7 million) for the nine months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $186.9 million decrease in Utility operating revenue and a $22.4 million decrease in operating revenues for PCI and PES. Additionally, the 2001 year to date period included a gain of $31.8 million that resulted from the sale of the Company's 9.72 percent interest in the Conemaugh Generating Station in January 2001.      The decrease in Utility operating revenue during the 2002 nine month period primarily results from a decrease of $193.2 million in standard offer service revenue due to increased migration to alternative suppliers, partially offset by a $15.4 million increase in delivery revenue due to hotter than normal weather during the period.      The decrease in PCI and PES' operating revenue during the 2002 nine month period results from the fact that Pepco's consolidated nine months ended September 30, 2002 results include the operating results from PCI and PES for seven months (January 2002 through July 2002), compared to a full nine months during the corresponding period last year. OPERATING EXPENSES Three Months Ended      Total consolidated operating expenses decreased by $118.6 million ($468.2 million vs. $586.8 million) for the three months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $29.9 million decrease in Utility operating expenses and an $88.7 million decrease in operating expenses for PCI and PES.      The decrease in Utility operating expenses during the 2002 quarter primarily results from a $44.2 million decrease in fuel and purchased energy expense due to less energy purchased because of increased customer migration. This decrease was partially offset by an increase of $8.3 million in O&M expenses primarily due to severance costs recorded in July 2002 related to the merger ($5.5 million); and an increase of $4.8 million in other taxes due to higher Maryland property taxes ($2.1 million) and higher delivery taxes ($2 million).      The decrease in PCI and PES' operating expenses during the 2002 quarter results from the fact that Pepco's consolidated three months ended September 30, 2002 results include the operating results from PCI and PES for one month (July 2002), compared to a full three months during the corresponding period last year. Nine Months Ended      Total consolidated operating expenses decreased by $168.7 million ($1,376.4 million vs. $1,545.1 million) for the nine months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $150 million decrease in Utility operating expenses and a $18.7 million decrease in operating expenses for PCI and PES.      The decrease in Utility operating expense during the 2002 nine month period results from a $166.3 million decrease in fuel and purchased energy expense due to less energy purchased due to higher customer migration. This decrease was partially offset by an increase of $4.1 million in O&M expenses due to an increase in severance costs recorded compared to the corresponding period last year ($2.3 million) and an increase in general power delivery expenses ($2.7 million); an increase of $4 million in depreciation expense; and an increase of $8.2 million in other taxes due to higher Maryland property taxes ($6.4 million) and higher delivery taxes and Pennsylvania property taxes ($1.8 million).      The decrease in PCI and PES' operating expense during the 2002 nine month period results from the fact that Pepco's consolidated three months ended September 30, 2002 results include the operating results from PCI and PES for seven months (January 2002 through July 2002), compared to a full nine months during the corresponding period last year. OTHER INCOME (EXPENSES) Three Months Ended      Total consolidated other expenses decreased by $3.7 million ($21.4 million vs. $25.1 million) for the three months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $9.5 million increase in Utility other expenses offset by a $13.2 million decrease in other expenses for PCI and PES.      The increase in Utility other income (expenses) during the 2002 quarter results from a $4.1 million decrease in interest income earned primarily due to lower proceeds remaining to invest from the Company's generation asset divestitures, and due to an increase of $4.2 million in interest expense due to higher interest incurred on the Company's outstanding debt used to partially fund the merger.      The decrease in PCI and PES' other expenses during the 2002 quarter results from the fact that Pepco's consolidated three months ended September 30, 2002 results include the operating results from PCI and PES for one month (July 2002), compared to a full three months during the corresponding period last year. Nine Months Ended      Total consolidated other income (expenses) decreased by $1.7 million ($70.9 million vs. $72.6 million) for the nine months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $20.6 million increase in Utility other expenses and a $22.3 million decrease in other expenses for PCI and PES.      The increase in Utility other expenses during the 2002 nine month period primarily results from a $33.7 million decrease in interest income primarily due to lower proceeds remaining to invest from the Company's generation asset divestitures, and due to a decrease of $18.5 million in interest expense as a result of lower interest expense incurred on commercial paper and other debt outstanding due to the payoff of approximately $100 million in debt.      The decrease in PCI and PES' other expense during the 2002 nine month period results from the fact that Pepco's consolidated nine months ended September 30, 2002 results include the operating results from PCI and PES for seven months (January 2002 through July 2002), compared to a full nine months during the corresponding period last year. INCOME TAX EXPENSE Three Months Ended      Total consolidated income tax expense increased by $10.6 million ($46.4 million vs. $35.8 million) for the three months ended September 30, 2002, compared to the corresponding period last year. This increase consists of a $4.8 million increase in Utility income tax expense and a $5.8 million decrease in income tax benefits for PCI and PES.      The increase in Utility income tax expense during the 2002 quarter results from the fact that the 2001 quarter included a nonrecurring credit in other taxes as a result of the Mirant dispute ($8.6 million), partially offset by lower taxes in the 2002 quarter ($1.6 million) due to lower interest income.      The decrease in PCI and PES' income tax benefits during the 2002 quarter results from the fact that Pepco's consolidated three months ended September 30, 2002 results include the operating results from PCI and PES for one month (July 2002), compared to a full three months during the corresponding period last year. Nine Months Ended      Total consolidated income tax expense decreased by $27.1 million ($82.6 million vs. $109.7 million) for the nine months ended September 30, 2002, compared to the corresponding period last year. This decrease consists of a $45.5 million decrease in Utility income tax expense and an $18.4 million decrease in income tax benefits for PCI and PES.      The decrease in Utility income tax expense during the 2002 nine month period results from lower taxes as a result of lower interest income ($11.4 million) and due to the fact that the 2001 period included taxes incurred on the Company's generating plant divestitures ($34.3 million).      The decrease in PCI and PES' income tax benefits during the 2002 nine month period results from the fact that Pepco's consolidated nine months ended September 30, 2002 results include the operating results from PCI and PES for seven months (January 2002 through July 2002), compared to a full nine months during the corresponding period last year. ENERGY TRADING RECLASSIFICATIONS      In 2002, the Emerging Issues Task Force issued a pronouncement entitled EITF Issue No. 02-3 (EITF 02-3) "Accounting for Contracts Involved in Energy Trading and Risk Management Activities," which addresses the presentation of revenue and expense associated with "energy trading book" contracts on a gross vs. net basis. Previously, the EITF concluded that gross presentation was acceptable, but with the issuance of EITF 02-3 and the subsequent guidance provided by the EITF, net presentation is required. Pepco does not enter into trading activities that are subject to the provisions of the pronouncement, however, its pre-merger subsidiary Pepco Energy Services did enter into such transactions and historically classified these contracts on a gross basis.      