AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JULY 28, 1995
REGISTRATION NO. 33--
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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POTOMAC ELECTRIC POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DISTRICT OF COLUMBIA AND VIRGINIA 53-0127880
(IRS EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
----------------
1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068
(202) 872-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ELLEN SHERIFF ROGERS
ASSOCIATE GENERAL COUNSEL, ASSISTANT SECRETARY AND ASSISTANT TREASURER
POTOMAC ELECTRIC POWER COMPANY
1900 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20068
(202) 872-3526
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)
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WITH COPIES TO:
GEORGE B. REID, JR.,D. MICHAEL LEFEVER, ESQ. STEPHEN K. WAITE, ESQ.
COVINGTON & BURLING WINTHROP, STIMSON, PUTNAM & ROBERTS
1201 PENNSYLVANIA AVENUE, N.W. ONE BATTERY PARK PLAZA
WASHINGTON, D.C. 20004 NEW YORK, NEW YORK 10004

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

__________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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Debt Securities.................................. $250,000,000 $86,206.90$125,000,000 $37,878.79

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(1)Estimated solely for the purpose of calculating the registration fee.
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Pursuant to Rule 429 under the Securities Act of 1933, each of the
Prospectuses filed as part of this Registration Statement may be used as a
combined prospectus in connection with the securities registered under this
Registration Statement and unsold debt securities having an aggregate offering
price of $100,000,000$75,000,000 previously registered under Registration Statement No.
33-5037733-61379 for which a registration fee of $31,250$25,862 was paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus to be used in
separate offerings of Debt Securities: First Mortgage Bonds and Medium-Term
Notes,Securities in an aggregate principal amount of
$350,000,000,$200,000,000, including $100,000,000$75,000,000 in principal amount of debt securities
registered under Registration Statement No. 33-50377.33-61379. One prospectus will be
used in connection with the offering of First Mortgage Bonds (the "First
Mortgage Bond Prospectus"). The other prospectus will be used in connection
with the offering of Medium-Term Notes (the "Medium-Term Note Prospectus").
The First Mortgage Bond Prospectus and the Medium-Term Note Prospectus are
identical with the exception of their respective Cover Pages, the section
headed "Plan of Distribution," the sections describing the respective Debt
Securities, and minor conforming changes to the sections headed "Use of
Proceeds," "Experts," and "Legal Opinions." The First Mortgage Bond Prospectus
includes a section headed "Description of Bonds and Mortgage" and the Medium-TermMedium-
Term Note Prospectus includes a section headed "Description of the Notes."

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS DATED JULY 28, 1995,,
SUBJECT TO COMPLETION

POTOMAC ELECTRIC POWER COMPANY

FIRST MORTGAGE BONDS

-----------

Potomac Electric Power Company (the "Company") may offer from time to time up
to $350,000,000$200,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds"), which may be offered in one or more series in amounts, at prices
and on terms to be determined by market conditions at the time of sale. The
aggregate principal amount, rate (or method of calculation) and time of payment
of interest, maturity, offering price, any redemption terms and other specific
terms of the series of New Bonds in respect of which this Prospectus is being
delivered, are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"). The amount of First Mortgage Bonds to be offered
hereby will be reduced by the amount of any Medium-Term Notes sold pursuant to
the Registration Statements of which this Prospectus is a part. See
"Description of Bonds and Mortgage."

The Company may sell the New Bonds through underwriters designated by the
Company or through dealers, directly to a limited number of institutional
purchasers, or through agents. See "Plan of Distribution." The Prospectus
Supplement sets forth the names of such underwriters, dealers or agents, if
any, any applicable commissions or discounts and the net proceeds to the
Company from such sale.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

-----------

THE DATE OF THIS PROSPECTUS IS , 19951997

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN
OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS ORNOR ANY
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS
AND ANY PROSPECTUS SUPPLEMENT SPEAKS AS OF THE DATE THEREOF AND DOES NOT
PURPORT TO REFLECT ANY CHANGES IN THE AFFAIRS OF THE COMPANY THEREAFTER.