Pepco Energy Services has completed its evaluation of the extent of the revenue and expense reclassifications required by EITF 02-3. Beginning with July 2002, all trades were recorded net and therefore no reclassification was required for the three months ended September 30, 2002. The impact of the implementation of EITF 02-3, because of financial statement line item changes, decreases Pepco Energy Services gross revenues for the nine months ended September 30, 2002 (consisting of the six months ended June 30, 2002) from approximately $423.6 million to $401 million. For the three and nine months ended September 30, 2001 gross revenues decreased from $212.1 million to $165.6 million and approximately $481.2 million to $400.7 million, respectively. There is no impact on Pepco's overall financial position or net results of operations as a result of the implementation of EITF 02-3. CAPITAL RESOURCES AND LIQUIDITY Pension Funding      As a result of recent declines in the values of securities in the financial markets, Pepco's pension assets have failed to achieve the level of returns assumed in the determination of their pension expense accruals thus far during 2002. As a result, should the financial markets remain at the lower levels of September 30, 2002 or decline further, Pepco will need to contribute additional funds to its pension plans in order to achieve a funding level of 100% with respect to its pension liabilities. In addition, due to current lower asset values in its pension plans and the potential need to modify the assumptions used to value its pension liabilities, Pepco could experience a substantially higher level of pension expense in the near term and until the financial markets' performance improves. Both the funding amount and the pension expense accrual will be determined by the actual return on plan assets for the year, which depends on the performance of the financial markets d uring the balance of the year, and the level of interest rates at year end 2002, which cannot be definitively predicted. Construction Expenditures      Utility construction expenditures totaled $146.9 million for the nine months ended September 30, 2002 and are projected to total approximately $170 million for the year ended December 31, 2002. For the five-year period 2002-2006, Utility construction expenditures are projected to total $833.7 million. These expenditures will be funded through cash provided from operations or through funds received from the issuance of short term debt. FORWARD LOOKING STATEMENTS      Some of the statements contained in this Form 10-Q are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding the Company's intents, beliefs and current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. Any forward-looking statements are not guarantees of future performance, and actual results could differ materially from those indicated by the forward-looking statements. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, p erformance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.      The forward-looking statements contained and incorporated by reference herein are qualified in their entirety by reference to the following important factors, which are difficult to predict, contain uncertainties, are beyond the Company's control and may cause actual results to differ materially from those contained in forward-looking statements:
·	Prevailing governmental policies and regulatory actions affecting the energy industry, including 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;
·	General economic conditions, including potential negative impacts resulting from an economic downturn;
·	Growth in demand, sales and capacity to fulfill demand;
·	Changes in tax rates or policies or in rates of inflation;
·	Changes in project costs;
·	Unanticipated changes in operating expenses and capital expenditures;
·	Capital market conditions;
·	Legal and administrative proceedings (whether civil or criminal) and settlements that influence our business and profitability;
·	Trading counterparty credit risk;
·	Ability to secure electric supply to fulfill sales commitments at favorable prices;
·	Volatility in market demand and prices for energy, capacity and fuel;
·	Interest rate fluctuations and credit market concerns; and
·	Effects of geopolitical events, including the threat of domestic terrorism.
Any forward-looking statements speak only as to the date of this Form 10-Q and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement are made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for the Company to predict all of such factors, nor can the Company assess the impact of any such factor on its 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.      The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors should not be construed as exhaustive. Item 4.    CONTROLS AND PROCEDURES (a)  Evaluation of Disclosure Controls and Procedures      Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. (b)  Changes in Internal Controls      There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II    OTHER INFORMATION Item 1.    LEGAL PROCEEDINGS
For information other than the disclosures contained below, refer to Item 3. Legal Proceedings of the Company's 2001 Form 10-K. Regulatory Contingencies      Final briefs on Pepco's District of Columbia divestiture proceeds sharing application were filed on July 31, 2002 following an evidentiary hearing in June 2002. That application was filed to implement a provision of the Company's D.C. Commission approved divestiture settlement that provided for a sharing of any net proceeds from the sale of its generation related assets. A principal issue in the case is whether a sharing between customers and shareholders of the excess deferred income taxes and accumulated deferred investment tax credits associated with the sold assets would violate the normalization provisions of the Internal Revenue Code and implementing regulations. Other issues deal with the inclusion of internal costs and cost allocations, with respect to which Pepco believes its calculations are correct. Accordingly, Pepco is of the strong belief that its calculation of the customers' share of divestiture proceeds is correct and that its position should p revail before the D.C. Commission or upon judicial review. The potential exists that Pepco could be required to make additional gain sharing payments to D.C. customers. Such additional payments, which cannot be estimated, would be charged to expense and could have a material adverse effect on results of operations in the quarter and year in which a decision is rendered; however, Pepco does not believe that additional payments, if any, will have a material adverse impact on its financial position. It is impossible to predict when the D.C. Commission will issue a decision.      Pepco filed its divestiture proceeds plan application in Maryland in April 2001. Reply briefs were filed in May 2002 and Pepco is awaiting a Proposed Order from the Hearing Examiner. It is a certainty that some party or parties will appeal the Hearing Examiner's Proposed Order to the Maryland Commission. The principal issue in the case is the same normalization issue that was raised in the D.C. case. Other issues deal with the inclusion of internal costs and cost allocations, with respect to which Pepco believes its calculations are correct. Accordingly, Pepco is of the strong belief that its calculation of the customers' share of divestiture proceeds is correct and that its position should prevail before the Maryland Commission or upon judicial review. The potential also exists that Pepco would be required to make additional gain sharing payments to Maryland customers. Such additional payments, which cannot be estimated, would be charged to expense and could ha ve a material adverse effect on results of operations in the quarter and year in which a decision is rendered; however, Pepco does not believe that additional payments, if any, will have a material adverse impact on its financial position. It is impossible to predict when the Hearing Examiner or the Maryland Commission will issue their decisions. Oil Spill at the Chalk Point Generating Station      On April 7, 2000, approximately 139,000 gallons of oil leaked from a pipeline at a generation station which was owned at the time by the Company at Chalk Point in Aquasco, Maryland. As of September 30, 2002, approximately $75 million in clean-up costs had been incurred in connection with the oil spill. For the year ended December 31, 2000, the Company recorded the net amount of $1 million in operating expense as a result of the oil spill, which represents an accrual of $75 million in total estimated oil spill related clean-up costs, net of $5 million in insurance proceeds received through June 30, 2000, (the date the amount was recorded by the Company) and an additional $69 million in probable recoveries (recorded as a receivable) from its insurance carriers. Through September 30, 2002, approximately $56 million has been received from insurance carriers and approximately $3.7 million has been received from other parties. The Company believes that the remaining re ceivable balance at September 30, 2002 will be recovered from its insurance carrier or other parties.      Additionally the State of Maryland Department of Environment executed a settlement agreement that reflects the full and final settlement of all claims and penalties against the Company for its violation of state laws in regards to the oil spill. The settlement agreement resulted in a total expense of $950,000, which was recorded in the third quarter of 2002.
Item 6.  EXHIBITS AND REPORTS ON FORM 8-K
(a)		Exhibits
		Exhibit 3.1	-	Articles of Incorporation - filed herewith.
		Exhibit 3.2	-	Bylaws - filed herewith.
		Exhibit 12	-	Computation of ratios - filed herewith.
		Exhibit 99	-	Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
(b)		Reports on Form 8-K
		A Current Report on Form 8-K was filed by the Company on July 25, 2002. The items reported on such Form 8-K were Item 5. (Other Events) and Item 7. (Financial Statements and Exhibits).
		A Current Report on Form 8-K was filed by the Company on July 26, 2002. The items reported on such Form 8-K were Item 5. (Other Events) and Item 7. (Financial Statements and Exhibits).
		A Current Report on Form 8-K was filed by the Company on August 2, 2002. The items reported on such Form 8-K were Item 1 (Changes in Control of Registrant) and Item 7 (Financial Statements and Exhibits).
		A Current Report on Form 8-K was filed by the Company on August 9, 2002. The items reported on such Form 8-K were Item 7 (Financial Statements and Exhibits) and Item 9 (Regulation FD Disclosure).

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.
November 13, 2002     Date				Potomac Electric Power Company            Registrant By   /s/ A. W. WILLIAMS                   A. W. Williams     Senior Vice President and      Chief Financial Officer
CERTIFICATIONS
I, Dennis R. Wraase, Chief Executive Officer of Potomac Electric Power Company, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Potomac Electric Power Company.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchanges Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:  November 13, 2002			/s/ D. R. WRAASE                  Dennis R. Wraase Chief Executive Officer
I, Andrew W. Williams, Chief Financial Officer of Potomac Electric Power Company, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Potomac Electric Power Company.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchanges Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:  November 13, 2002			/s/ A. W. WILLIAMS                Andrew W. Williams Senior Vice President and Chief Financial Officer

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 nine months ended September 30, 2002, and for each of the years 2001 through 1997, on the basis of Utility operations only, are as follows:
	Nine        Months Ended    September 30, 2002		For the Year Ended December 31,
			2001	2000	1999	1998	1997
			(Dollar Amounts in Millions)
Net income		$125.7	$194.2	$348.9	$228.0	$211.2	$164.7
Taxes based on income		83.8	130.9	352.9	142.6	131.0	97.5
Income before taxes		209.5	325.1	701.8	370.6	342.2	262.2
Fixed charges:
Interest charges		69.0	112.5	170.1	156.1	151.8	146.7
Interest factor in rentals		6.8	23.4	23.2	23.4	23.8	23.6
Total fixed charges		75.8	135.9	193.3	179.5	175.6	170.3
Income before income taxes and fixed charges		$285.3	$461.0	$895.1	$550.1	$517.8	$432.5
Coverage of fixed charges		3.76	3.39	4.63	3.06	2.95	2.54
Preferred dividend requirements		$3.8	$5.0	$5.5	$8.9	$18.0	$16.5
Ratio of pre-tax income to net income		1.67	1.67	2.01	1.63	1.62	1.59
Preferred dividend factor		$  6.3	$  8.4	$ 11.1	$ 14.5	$ 29.2	$ 26.2
Total fixed charges and preferred dividends		$ 82.1	$144.3	$204.4	$194.0	$204.8	$196.5
Coverage of combined fixed charges and preferred dividends		3.48	3.20	4.38	2.84	2.53	2.20

Exhibit 12 Statements Re. Computation of Ratios
The computations of the coverage of fixed charges before income taxes, and the coverage of combined fixed charges and preferred dividends for the nine months ended September 30, 2002, and for each of the years 2001 through 1997, on a consolidated basis, are as follows.
	Nine        Months Ended    September 30, 2002		For the Year Ended December 31,
			2001	2000	1999	1998	1997
			(Dollar Amounts in Millions)
Net income*		$142.8	$192.3	$369.1	$256.7	$234.8	$179.8
Taxes based on income		51.2	83.5	341.2	114.5	122.3	65.6
Income before taxes		194.0	275.8	710.3	371.2	357.1	245.4
Fixed charges:
Interest charges		96.9	166.4	230.7	208.7	208.6	216.1
Interest factor in rentals		7.2	23.8	23.6	23.8	24.0	23.7
Total fixed charges		104.1	190.2	254.3	232.5	232.6	239.8
Competitive subsidiary capitalized interest		-	(2.7)	(3.9)	(1.8)	(0.6)	(0.5)
Income before income taxes and fixed charges		$298.1	$463.3	$960.7	$601.9	$589.1	$484.7
Coverage of fixed charges		2.86	2.44	3.78	2.59	2.53	2.02
Preferred dividend requirements		$  3.8	$  5.0	$  5.5	$  8.9	$ 18.0	$ 16.5
Ratio of pre-tax income to net income		1.36	1.43	1.92	1.45	1.52	1.36
Preferred dividend factor		$  5.1	$  7.2	$10.6	$12.9	$27.4	$22.4
Total fixed charges and preferred dividends		$109.2	$197.4	$264.9	$245.4	$260.0	$262.2
Coverage of combined fixed charges and preferred dividends		2.73	2.35	3.63	2.45	2.27	1.85
* Adjusted to remove the impact of POM's loss from equity investment amounts.

Exhibit 99
Certificate of Chief Executive Officer and Chief Financial Officer of Potomac Electric Power Company (pursuant to 18 U.S.C. Section 1350)
I, Dennis R. Wraase, Chief Executive Officer, and I, Andrew W. Williams, Senior Vice President and Chief Financial Officer, of Potomac Electric Power Company, certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Potomac Electric Power Company for the quarter ended September 30, 2002, filed with the Securities and Exchange Commission on the date hereof (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained therein fairly presents, in all material respects, the financial condition and results of operations of Potomac Electric Power Company.
November 13, 2002	/s/ D. R. WRAASE                  Dennis R. Wraase Chief Executive Officer
November 13, 2002	/s/ A. W. WILLIAMS                Andrew W. Williams Senior Vice President and   Chief Financial Officer