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AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports and other information with the Securities
and Exchange Commission (the "Commission"). Information concerning directors
and officers, their remuneration and any material interest of such persons in
transactions with the Company, as of particular dates, is disclosed in such
reports and in proxy statements distributed to shareholders of the Company and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison
Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, 13th Floor,
New York, New York. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information also may be obtained from the Commission's Electronic Data
Gathering and Retrieval ("EDGAR") database located at the website maintained
by the Commission at http://www.sec.gov. In addition, reports, proxy
statements and other information concerning the Company can be inspected at
the offices of the New York Stock Exchange, Inc., where certain securities of
the Company are listed.

The Company has filed with the Commission registration statements on Form S-
3 relating to the First Mortgage Bonds (herein, together with all amendments
and exhibits, referred to as the "Registration Statements") under the
Securities Act of 1933, as amended (the "1933 Act"). This Prospectus does not
contain all of the information set forth in the Registration Statements,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statements.

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
under the 1934 Act are incorporated by reference in this Prospectus:

(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.1996.

(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 19951997 and June 30, 1995.1997.

(c) The Company's Current Reports on Form 8-K dated January 27, 1995April 7, 1997, April
17, 1997, May 5, 1997, July 14, 1997 and dated May 19, 1995.August 6, 1997.

All documents subsequently filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in an
incorporated document shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other incorporated document subsequently filed or in an accompanying
Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

2
THE COMPANY HEREBY UNDERTAKES TO FURNISH, WITHOUT CHARGE, TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ELLEN SHERIFF ROGERS,
ASSOCIATE GENERAL COUNSEL, ASSISTANT SECRETARY AND ASSISTANT TREASURER, POTOMAC ELECTRIC
POWER COMPANY, 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON, D.C. 20068 (202-872-3526)(202-
872-3526).

THE COMPANY

Potomac Electric Power Company, a District of Columbia and Virginia
corporation (the "Company"), is engaged in the generation, transmission,
distribution and sale of electric energy in the Washington, D.C. metropolitan
area, including the District of Columbia and major portions of Montgomery and
Prince George's Counties in Maryland. It also supplies, at wholesale, electric
energy to the Southern Maryland Electric Cooperative, Inc., which distributes
electricity in Calvert, Charles, Prince George's and St. Mary's Counties in
southern Maryland. The Company's wholly owned nonutility subsidiary, Potomac
Capital Investment Corporation ("PCI"), was organized in late 1983 to provide
a vehicle to conduct the Company's ongoing nonutility businesses. PCI's
principal investments have been in aircraft and power generation equipment,
equipment leasing and marketable securities, primarily preferred stock with
the
objective of supplementing utility earningsmandatory redemption features. PCI is also involved with activities which
provide telecommunication and building long-term value. The
principal assets ofenergy services. In addition, PCI are portfolios of securities and equipment leases, and
to a lesser extenthas
investments in real estate and other investments. In May 1995, PCI
announced adoption of a plan to end its investmentproperties in the aircraft equipment
leasing business.Washington, D.C. metropolitan
area. The mailing address of the Company's executive offices is 1900
Pennsylvania Avenue, N.W., Washington, D.C. 20068, and its telephone number is
202-872-2000.

USE OF PROCEEDS

The Company may offer from time to time pursuant to this Prospectus up to an
aggregate principal amount of $350,000,000$200,000,000 of its First Mortgage Bonds.

The proceeds from the sale of the securities offered herebyFirst Mortgage Bonds will be used to
refund short-term debt incurred primarily to finance, on a temporary basis,
the Company's utility construction program and operations, and to refund the
Company's senior securities, including the retirement of long-term debt and
the satisfaction of contractual sinking fund requirements.

SELECTED FINANCIAL INFORMATION

The following is a selection of certain consolidated financial information
of the Company which was derived from, and is qualified in its entirety by,
the audited consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994,1996, and the
unaudited consolidated financial information contained in its Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995,1997, which are available as
described herein under "Incorporation of Certain Documents by Reference." The
interim financial data are unaudited; however, in the opinion of the
management of the Company, such data reflect all adjustments, consisting of
normal recurring accruals, necessary for a fair statement of the results of
operations for the interim periods presented.