EX-3

RESTATED ARTICLES OF INCORPORATION AND ARTICLES OF RESTATEMENT OF POTOMAC ELECTRIC POWER COMPANY           These Restated Articles of Incorporation and Articles of Restatement of Potomac Electric Power Company (hereinafter called the "Company"), a District of Columbia corporation and a domestic corporation of the Commonwealth of Virginia, were duly adopted by the Company in accordance with the provisions of Section 29-101.58a of the District of Columbia Business Corporation Act and Section 13.1-711 of the Virginia Stock Corporation Act. The Company's Articles of Incorporation were originally filed in the District of Columbia on April 28, 1896, and Articles of Reincorporation of an Existing Domestic Corporation were filed in the District of Columbia on February 20, 1957.           The Restated Articles of Incorporation and Articles of Restatement of the Company are as follows: I.        The name of the Company is: POTOMAC ELECTRIC POWER COMPANY II.      The duration of the Company shall be perpetual. III.     The purposes for which the Company is organized are:
	(A)     To manufacture, produce, generate, buy, sell, lease, deal in, transmit and distribute (i) power, light, energy and heat in the form of electricity or otherwise, (ii) by-products thereof and (iii) appliances, facilities and equipment for use in connection therewith;           (B)     To acquire (by construction, purchase, condemnation, lease or otherwise), use, maintain, operate, deal in and dispose of, power plants, dams, substations, office buildings, service buildings, transmission lines, distribution lines, and all other buildings, machinery, property (real, personal or mixed) and facilities (including water power and other sites), and all fixtures, equipments and appliances, necessary, appropriate, incidental or convenient for its corporate purposes; and           (C)     To conduct business as a public service company, which business is briefly described as the purchase, manufacture, generation, transmission, distribution and sale, both at wholesale and at retail, of electricity or other power or energy for light, heat and power purposes in the District of Columbia, the Commonwealth of Virginia, the State of Maryland and elsewhere.
IV.      The aggregate number of shares which the Company shall have authority to issue is 207,750,000 divided into two classes: the first consisting of 7,750,000 shares of the par value of $50 each; and the second consisting of 200,000,000 shares of $.01 par value each. V.        Said 7,750,000 shares of the par value of $50 each are designated as Serial Preferred Stock; said 200,000,000 shares of the par value of $.01 each are designated as Common Stock. Such of said authorized shares of Serial Preferred Stock and Common Stock as are unissued at any time may be issued, in whole or in part, at any time or from time to time by action of the Board of Directors of the Company, subject to the laws in force in the District of Columbia and the Commonwealth of Virginia and the terms and conditions set forth in the Articles of Incorporation of the Company.           The preferences, qualifications, limitations, and restrictions, the special or relative rights, and the voting power in respect of the shares of each said class are as follows: (A)       SERIAL PREFERRED STOCK           (a)     Subject to the provisions hereafter in this subdivision (A) set forth, the authorized and unissued shares of Serial Preferred Stock may be divided into and issued, from time to time, in one or more series as the Board of Directors may determine, and the Board of Directors is hereby expressly authorized to adopt from time to time resolutions, in respect of any unissued shares of Serial Preferred Stock, to fix and determine:
	(1)     The division of such shares into series and the designation and authorized number of the shares of the particular series;           (2)     The rate of dividend for the particular series;           (3)     The price or prices at and the terms and conditions on which shares of the particular series may be redeemed;           (4)     The amount payable upon shares of the particular series in the event of voluntary liquidation;           (5)     Sinking fund provisions (if any) for the redemption or purchase of shares of the particular series; and           (6)     The terms and conditions (if any) on which the shares of the particular series may be converted into other classes of stock of the Company;
All shares of Serial Preferred Stock shall be of equal rank with each other, regardless of series, and all shares thereof shall be identical except as to the above listed relative rights and preferences, in respect of any or all of which there may be variations between different series as fixed and determined by the Board of Directors in said resolutions. All shares of the Serial Preferred Stock of any one series shall be identical with each other in all respects.           (b)     The following terms, as used in this subdivision (A), shall have the following meanings:
	(1)     The term senior stock shall mean any class of stock ranking in its claim to assets or dividends prior to the 1,600,000 shares of Serial Preferred Stock created hereby;          (2)     The term parity stock shall mean any class of stock ranking in its claim to assets or dividends on a parity with the Serial Preferred Stock, but shall not include any of the 1,600,000 shares of Serial Preferred Stock created hereby, nor shall it include any increase in the authorized amount of the Serial Preferred Stock; and           (3)     The term junior stock shall mean the Common Stock and any other class of stock ranking in its claim to assets or dividends junior to the Serial Preferred Stock.
(c)     The holders of the Serial Preferred Stock shall be entitled to receive, but only when and as declared by the Board of Directors, cumulative cash dividends in the case of each series at the annual rate for such series theretofore fixed by the Board of Directors as hereinbefore provided, payable quarter-yearly on the first days of March, June, September and December in each year to stockholders of record on the respective dates fixed for the purpose by the Board of Directors as dividends are declared.                     No dividend shall be declared on any shares of the Serial Preferred Stock unless there shall likewise be declared on all shares of the Serial Preferred Stock at the time outstanding like dividends, ratably in proportion to the respective annual dividend rates fixed therefor.                     The dividends on shares of the Serial Preferred Stock shall be cumulative from the quarter-yearly dividend payment date next preceding the date of issue of such shares, unless such shares shall have been issued after the record date and before the payment date for a particular dividend, in which case the dividends shall be cumulative from the quarter-yearly dividend payment date next ensuing after the date of issue of such shares. Unless dividends on all outstanding shares of the Serial Preferred Stock, at the annual dividend rate or rates fixed therefor, shall have been paid for all past quarter-yearly dividend periods to which they are entitled, and the full dividend thereon at said rate or rates for the quarter-yearly dividend period current at the time shall have been paid or declared and set apart for payment, but without interest on accumulated dividends, and unless all sinking fun d payments, if any, theretofore required to have been made shall have been made or provided for, no dividends shall be declared and no other distribution shall be made on any junior stock, and no junior stock shall be purchased, retired or otherwise acquired for value by the Company. No dividend shall be declared on any junior stock payable more than 120 days after the date of declaration.                     The holders of the Serial Preferred Stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this subdivision (c).           (d)     The Company, at the option of the Board of Directors or by the operation of the sinking fund, if any, provided for the Serial Preferred Stock of any series, may, from time to time, subject to such terms and conditions, if any, as may be fixed by the Board of Directors with respect to any series as hereinbefore provided, redeem the whole or any part of such series at any time outstanding, by paying in cash the applicable redemption price therefor theretofore fixed by the Board of Directors as hereinbefore provided.                     Notice of every such redemption shall be given by publication at least once in each of two calendar weeks in each of two daily newspapers printed in the English language, one published and of general circulation in the City of Washington, District of Columbia, and the other in the Borough of Manhattan, The City of New York, the first publication to be at least thirty days and not more than sixty days prior to the date fixed for such redemption. At least thirty days' and not more than sixty days' previous notice of every such redemption shall also be mailed to the holders of record of the shares so to be redeemed, at their respective addresses as the same shall appear on the books of the Company; but failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares so to be redeemed.                     In case of the redemption of a part only of any series of the Serial Preferred Stock at the time outstanding, the Company or its duly authorized agent shall select by lot the shares so to be redeemed. The Board of Directors shall have full power and authority, subject to the limitations and provisions herein contained, to prescribe the manner in which the drawings by lot shall be conducted and the terms and conditions upon which the Serial Preferred Stock shall be redeemed from time to time.                     If such notice of redemption shall have been duly given by publication, and if on or before the redemption date specified therein the funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds, in trust for the account of the holders of the shares so called for redemption, so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed to be outstanding on and after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable upon redemption thereof, without interest.                     Provided, however, in the alternative, that, after giving notice by publication of any such redemption as hereinbefore provided or after giving to the bank or trust company referred to below irrevocable authorization to give or complete such notice by publication, and prior to the redemption date specified in such notice, the Company may deposit in trust, for the account of the holders of the shares of Serial Preferred Stock so to be redeemed, the funds necessary for such redemption with a bank or trust company in good standing, organized and doing business under the laws of the United States or of any state or territory or of the District of Columbia and having its principal office in the City of Washington, District of Columbia, or in the Borough of Manhattan, The City of New York, having capital, surplus and undivided profits aggregating at least Ten Million Dollars, designated in suc h notice of redemption, and thereupon all shares of the Serial Preferred Stock with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, and all rights with respect to such shares of Serial Preferred Stock shall forthwith upon such deposit in trust cease and terminate, except only the right of the holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest and the right to exercise, on or before such redemption date privileges of conversion or exchange, if any, not theretofore expiring.                     Shares of Serial Preferred Stock purchased or redeemed pursuant to any obligation of the Company to purchase or redeem shares for a sinking fund, shares redeemed pursuant to the provisions hereof or purchased and for which credit shall have been taken against any sinking fund obligation, and shares surrendered pursuant to any conversion right, shall not be reissued or otherwise disposed of and shall be canceled. Any other shares of Serial Preferred Stock redeemed or otherwise acquired by the Company shall continue to be part of the authorized capital stock of the Company and may thereafter, in the discretion of the Board of Directors and to the extent permitted by law, be sold or reissued from time to time, as part of the same or another series, subject to the terms and conditions herein set forth.                     If and so long as the Company shall be in default in the payment of any quarter-yearly dividend on shares of any series of the Serial Preferred Stock, or shall be in default in the payment of funds into or the setting aside of funds for any sinking fund created for any series of the Serial Preferred Stock, the Company may not (other than by the use of unapplied funds, if any, paid into or set aside for a sinking fund or funds prior to such default) (i) redeem any shares of the Serial Preferred Stock unless all shares thereof are redeemed, or (ii) purchase or otherwise acquire for a consideration any shares of the Serial Preferred Stock, except pursuant to offers of sale made by holders of the Serial Preferred Stock in response to an invitation for tenders given simultaneously by the Company by mail to the holders of record of all shares of the Serial Preferred Stock then outstanding.           (e)     In the event of any voluntary liquidation, dissolution or winding up of the Company, then, before any distribution or payment shall be made to the holders of any junior stock, the holder of each share of the Serial Preferred Stock shall be entitled to be paid in full in cash the amount fixed with respect to such share by the Board of Directors as hereinbefore provided, together with an amount computed at the annual dividend rate therefor from the date upon which dividends thereon became cumulative to the date fixed for the payment thereof, less the aggregate of the dividends theretofore paid thereon. If such payments shall have been made in full to the holders of the Serial Preferred Stock, the remaining assets and funds of the Company shall be distributed among the holders of the Common Stock and any other junior stock according to their respective rights, preferences, restrictions, qualifications and shares.                     In the event of any involuntary liquidation, dissolution or winding up of the Company, then, before any distribution or payment shall be made to the holders of any junior stock, the holder of each share of the Serial Preferred Stock shall be entitled to be paid in full the par value thereof in cash, together with an amount computed at the annual dividend rate therefor from the date upon which dividends thereon became cumulative to the date fixed for the payment thereof, less the aggregate of the dividends theretofore paid thereon. If such payments shall have been made in full to the holders of the Serial Preferred Stock, the remaining assets and funds of the Company shall be distributed among the holders of the Common Stock and any other junior stock according to their respective rights, preferences, restrictions, qualifications and shares.                     With respect to the payments to be made in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, all series of the Serial Preferred Stock shall rank ratably according to their respective interests without preference of any series thereof over any other series.           (f)     Subject to the limitations hereinafter specified, whenever the full dividends on the Serial Preferred Stock at the time outstanding for all past quarter-yearly dividend periods shall have been paid and the full dividend thereon for the quarter-yearly dividend period then current shall have been paid or declared and a sum sufficient for the payment thereof set apart, then such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared on the Common Stock and any other junior stock, and the Serial Preferred Stock shall not be entitled to participate in any such dividends.           (g)     So long as any shares of the Serial Preferred Stock are outstanding, no amendment to the Articles of Incorporation of the Company which would (i) create, change any junior stock into, or increase the rights and preferences of, any senior or parity stock, (ii) increase the authorized amount of the Serial Preferred Stock in excess of the 1,600,000 shares created hereby or the authorized amount of any senior or parity stock, or (iii) change the express terms of the outstanding shares of Serial Preferred Stock in any manner substantially prejudicial to the holders thereof, shall be made without the affirmative consent (given in writing without a meeting or by a vote at a meeting duly called for the purpose) of the holders of more than two thirds of the aggregate number of shares of the Serial Preferred Stock then outstanding; but any such amendment may be made with such affirmative consent, together with such addition al vote or consent of stockholders as from time to time may be required by law; provided, however, that if any such amendment would change the express terms of the outstanding shares of Serial Preferred Stock of any particular series in any manner substantially prejudicial to the holders thereof without correspondingly affecting the holders of the outstanding shares of Serial Preferred Stock of all series, then, in lieu of such consent of the holders of Serial Preferred Stock (or, if such consent of the holders of the outstanding shares of Serial Preferred Stock is required by law, in addition thereto), a like affirmative consent of the holders of more than two thirds of the Serial Preferred Stock of the affected series at the time outstanding shall be necessary for making such amendment.           (h)     So long as any shares of the Serial Preferred Stock are outstanding, the Company shall not, without the affirmative consent (given in writing without a meeting or by a vote at a meeting duly called for the purpose) of the holders of at least a majority of the aggregate number of shares of the Serial Preferred Stock then outstanding:
	(1)     issue any shares of the Serial Preferred Stock in excess of 300,000 shares thereof at any one time outstanding, or issue any shares of senior or parity stock (either directly or by reclassification), unless for a period of twelve consecutive calendar months within the fifteen calendar months next preceding the date on which such shares are to be issued net earnings (after depreciation and taxes but before deducting interest) have been at least one and one-half times the annual interest charges and dividend requirements on all indebtedness of the Company and on all shares of Serial Preferred Stock and senior and parity stock which shall then be outstanding; for the purpose of such computation, the shares and any indebtedness proposed to be issued in connection with such issue shall be included, but any indebtedness or shares proposed to be retired in connection with such issue shall be excluded, and in determining such net earnings, the Board of Directors of the Company shall make such adjustments, by way of increase or decrease in such net earnings, as shall in their opinion be necessary to give effect for the entire twelve months for which such net earnings are determined to any acquisition or disposition of property the earnings of which can be separately ascertained, and to any issue, sale, assumption or retirement of securities, which shall have occurred after the commencement of such twelve months' period and prior to or in connection with the issue of the shares of the Serial Preferred Stock or senior or parity stock; or           (2)     issue any shares of the Serial Preferred Stock, in excess of 300,000 shares thereof at any one time outstanding, or issue any shares of senior or parity stock (either directly or by reclassification), unless immediately after such proposed issue the aggregate of (i) the capital of the Company applicable to its stock ranking junior as to assets and dividends and (ii) the surplus of the Company shall be not less than the aggregate amount payable upon involuntary liquidation to the holders of the Serial Preferred Stock and of senior and parity stock then to be outstanding, excluding from such computation all stock to be retired through such proposed issue; or           (3)     issue any unsecured notes, debentures or other securities representing unsecured indebtedness, or assume or guarantee any such unsecured securities, other than for the extension, renewal or refunding of outstanding debt securities theretofore issued or assumed, or for the redemption or retirement of shares of the Serial Preferred Stock or of any senior or parity stock, if immediately after such issue or assumption the total principal amount of such unsecured securities then outstanding would exceed twenty-five per cent of the aggregate of (i) the total principal amount of all bonds or other securities representing secured indebtedness issued, assumed or guaranteed by the Company and then to be outstanding and (ii) the capital and surplus of the Company as then stated on its books less any known excess of book value of the Company's physical property which is devoted to public use over (I) the actual cost thereof t o the Company and (II) as to such property as was not acquired as the result of arm's length negotiations, the actual cost thereof to the one first devoting the same to public use; or           (4)     merge or consolidate with or into any other corporation or corporations or sell or lease all or substantially all of its assets, unless such merger, consolidation, sale or lease, or the issue and assumption of all securities to be issued or assumed in connection with any such merger, consolidation, sale or lease shall have been ordered, approved or permitted by the regulatory authority or authorities having jurisdiction in the premises; provided that the provisions of this clause (4) shall not apply to a purchase, lease or other acquisition by the Company of the franchises or assets of another corporation, or otherwise apply in any manner which does not involve a merger or consolidation or sale or lease by the Company of all or substantially all of its assets.
(i)     So long as any shares of the Serial Preferred Stock are outstanding, the Company shall not pay any dividends on its Common Stock (other than dividends payable in Common Stock) or make any distribution on, or purchase or otherwise acquire for value, any of its Common Stock (each such payment distribution purchase and/or acquisition being herein referred to as a "Common Stock dividend") except to the extent permitted by the following provisions:
	(1)     No Common Stock dividend shall be declared or paid in an amount which, together with all other Common Stock dividends declared in the year ending on (and including) the date of the declaration of such Common Stock dividend, would in the aggregate exceed 50% of the net earnings of the Company for the period consisting of the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such Common Stock dividend after deducting from such net earnings dividends accruing on any stock other than Common Stock of the Company during such period, if at the end of such period, the ratio (herein referred to as the "capitalization ratio") of the sum of (i) the capital represented by the Common Stock (including premiums on Common Stock) and (ii) the surplus accounts of the Company, to the sum of (I) the total capital and (II) the surplus accounts of the Company (after adjust ment in each case of the surplus accounts to reflect payment of such Common Stock dividend) would be less than 20%.           (2)     If such capitalization ratio, determined as aforesaid, shall be 20% or more, but less than 25%, no Common Stock dividend shall be declared or paid in an amount which, together with all other Common Stock dividends declared in the year ending on (and including) the date of the declaration of such Common Stock dividend, would in the aggregate exceed 75% of the net earnings of the Company for the period consisting of the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such Common Stock dividend after deducting from such net earnings dividends accruing on any stock other than the Common Stock of the Company during such period; and           (3)     If such capitalization ratio, determined as aforesaid, shall be in excess of 25%, no Common Stock dividend shall be declared or paid which would reduce such capitalization ratio to less than 25% except to the extent permitted by the next preceding subparagraphs (1) and (2).