12 MONTHS ENDED
-----------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993 1992(1)
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)

Income Statement Data:
Total Revenue................. $ 1,772,8471,911,969 $ 2,010,311 $ 1,876,102 $ 1,823,074
$ 1,725,205 $ 1,601,558
Operating Revenue............. 1,761,1471,800,921 1,834,857 1,822,432 1,790,600 1,702,442 1,562,167
Net Income.................... 87,646223,080 236,960 94,391 227,162 241,579 216,782
Earnings for Common Stock..... 70,949206,490 220,356 77,540 210,725 225,324 202,390
Earnings Per Share of Common
Stock........................ .601.74 1.86 .65 1.79 1.95 1.80
Balance Sheet Data at end of
period:
Property and Plant, net....... $ 4,343,5434,443,141 $ 4,298,2604,423,249 $ 4,131,1424,400,311 $ 3,931,2574,334,399

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(1) In 1992, Net Income and Earnings for Common Stock include $16,022,000, and
Earnings Per Share of Common Stock includes $.14, from the cumulative
effect of a change in accounting to provide for the accrual of revenue for
service rendered but unbilled.

AS OF JUNE 30,
19951997
----------------------
AMOUNT RATIO
----------- -----
(THOUSANDS)

Capital Structure (excluding nonutility subsidiary debt
and current maturities):
Long-Term Debt....................................... $1,703,370Debt........................................ $1,727,065 44.9%
Preferred Stock...................................... 268,886 7.1Stock....................................... 266,293 6.9
Common Equity........................................ 1,818,554 48.0Equity......................................... 1,857,120 48.2
---------- -----
Total Capitalization............................... $3,790,810Capitalization................................ $3,850,478 100.0%
==========
Parent Company Long-Term Debt and Preferred Stock
Redemption Due in One Year and Short-Term Debt.......................................Debt......... $ 419,000412,585
==========

RATIOS OF EARNINGS TO FIXED CHARGES

12 MONTHS ENDED
-----------------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------

Parent company only....... 2.872.90 3.08 3.05 3.23 3.20 2.73
2.86 2.79
Fully consolidated........ 1.472.26 2.24 1.52 2.37 2.31 2.19 2.23 2.14

For purposes of computing the ratio of earnings to fixed charges for rate-
regulated public utilities, earnings represent net income before cumulative
effect of accounting changes plus income taxes and fixed charges. Fixed
charges represent interest charges on debt (exclusive of credits arising from
the allowance for funds used during construction) and the portion of rentals
deemed representative of the interest factor.

DESCRIPTION OF BONDS AND MORTGAGE

GENERAL. The New Bonds are to be issued under the Mortgage and Deed of Trust
dated July 1, 1936, between the Company and The Bank of New York, New York,
N.Y., as Trustee and as successor in such capacity to The Riggs National Bank
of Washington, D.C., as Trustee (the "Trustee"), as amended and supplemented and as to be
supplemented by a separate supplemental indenture (the "Supplemental
Indenture") each time New Bonds are offered under this Prospectus and the
accompanying Prospectus Supplement. Said mortgage, as so amended and
supplemented and to be supplemented, is herein sometimes called the
"Mortgage." Copies of the documents currently constituting the Mortgage are
exhibits to the Registration Statements, as is the form of the Supplemental
Indenture.

Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to the
New Bonds being offered thereby: (1) the designation and aggregate principal
amount of such New Bonds; (2) the date on which such New Bonds will mature;
(3) the rate per annum at which such New Bonds will bear interest, or the
method of determining such rate; (4) the dates on which such interest will be
payable; (5) any redemption terms; and (6) other specific terms applicable to
the New Bonds.

The New Bonds will be available only in fully registered form without
coupons in denominations of $1,000 or any multiple thereof, except as may be
set forth in the accompanying Prospectus Supplement. Both principal and
interest on the New Bonds will be payable at the agenciesagency of the Company, The
Riggs National Bank of Washington, D.C. and Bankers Trust Company,New York, New York, N.Y. The Company will not impose charges for any
exchanges of New Bonds.

The Supplemental Indenture will contain no provisions for an improvement and
sinking fund or any maintenance and replacement requirement or dividend
restriction; neither does the Mortgage nor any indenture supplemental thereto
relating to any outstanding Series of Bonds contain any such provisions.