For the purposes of this subdivision (i) the total capital of the Company shall be deemed to consist of the aggregate of (x) the principal amount of all outstanding indebtedness of the Company represented by bonds, notes or other evidences of indebtedness maturing by their terms one year or more after the date of the issue thereof and (y) the par or stated value of all outstanding capital stock (including premiums on capital stock) of all classes of the Company. All indebtedness and shares of stock of the Company acquired by the Company and held in its treasury shall be excluded in determining total capital.             Purchases or other acquisitions of Common Stock shall be deemed, for the purposes of the foregoing provisions of this subdivision (i), to have been declared as dividends as of the date on which such purchases or acquisitions are consummated.           (j)     No holder of Serial Preferred Stock shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock, or securities convertible into, or carrying or evidencing any right to purchase, stock, of any class whatever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise.           (k)     Except as otherwise in subdivisions (g) and (h) of this subdivision (A) or by statute specifically provided, the Serial Preferred Stock shall have no voting power unless and until dividends payable thereon are in default in an amount equivalent to four full quarter-yearly dividends on the Serial Preferred Stock at the time outstanding. In such event and until such default shall have been remedied as hereinafter provided, the holders of Serial Preferred Stock, voting separately, shall become entitled to elect twenty-five percent of the Board of Directors, or the smallest number of directors that exceeds twenty-five percent of the Board, but in no event less than two directors, and the other stockholders then entitled to vote for the election of directors, voting separately by classes if so required by the provisions applicable to such classes, shall be entitled to elect the remaining directors of the Company. Upon the accrual of such special right to the holders of Serial Preferred Stock a meeting of the stockholders then entitled to vote for the election of directors shall be held upon notice promptly given, as provided in the By-Laws for a special meeting, by the President or the Chairman of the Board of the Company. If within fifteen days after the accrual of such special right to the holders of Serial Preferred Stock, the President and the Chairman of the Board of the Company shall fail to call such meeting, then such meeting shall be held upon notice, as provided in the By-Laws for a special meeting, given by the holders of not less than five hundred shares of Serial Preferred Stock after filing with the Company notice of their intention so to do. The terms of office of all persons who may be directors of the Company at the time shall terminate upon the election of directors by the holders of Serial Preferred Stock, whether or not at the time of such termination the remaining directors of the Company shall have b een elected; and thereafter and during the continuance of such special right of the holders of Serial Preferred Stock, the Board of Directors shall be divided into two or more classes, one class consisting of the directors to be elected by the holders of Serial Preferred Stock and the other class or classes consisting of the directors to be elected by the other stockholders entitled to vote for the election of directors, and the directors of each such class elected at such meeting, or at any adjournment thereof, and the directors of each such class elected at any subsequent annual meeting for the election of directors, held during the continuance of such special right, shall hold office until the next succeeding annual election and until their respective successors by classes are elected and qualified.                  However, if and when all dividends then in default on the Serial Preferred Stock shall be paid (and such dividends shall be declared and paid as soon as reasonably practicable out of surplus or net profits, but without diminishing the amount of capital of the Company), the holders of Serial Preferred Stock shall be divested of such special right, but subject always to the same provisions for the revesting of such special right in the holders of Serial Preferred Stock in the case of any similar future default or defaults. Whenever the holders of Serial Preferred Stock shall be so divested of such special right, the method of election of the Board of Directors by the vote of the other stockholders entitled to vote for the election of directors exclusively shall be restored, and the election of directors shall take place at the next succeeding annual meeting for the election of directors, or at any adjournme nt thereof.           (l)     Except as hereinafter provided, during the continuance of the special right of the holders of Serial Preferred Stock to elect directors as provided in subdivision (k) of this subdivision (A), at all meetings for the election of directors the presence in person or by proxy of the holders of record of a majority of the outstanding shares of Serial Preferred Stock shall be necessary to constitute a quorum for the election of directors whom the holders of Serial Preferred Stock are entitled to elect, and the presence in person or by proxy of the holders of record of a majority of the outstanding shares of each other class of stock then entitled to vote for the election of directors shall be necessary to constitute a quorum for the election of the directors whom the holders of such class of stock are entitled to elect. In the absence of such a quorum of the holders of stock of any particular class then entitled to vote for the election of directors, the holders of a majority of the shares of the stock of such class so present in person or represented by proxy may adjourn from time to time the meeting for the election of directors to be elected by such stock, without notice other than announcement at the meeting, until the requisite quorum of holders of such stock shall be obtained. However, at the first meeting for the election of directors after any accrual of the special right of the holders of Serial Preferred Stock, and at any subsequent annual meeting for the election of directors held during the continuance of such special right, if there shall not be such a quorum of the holders of Serial Preferred Stock the meeting shall be adjourned from time to time as above provided until such quorum shall have been obtained; provided that, if such quorum shall not have been obtained within ninety days from the date of such meeting as originally called (or, in the case of any annual meeting held during the continuance of such special right, from the date fixed for such annual meeting), the presence in person or by proxy of the holders of record of one third of the outstanding shares of Serial Preferred Stock shall then be sufficient to constitute a quorum for the election of the directors whom the holders of Serial Preferred Stock are then entitled to elect. The absence of a quorum of the holders of any class of stock then entitled to vote for the election of directors shall not, except as hereinafter provided, prevent or invalidate the election by the other class or classes of stockholders of the directors which they are entitled to elect, if the necessary quorum of stockholders of such other class or classes is present in person or represented by proxy at any such meeting or any adjournment thereof. However, at the first meeting for the election of directors after any accrual of the special right of the holders of Serial Preferred Stock to elect directors as provided in subdivision (k) of this subdivision (A), the absence of a quorum of the holders of Serial Preferred Stock shall prevent the election of directors by the holders of Common Stock until the election of directors by the holders of Serial Preferred Stock after a quorum of the holders of Serial Preferred Stock shall have been obtained. (B)        COMMON           (a)     No holder of Common Stock shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock, or securities convertible into, or carrying or evidencing any right to purchase, stock, of any class whatever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise.           (b)     Except as otherwise provided by statute or by this Article V, voting rights for all purposes shall be vested exclusively in the holders of the Common Stock, who shall have one vote for each share held by them. VI.     The following provisions are set forth herein for the regulation of the internal affairs of the Company:
	At the date hereof, the Company has issued and outstanding $1,006,800,000 aggregate principal amount of First Mortgage Bonds issued under and secured by the lien of the Company's Mortgage and Deed of Trust dated July 1, 1936, as amended and supplemented, heretofore made by the Company to The Bank of New York (as successor to The Riggs National Bank of Washington, D.C.), as Trustee, which Mortgage and Deed of Trust, as amended and supplemented, constitutes a lien on substantially all the properties and franchises of the Company, other than cash, accounts receivable and other liquid assets, securities, leases by the Company as lessor, equipment and materials not installed as part of the fixed property, and electric energy and other materials, merchandise or supplies produced or purchased by the Company for sale, distribution or use. The Board of Directors of the Company may from time to time cause to be issued additional First Mortgage Bonds to be secured by said Mortgage and Deed of Trust, as heretofore or hereafter amended and supplemented, without limitation as to principal amount and without action by or approval of the Company's shareholders, and in connection therewith may cause to be executed and delivered by the Company such supplemental indentures, containing such additional covenants, as the Board may approve.           Without the assent of the shareholders of any class the stated capital of the Company may, from time to time, be reduced in respect of shares of its Serial Preferred Stock reacquired in conversion and cancelled.
VII.          The address of the Company's registered office in the District of Columbia is 701 Ninth Street, N.W., and the name of its registered agent at such address is John J. Sullivan.                  The address of the Company's registered office in Virginia is 8280 Greensboro Drive, #900, P.O. Box 9346, Tyson's Corner, McLean, Virginia 22102; and the name of its registered agent at such address is Sean F. Murphy, who is a resident of Virginia and a member of the Virginia State Bar. VIII.        The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The number of directors of the Company shall be the number from time to time fixed by, or in the manner provided in, the By-Laws of the Company. The directors shall be elected in the manner provided in the By-Laws.                  Notwithstanding the foregoing, whenever the holders of any class of stock issued by the Company shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Articles of Incorporation applicable thereto, and such directors so elected shall not be divided into classes unless expressly provided by such terms.                  IN WITNESS WHEREOF, Potomac Electric Power Company has duly caused these Restated Articles of Incorporation and Articles of Restatement to be duly executed in its name by Dennis R. Wraase, its President, and its corporate seal to be hereunto affixed and duly attested by Ellen Sheriff Rogers, its Secretary, all as of the 12th day of August, 2002.
		D. R. WRAASE                             Dennis R. Wraase       President
Attest: ELLEN SHERIFF ROGERS       Ellen Sheriff Rogers       Secretary

EX-3

By-Laws

of

POTOMAC ELECTRIC POWER COMPANY

WASHINGTON, D. C.

August 1, 2002

POTOMAC ELECTRIC POWER COMPANY

BY-LAWS

_______

ARTICLE I

          SECTION 1.     The annual meeting of the stockholders of the Company shall be held on such day, at such time and place within or without the District of Columbia as the Board of Directors or the Executive Committee shall designate for the purpose of electing directors and of transacting any other proper business.

          SECTION 2.     Special meetings of the stockholders, when called, shall be held at such time and place within or without the District of Columbia and may be called by the Board of Directors or the Executive Committee, or, if the meeting is for the purpose of enabling the holders of the Serial Preferred Stock of the Company to elect directors upon the conditions set forth in the Articles of Incorporation of the Company, such meeting shall be called as therein provided.

          SECTION 3.     Notice stating the place, day and hour of each meeting of the stockholders and the purpose or purposes for which the meeting is called shall be given in any manner permitted by law not less than ten days (or such longer period as may be prescribed by law) and not more than fifty days before the date of the meeting to each stockholder of record entitled to vote at the meeting.

          In connection with the first election of a portion of the members of the Board of Directors by the holders of the Serial Preferred Stock upon accrual of such right, as provided in the Articles of Incorporation of the Company, the Company shall prepare and mail to the holders of the Serial Preferred Stock entitled to vote thereon such proxy forms, communications and documents as may be deemed appropriate for the purpose of soliciting proxies for the election of directors by the holders of the Serial Preferred Stock.

          SECTION 4.     At each meeting of stockholders the holders of record of a majority of the outstanding shares entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum, except as otherwise provided by law or by the Articles of Incorporation of the Company. The affirmative vote of the holders of a majority of the shares represented at a duly organized meeting at which a quorum was present at the time of organization, and entitled to vote on the subject matter, shall be the act of the stockholders, unless the vote of the holders of a greater number, or voting by classes, is required by law or by the Articles of Incorporation of the Company and except that in elections of directors those receiving the greatest numbers of votes shall be deemed elected even though not receiving a majority. If a meeting cannot be organized because a quorum has not attended, the holders of a majority of the shares represented at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained, when any business may be transacted which might have been transacted at the meeting as first convened had there been a quorum.

          SECTION 5.     Meetings of the stockholders shall be presided over by the Chairman of the Board or, if he or she is not present, by the President or, if neither is present, by a chairman to be chosen at the meeting. The Secretary of the Company or, if he or she is not present, an Assistant Secretary of the Company or, if neither is present, a secretary to be chosen at the meeting, shall act as Secretary of the meeting.

          SECTION 6.     Each stockholder entitled to vote at any meeting may so vote either in person or by proxy executed in writing by the stockholder or by his or her duly authorized attorney-in-fact and shall be entitled to one vote on each matter submitted to a vote for each share of stock of the Company having voting power thereon registered in his or her name at the date fixed for the determination of the stockholders entitled to vote at the meeting.

          SECTION 7.     In order to determine who are stockholders of the Company for any proper purpose, the Board of Directors either may close the stock transfer books or, in lieu thereof, may fix in advance a date as the record date for such determination, such date in any case to be not more than fifty days (and, in the case of a meeting of stockholders, not less than ten days or such longer period as may be required by law) prior to the date on which the particular action, requiring such determination, is to be taken. When such a record date has been so fixed for the determination of stockholders entitled to vote at a meeting, such determination shall apply to any adjournment thereof.

ARTICLE II

BOARD OF DIRECTORS

          SECTION 1.     The Board of Directors of the Company shall consist of six (6) persons. Directors need not be stockholders. Except as provided in the Articles of Incorporation of the Company or Section 2 hereof, the each director shall be elected at the annual meeting of the stockholders. Except as provided in the Articles of Incorporation of the Company, each director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. A majority of the members of the Board shall constitute a quorum for the transaction of business, but if any meeting of the Board cannot be organized because a quorum has not attended, a majority of those present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained, when any business may be transacted which might have been transacted at t he meeting as first convened had there been a quorum. The acts of a majority of the directors present at a meeting at which a quorum is present shall, except as otherwise provided by law, by the Articles of Incorporation of the Company, or by these By-Laws, be the acts of the Board of Directors.

          The Board of Directors, as soon as is reasonably practicable after the initial election of directors by the stockholders in each year, shall elect one of its number Chairman of the Board, who may be, but is not required to be, an officer and employee of the Company.

          SECTION 2.     Except as provided in the Articles of Incorporation of the Company, any vacancy from any cause (except an increase in the authorized number of directors) occurring among the directors shall be filled without undue delay by a majority of the remaining directors or the sole remaining director. The term of any director elected by the remaining directors to fill a vacancy shall expire at the next stockholders' meeting at which directors are elected.

          SECTION 3.     Regular meetings of the Board of Directors shall be held at the office of the Company in the District of Columbia (unless otherwise fixed by resolution of the Board) at such time as may from time to time be fixed by resolution of the Board. Special meetings of the Board may be held upon call of the Executive Committee, or the Chairman of the Board, or the President, by any form of notice permitted by law, setting forth the time and place (either within or without the District of Columbia) of the meeting. A meeting of the Board may be held without notice, immediately after, and at the same place as, the annual meeting of the stockholders. A waiver in writing of any notice, signed by a director, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice to such director. Neither the business to be transacted at, nor the purpose of, any regular or specia l meeting of the Board need be specified in any notice, or waiver of notice, of such meeting.

          SECTION 4.     Meetings of the Board of Directors shall be presided over by the Chairman of the Board or, if he is not present, by the President or, if neither is present, by a chairman to be chosen at the meeting. The Secretary of the Company or, if he or she is not present, an Assistant Secretary of the Company or, if neither is present, a secretary to be chosen at the meeting, shall act as secretary of the meeting.

          SECTION 5.     The Board of Directors may, by resolution or resolutions adopted by not less than the number of directors necessary to constitute a quorum of the Board, designate an Executive Committee consisting of not less than two nor more than five directors. Except as otherwise provided by law, the Executive Committee shall have and may exercise, when the Board is not in session, all of the powers of the Board in the management of the property, business and affairs of the Company; but the Executive Committee shall not have power to fill vacancies in the Board, or to change the membership of, or to fill vacancies in, the Executive Committee, or to adopt, alter, amend, or repeal by-laws of the Company. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee. The Executive Committee may make rules for the conduct of its business and f ix the time and place of its meetings, and may appoint such committees and assistants as it shall from time to time deem necessary. A majority of the members of the Executive Committee shall constitute a quorum, and the acts of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the acts of said Committee. All action taken by the Executive Committee shall be reported to the Board at its regular meeting next succeeding the taking of such action.

          SECTION 6.     The Board of Directors may also, by resolution or resolutions adopted by not less than the number of directors necessary to constitute a quorum of the Board, designate one or more other committees, each such committee to consist of such number of directors as the Board may from time to time determine, which, to the extent provided in said resolution or resolutions, shall have and may exercise such limited authority as the Board may authorize. Such committee or committees shall have such name or names as the Board may from time to time determine. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. A majority, or such other number as the Board may designate, of the members of any such committee shall constitute a quorum. Each such committee may make rules for the conduct of its business and fix the time and place of its m eetings unless the Board shall otherwise provide. All action taken by any such committee shall be reported to the Board at its regular meeting next succeeding the taking of such action, unless otherwise directed.

          SECTION 7.     The Board of Directors shall fix the compensation to be paid to each director who is not a salaried employee of the Company for serving as a director and for attendance at meetings of the Board and committees thereof, and may authorize the payment to directors of expenses incurred in attending any such meeting or otherwise incurred in connection with the business of the Company. This By-Law shall not be construed to preclude any Director from serving the Company in any other capacity and receiving compensation therefor.