The Mortgage does not contain any covenants or other provisions that
specifically are intended to afford holders of the New Bonds special
protection in the event of a highly leveraged transaction.

The following statements are outlines of certain provisions contained in the
Mortgage and do not purport to be complete. They are qualified by express
reference to the cited Sections and Articles of the Mortgage. Certain terms
used are as defined in the Mortgage.

SECURITY. The New Bonds will be secured, together with all other Bonds now
or hereafter issued under the Mortgage, by a valid and direct first lien
(subject to certain leases, Permitted Liens and other minor matters) on
substantially all the properties and franchises of the Company (the principal
properties being its generating stations and its electric transmission and
distribution systems), other than cash, accounts receivable and other liquid
assets, securities (including securities evidencing investments in
subsidiaries of the Company), 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 Company's 9.72% undivided interest in a
mine-mouth, steam-electric generating station, known as the Conemaugh
Generating Station, which is located in Indiana County, Pennsylvania, and its
associated transmission lines is that of a tenant in common with eight other
utility owners. Substantially all of the Company's transmission and
distribution lines of less than 230,000 volts, portions of its 230,000 and
500,000 volt transmission lines, substantially all of the Conemaugh
transmission lines, and 11 substations are located on land owned by others or
on public streets and highways.

The Mortgage contains provisions subjecting after-acquired property (subject
to pre-existing and Permitted Liens) to the lien thereof. The lien on such
property is, however, subject to rights of persons having superior equities
attaching prior to the recording or filing of an appropriate supplemental
indenture.

ISSUANCE OF ADDITIONAL BONDS. Additional Bonds ranking equally with the New
Bonds may be issued in an aggregate amount of up to (i) 60% of the Net
Bondable Value of Property Additions not subject to an

Unfunded Prior Lien, (ii) the amount of cash deposited with the Trustee (which
may thereafter be withdrawn on the same basis that Additional Bonds are
issuable under (i) and (iii)), and (iii) the amounts of Bonds retired or to be
retired (except out of trust moneys or by any sinking or analogous fund if the
fund prevents such use) (Secs. 4, 6 and 7, Art. III; Sec. 4, Art. VIII).

Additional Bonds may not be issued unless Net Earnings of the Company
Available for Interest and Property Retirement Appropriations (i.e., earnings
before depreciation, amortization, income taxes and interest charges) during
12 of the immediately preceding 15 months shall have been at least twice the
annual interest charges on all Bonds and Prior Lien Bonds then outstanding and
then being issued, unless they are being issued on the basis of Bonds paid at
or redeemed or purchased within two years of maturity or on the basis of
Property Additions subject to an Unfunded Prior Lien (which simultaneously
becomes a Funded Prior Lien) and the Bonds are issued within two years of the
maturity of the Prior Lien Bonds secured by such Prior Liens (Secs. 3, 4 and
7, Art. III). Giving effect to the issuance of the New Bonds at an assumed
rate of interest of 8%, such Net Earnings for the twelve months ended June 30,
19951997 would be approximately 5.15.8 times the aggregate annual interest charges
referred to above. Such coverage would permit issuance of approximately $2.2$2.6
billion of mortgage bonds (in addition to the New Bonds) at an assumed average
interest rate of 8% per annum, against property additions or cash deposits,
although only approximately $360$530 million of such additional bonds could
currently be issued in compliance with unbonded net property addition
limitations contained in the Mortgage.

So long as any New Bonds are outstanding, Property Additions constructed or
acquired on or before December 31, 1946 may not be made the basis for the
issue of Bonds, or the withdrawal of cash, or the reduction of cash required
to be paid to the Trustee (Sec. 2, Part IV, Supplemental Indenture).

Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the
circumstances and subject to the limitations contained in the Mortgage (Sec.
16, Art. IV).

After giving effect to the issuance of the New Bonds (which are to be issued
against Property Additions), approximately $600$880 million of the Property
Additions as of June 30, 19951997 will remain available for the purposes permitted
in the Mortgage, including the issuance of Bonds.

RELEASE OF PROPERTY. The Mortgage permits property to be released from the
lien of the Mortgage upon compliance with the provisions thereof. Such
provisions generally require that cash be deposited with the Trustee in an
amount equal to the fair value of the property to be released. The Mortgage
permits the Company to reduce such amounts of cash otherwise required to be
deposited by substituting a like amount of Bonds retired. The Mortgage also
contains certain requirements relating to the withdrawal of cash deposited to
obtain a release of property (Art. VII and Art. VIII).

MODIFICATION OF MORTGAGE. With the consent of the holders of 80% in amount
of Bonds and of 80% in amount of Bonds of each series affected if less than
all are affected, the Mortgage may be changed except to affect the terms of
payment of the principal or interest on any Bonds or to reduce the percentage
of Bondholders required to effect any change (Sec. 6, Art. XV).

The Supplemental Indenture, however, provides that the foregoing percentages
shall be reduced to 60% upon the consent or agreement to such change by the
holders of all outstanding Bonds. Purchasers of the New Bonds will be deemed
to have agreed to such reduction pursuant to the terms of the Supplemental
Indenture.

EVENTS OF DEFAULT. The holders of 25% in amount of Bonds, upon any Event of
Default, may require the Trustee to accelerate maturity of the Bonds (although
a majority in amount of Bonds may waive such default and rescind such
acceleration if such default is cured) and to enforce the lien of the Mortgage
upon being indemnified to its satisfaction (Sec. 1 and 4, Art. IX).

The holders of a majority in amount of Bonds may direct proceedings for the
sale of the trust estate, or for the appointment of a receiver or any other
proceedings under the Mortgage, but have no right to involve the Trustee in
any personal liability without indemnifying it to its satisfaction (Sec. 11,
Art. IX).

Events of Default include failure to pay principal, failure for 30 days to
pay interest or to satisfy any improvement, maintenance or sinking fund
obligation, failure for 60 days (after notice by the Trustee or the holders of
15% in amount of Bonds) to perform any other covenant, and certain events of
bankruptcy, insolvency or reorganization (Sec. 1, Art. IX).

While the Mortgage by its terms does not require that periodic evidence be
furnished to the Trustee as to the absence of default or as to compliance with
the terms of the Mortgage, the Trust Indenture Act of 1939, as amended,
now
requires that annual certificates as to the absence of such defaults be
furnished to the Trustee.

RELATIONSHIPS WITH TRUSTEE. The Riggs National Bank of Washington, D.C.
("Riggs Bank")New York is Trusteethe trustee under
indentures for the Company's General Retirement Plan, Savings
Plan for Exempt Employees, Savings Plan for Non-Bargaining Unit, Non-Exempt
Employees,medium-term notes, 5% Convertible Debentures due
2002 and Savings Plan for Bargaining Unit Employees.7% Convertible Debentures due 2018, and in connection with a sale and
leaseback of the Company's Control Center. The Company has with Riggs Bank,the Trustee
and its affiliates, as it has with various other banks, a demand deposit
accounts.
Riggs Bank is one of a number of banks with which the Company hasaccount and conventional and revolving credit arrangementsarrangements. The Bank of New
York is the Issuing and also performs various other banking-
related servicesPaying Agent for the Company.medium-term notes issued by PCI.

PLAN OF DISTRIBUTION

The Company may sell the New Bonds: (i) through underwriters or dealers;
(ii) directly to one or more purchasers; (iii) through agents or;agents; or (iv) through
a combination of any such methods of sale. The Prospectus Supplement with
respect to any New Bonds being offered thereby sets forth the terms of the
offering of such New Bonds, including the name or names of any underwriters,
the purchase price of such New Bonds and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such New Bonds may be listed.

If underwriters are used in the sale, the New Bonds will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The New
Bonds may be offered to the public, either through underwriting syndicates
represented by the underwriter or underwriters to be designated by the Company
or directly by one or more of such firms. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the New
Bonds offered thereby will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such New Bonds if any are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.

New Bonds may be sold directly by the Company or through agents designated
by the Company from time to time. The Prospectus Supplement sets forth the
name of any agent involved in the offer or sale of the New Bonds in respect of
which the Prospectus Supplement is delivered as well as any commission payable
by the Company to such agent. Unless otherwise indicated in the Prospectus
Supplement, any such agent is acting on a best efforts basis for the period of
its appointment.

If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase the New Bonds from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.

Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the 1933 Act. Agents and underwriters
may be customers of, engaged in transactions with, or perform services for the
Company in the ordinary course of business.

EXPERTS

The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 19941996 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.

With respect to the unaudited consolidated financial information of the
Company for the three monththree- and twelve-month periods ended March 31, 19951997 and 1994,1996,
and the six
monththree-, six- and twelve-month periods ended June 30, 19951997 and 19941996
incorporated by reference in this Prospectus, Price Waterhouse LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports
dated May 1, 199514, 1997 and July 28,
1995,August 13, 1997, incorporated by reference herein,
state that they did not audit and they do not express opinions on that
unaudited consolidated financial information. Price Waterhouse LLP has not
carried out any significant or additional audit tests beyond those which would
have been necessary if such reports had not been incorporated by reference.included. Accordingly, the
degree of reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied. Price
Waterhouse LLP is not subject to the liability provisions of Section 11 of the
1933 Act for their reports on the unaudited consolidated financial information
because each such report is not a "report" or a "part" of the registration
statement prepared or certified by Price Waterhouse LLP within the meaning of
Sections 7 and 11 of the 1933 Act.

The statements as to matters of law and legal conclusions contained under
"Description of Bonds and Mortgage--Security" have been prepared under the
supervision of, and reviewed by, William T. Torgerson, Esq., Senior Vice
President and General Counsel for the Company, and are made on his authority.

LEGAL OPINIONS

Certain legal matters in connection with the securities to be offered hereby
will be passed upon for the Company by Covington & Burling, 1201 Pennsylvania
Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900
Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly
employed by the Company as Senior Vice President and General Counsel. Unless
otherwise indicated in the accompanying Prospectus Supplement, the legality of
such securities will be passed upon for the underwriter, dealer or agents by
Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, N.Y.,
who will, however, not pass on the incorporation of the Company.

POTOMAC ELECTRIC POWER COMPANY

MEDIUM-TERM NOTES

-----------

Potomac Electric Power Company (the "Company") may offer from time to time up
to $350,000,000$200,000,000 aggregate principal amount of its Medium-Term Notes (the
"Notes") having maturities ranging from nine months to thirty years from the
date of issuance. Each Note will bear interest at a rate or pursuant to an
interest rate formula determined by the Company at or prior to the sale
thereof. The aggregate principal amount, the interest rate or formula for
determining such rate, interest payment dates for floating rate Notes, purchase
price, date of maturity, redemption terms, if any, and certain other variable
terms with respect to the Notes will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement") or Pricing Supplement
thereto (the "Pricing Supplement") to be filed with respect to the issuance and
sale of Notes. The terms upon which each issuance and sale of Notes are
offered, together with the names of the agents and the agents' commissions or
discounts, if applicable, will also be set forth in the Prospectus Supplement
or Pricing Supplement. See "Plan of Distribution" regarding possible
indemnification arrangements for agents. The amount of Medium-Term Notes to be
offered hereby will be reduced by the amount of any First Mortgage Bonds sold
pursuant to the Registration Statements of which this Prospectus is a part. See
"Description of the Notes."

The Notes may be offered on a continuous basis by the Company through agents.
The Notes may also be sold by the Company to any agent at negotiated discounts
for its own account or for resale to one or more investors.investors and other purchasers
at varying prices relating to prevailing market prices at the time of resale as
determined by such agent. The Notes will not be listed on any securities
exchange. The Company or the agents may reject, in whole or in part, any offer
to purchase the Notes. See "Plan of Distribution."

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

-----------

The date of this Prospectus is , 19951997

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS SPEAKS AS
OF ITS DATE AND DOES NOT PURPORT TO REFLECT ANY CHANGES IN THE AFFAIRS OF THE
COMPANY THEREAFTER.

----------------

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports and other information with the Securities
and Exchange Commission (the "Commission"). Information concerning directors
and officers, their remuneration and any material interest of such persons in
transactions with the Company, as of particular dates, is disclosed in such
reports and in proxy statements distributed to shareholders of the Company and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C.;, 500 West Madison
Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, 13th Floor,
New York, New York. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information also may be obtained from the Commission's Electronic Data
Gathering and Retrieval ("EDGAR") database located at the website maintained
by the Commission at http://www.sec.gov. In addition, reports, proxy
statements and other information concerning the Company can be inspected at
the offices of the New York Stock Exchange, Inc., where certain securities of
the Company are listed.