          SECTION 8.     At a special meeting called expressly for such purpose, any director elected by the holders of the Serial Preferred Stock, or elected by directors to fill a vacancy among the directors elected by the holders of such Stock, may be removed, only for cause, by a vote of the holders of a majority of the shares of Serial Preferred Stock, and the resulting vacancy may be filled, for the unexpired term of the director so removed, by a vote of the holders of such Stock.

          SECTION 9.     With respect to a Company officer, director, or employee, the Company shall indemnify, and with respect to any other individual the Company may indemnify, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (an "Action"), whether civil, criminal, administrative, arbitrative or investigative (including an Action by or in the right of the Company) by reason of the fact that he or she is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such Action; except in relation to matters as t o which he shall be finally adjudged in such Action to have knowingly violated the criminal law or be liable for willful misconduct in the performance of his or her duty to the Company. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person was guilty of willful misconduct.

          Any indemnification (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth above. In the case of any director, such determination shall be made: (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such Action; or (2) if such a quorum is not obtainable, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate) consisting solely of two or more directors not at the time parties to the proceeding; or (3) by special legal counsel selected by the Board of Directors or its committee in the manner prescribed by clause (1) or (2) of this paragraph, or if such a quorum is not obtainable and such a co mmittee cannot be designated, by majority vote of the Board of Directors, in which selection directors who are parties may participate; or (4) by vote of the shareholders, in which vote shares owned by or voted under the control of directors, officers and employees who are at the time parties to the Action may not be voted. In the case of any officer, employee, or agent other than a director, such determination may be made (i) by the Board of Directors or a committee thereof; (ii) by the Chairman of the Board of the Company or, if the Chairman is a party to such Action, the President of the Company, or (iii) such other officer of the Company, not a party to such Action, as such person specified in clause (i) or (ii) of this paragraph may designate. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemn ification and evaluation as to reasonableness of expenses shall be made by those entitled hereunder to select such legal counsel.

          Expenses incurred in defending an Action for which indemnification may be available hereunder shall be paid by the Company in advance of the final disposition of such Action as authorized in the manner provided in the preceding paragraph, subject to execution by the person being indemnified of a written undertaking to repay such amount if and to the extent that it shall ultimately be determined by a court that such indemnification by the Company is not permitted under applicable law.

          It is the intention of the Company that the indemnification set forth in this Section 9 of Article II, shall be applied to no less extent than the maximum indemnification permitted by law. In the event that any right to indemnification or other right hereunder may be deemed to be unenforceable or invalid, in whole or in part, such unenforceability or invalidity shall not affect any other right hereunder, or any right to the extent that it is not deemed to be unenforceable. The indemnification provided herein shall be in addition to, and not exclusive of, any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders, or otherwise, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and inure to the benefit of such person's heirs, executors, and administrators.

          SECTION 10.     In any proceeding brought by a stockholder in the right of the Company or brought by or on behalf of the stockholders of the Company, no monetary damages shall be assessed against an officer or director. The liability of an officer or director shall not be limited as provided in this section if the officer or director engaged in willful misconduct or a knowing violation of the criminal law.

ARTICLE III

OFFICERS

          SECTION 1.     The Board of Directors, as soon as reasonably practicable after the initial election of directors by stockholders in each year, may elect a Chairman of the Board as an officer of the Company, shall elect a President, one or more Vice Presidents (who may be given such other descriptive titles as the Board may specify), a Secretary, and a Treasurer, and from time to time may elect such Assistant Secretaries, and Assistant Treasurers and other officers, and appoint such other agents, as it may deem desirable. Any two or more offices may be held by the same person, except the offices of President and Secretary. The Board of Directors shall elect the Chairman of the Board or one of the above officers Chief Executive Officer of the Company.

          SECTION 2.     The term of office of all officers shall be until the next succeeding annual election of officers and until their respective successors shall have been elected and qualified; but any officer or agent elected or appointed by the Board of Directors may be removed, with or without cause, by the affirmative vote of a majority of the members of the Board whenever in their judgment the best interests of the Company will be served thereby. Such removal shall be without prejudice to contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Unless specifically authorized by resolution of the Board of Directors, no agreement for the employment of any officer for a period longer than one year shall be made.

          SECTION 3.     Subject to such limitations as the Board of Directors or the Executive Committee may from time to time prescribe, the officers of the Company shall each have such authority and perform such duties in the management of the property, business and affairs of the Company as by custom generally pertain to their respective offices, as well as such authority and duties as from time to time may be conferred by the Board of Directors, the Executive Committee or the Chief Executive Officer.

          SECTION 4.     The salaries of all officers, employees and agents of the Company shall be determined and fixed by the Board of Directors, or pursuant to such authority as the Board may from time to time prescribe.

ARTICLE IV

CERTIFICATES OF STOCK

          SECTION 1.     The shares of the capital stock of the Company shall be represented by certificates, provided that the Board of Directors of the Company may provide by resolution that some or all of the shares of any or all of its classes or series of capital stock may be uncertificated shares. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. Shares of the capital stock of the Company that are evidenced by certificates shall be in such form as the Board of Directors may from time to time prescribe. Such certificates shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary, shall be sealed with the seal of the Company, or a facsimile thereof, shall be countersigned and regist ered in such manner, if any, as the Board may by resolution prescribe. Where such a certificate is countersigned by a transfer agent (other than the Company or an employee of the Company), or by a transfer clerk and registered by a registrar, the signatures thereon of the President or Vice President and the Secretary or Assistant Secretary may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Company with the same effect as if such officer had not ceased to hold such office at the date of its issue.

          SECTION 2.     The shares of the capital stock of the Company shall be transferable on the books of the Company by the holders thereof in person or by duly authorized attorney, and, if represented by certificates, upon surrender and cancellation of the certificates evidencing such shares, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures as the Company or its agents may reasonably require and, if uncertificated, upon receipt of appropriate instructions.

          SECTION 3.     No certificate evidencing shares of the capital stock of the Company shall be issued in place of any certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft or destruction, and upon such indemnification of the Company and its agents by such person or persons and in such manner, as the Board of Directors may from time to time prescribe.

ARTICLE V

CHECKS, NOTES, CONTRACTS, ETC.

          All checks and drafts on the Company's bank accounts, bills of exchange, promissory notes, acceptances, obligations, other instruments for the payment of money, and endorsements other than for deposit in a bank account of the Company shall be signed by the Treasurer or an Assistant Treasurer and shall be countersigned by the Chief Executive Officer, the President, or a Vice President, unless otherwise authorized by the Board of Directors; provided that checks drawn on the Company's dividend and/or special accounts may bear the manual signature, or the facsimile signature, affixed thereto by a mechanical device, of such officer or agent as the Board of Directors shall authorize.

          All contracts, bonds and other agreements and undertakings of the Company shall be executed by the Chief Executive Officer, the President or a Vice President, or by such other person or persons as may be designated in writing from time to time by the Board of Directors, the Executive Committee, the Chief Executive Officer, the President or a Vice President, and, in the case of any such document required to be under seal, the corporate seal shall be affixed thereto and attested by the Secretary or an Assistant Secretary.

          Whenever any instrument is required by this Article to be signed by more than one officer of the Company, no person shall so sign in more than one capacity.

ARTICLE VI

FISCAL YEAR

          The fiscal year of the Company shall begin on the first day of January in each year and shall end on the thirty-first day of December following.

ARTICLE VII

OFFICES

          The principal office of the Company shall be situated in the District of Columbia. The registered office of the Company in Virginia shall be situated in the County of Fairfax. The Company may have such other offices at such places, within the District of Columbia, the Commonwealth of Virginia, or elsewhere, as shall be determined from time to time by the Board of Directors or by the Chief Executive Officer.

ARTICLE VIII

AMENDMENTS

          Except as otherwise provided by law, the Board of Directors may alter, amend, or repeal the By-Laws of the Company, or adopt new By-Laws, at any meeting of the Board, by the affirmative vote of not less than the number of directors necessary to constitute a quorum of the Board.