The Company has filed with the Commission registration statements on Form S-
3 relating to the Notes (herein, together with all amendments and exhibits,
referred to as the "Registration Statements") under the Securities Act of
1933, as amended (the "1933 Act"). This Prospectus does not contain all of the
information set forth in the Registration Statements, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration
Statements.

----------------

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
under the 1934 Act are incorporated by reference in this Prospectus:

(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.1996.

(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 19951997 and June 30, 1995.1997.

(c) The Company's Current Reports on Form 8-K dated January 27, 1995April 7, 1997, April
17, 1997, May 5, 1997, July 14, 1997 and dated May 19, 1995.August 6, 1997.

THE COMPANY

USE OF PROCEEDS

The Company may offer from time to time pursuant to this Prospectus up to an
aggregate principal amount of $350,000,000$200,000,000 of its Medium-Term Notes.

The proceeds from the sale of the Notes will be used to refund short-term
debt incurred primarily to finance, on a temporary basis, the Company's
utility construction program and operations, and to refund the Company's
senior securities, including the retirement of long-term debt and the
satisfaction of contractual sinking fund requirements.

SELECTED FINANCIAL INFORMATION

Income Statement Data:
Total Revenue................Revenue................. $ 1,772,847 $1,823,074 $1,725,205 $1,601,5581,911,969 $ 2,010,311 $ 1,876,102 $ 1,823,074
Operating Revenue............ 1,761,147Revenue............. 1,800,921 1,834,857 1,822,432 1,790,600
1,702,442 1,562,167
Net Income................... 87,646Income.................... 223,080 236,960 94,391 227,162 241,579 216,782
Earnings for Common Stock.... 70,949Stock..... 206,490 220,356 77,540 210,725 225,324 202,390
Earnings Per Share of Common
Stock....................... .60Stock........................ 1.74 1.86 .65 1.79 1.95 1.80
Balance Sheet Data at end of
period:
Property and Plant, net......net....... $ 4,343,5434,443,141 $ 4,298,2604,423,249 $ 4,131,142 $3,931,2574,400,311 $ 4,334,399

AS OF JUNE 30, 1995
---------------------1997
----------------------
AMOUNT RATIO
------------ ------------------ -----
(THOUSANDS)

Capital Structure (excluding nonutility subsidiary debt
and current maturities):
Long-Term Debt....................................... $ 1,703,370Debt........................................ $1,727,065 44.9%
Preferred Stock...................................... 268,886 7.1Stock....................................... 266,293 6.9
Common Equity........................................ 1,818,554 48.0
------------ -------Equity......................................... 1,857,120 48.2
---------- -----
Total Capitalization............................... $ 3,790,810Capitalization................................ $3,850,478 100.0%
======================
Parent Company Long-Term Debt and Preferred Stock
Redemption Due in One Year and Short-Term Debt.......................................Debt......... $ 419,000
============412,585
==========

RATIOS OF EARNINGS TO FIXED CHARGES

Parent company only....... 2.872.90 3.08 3.05 3.23 3.20 2.73
2.86 2.79
Fully consolidated........ 1.472.26 2.24 1.52 2.37 2.31 2.19 2.23 2.14

For purposes of computing the ratio of earnings to fixed charges for rate-
regulated public utilities, earnings represent net income before cumulative
effect of accounting change plus income taxes and fixed charges. Fixed charges
represent interest charges on debt (exclusive of credits arising from the
allowance for funds used during construction) and the portion of rentals
deemed representative of the interest factor.

DESCRIPTION OF THE NOTES

The Notes will be issued under an Indenture between the Company and The Bank
of New York, as Trustee (the "Trustee"), dated as of July 28, 1989 (such
Indenture as originally executed and delivered and as thereafter supplemented
and amended, together with any constituent instruments establishing the terms
of particular Notes, being herein called the "Indenture"). The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
of the provisions of the Indenture, a copy of which has been incorporated by
reference as an exhibit to the Registration Statements of which this
Prospectus is a part. The terms and conditions set forth below will apply to
each Note unless otherwise specified in the applicable Prospectus Supplement
or Pricing Supplement. Certain terms used are defined in the Indenture.

As of the date of this Prospectus, $350,000,000$275,000,000 aggregate principal amount
of Indenture Securities (defined herein) are issued and outstanding (not
including the Notes offered hereby). The Notes, issued and to be issued, will
be unsecured and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company from time to time outstanding. As
of the date of this Prospectus, an aggregate of $1,266,600,000$1,341,800,000 of secured debt
is outstanding. The terms of the Notes will not restrict the further
incurrence of secured debt by the Company. The Notes will not be subject to
any sinking fund.

Unless otherwise specified in a Prospectus Supplement, the Notes will mature
on any day from 9 months to 30 years from the date of original issue (the
"Original Issue Date"), as selected by the purchaser and agreed to by the
Company. Each Note will bear interest at either (a) a fixed rate (a "Fixed
Rate Note") or (b) rates determined by reference to a Base Rate (as hereafter
defined), which may be adjusted by a Spread or Spread Multiplier (as hereafter
defined) (a "Floating Rate Note").

The Notes will be offered on a continuous basis. Reference is made to the
Prospectus Supplement or the applicable Pricing Supplement with respect to the
Notes described therein for the following terms: (1) the purchase price of
such Notes (the "Issue Price"), or a statement that the Notes are being
offered by an agent as principal at varying market prices; (2) the Original
Issue Date; (3) the stated maturity date of such Notes (the "Maturity Date");
(4) if Fixed Rate Notes, the rate per annum at which such Notes if Fixed Rate Notes will bear
interest (the "Interest Rate"); (5) if Floating Rate Notes, the interest rate
formula and other variable terms with respect to Floating Rate Notes;terms; (6) the date or dates from which any such
interest shall accrue; (7) the terms for redemption, if any; and (8) any other
terms of such Notes.

The Notes will be subject to redemption by the Company on and after the
initial redemption date, if any, fixed at the time of sale and set forth in
the applicable Pricing Supplement (the "Initial Redemption Date"). If no
Initial Redemption Date is indicated with respect to a Note, such Note will
not be redeemable prior to maturity. On and after the Initial Redemption Date
with respect to any Note, such Note will be redeemable in whole or in part in
increments of $1,000 at the option of the Company at a redemption price (the
"Redemption Price") determined in accordance with the following paragraph,
together with interest thereon payable to the date of redemption, on notice
given no more than 60 nor less than 30 days prior to the date of redemption.

The Redemption Price for each Note subject to redemption shall initially be
equal to a certain percentage (the "Initial Redemption Percentage") of the
principal amount of such Note to be redeemed and shall decline at each
anniversary of the Initial Redemption Date with respect to such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of such principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction with respect to each Note subject to redemption prior to maturity
will be fixed at the time of sale and set forth in the applicable Pricing
Supplement.

The Notes will be repayable by the Company at the option of the Holders
thereof prior to the stated Maturity Date only if one or more optional
repayment dates ("Optional Repayment Date") are specified in the applicable
Prospectus Supplement or Pricing Supplement. If so specified, the Notes will
be subject to repayment at the

option of the Holders thereof on any Optional Repayment Date in whole or from
time to time in part in increments of $1,000 or such other minimum
denomination specified in the applicable Prospectus Supplement or Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $1,000 or such other minimum denomination), at a repayment price equal
to 100% of the unpaid principal amount to be repaid, together with unpaid
interest accrued thereon to the date of repayment. For any Note to be repaid,
such Note must be received, together with the form thereon entitled "Option to
Elect Repayment" duly completed, by the Trustee at its office maintained for
such purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the Trustee located at 101 Barclay Street, not more
than 60 nor less than 30 calendar days prior to the date of repayment.
Exercise of such repayment option by the Holder will be irrevocable.

Only the Depositary may exercise the repayment option in respect of global
securities representing Book-Entry Notes (as hereinafter defined).
Accordingly, owners of beneficial interests in global securities ("Beneficial
Owners") that desire to have all or any portion of the Book-Entry Notes
represented by such global securities repaid must instruct the participant
through which they own their interest to direct the Depositary to exercise the
repayment option on their behalf by delivering the related global security and
duly completed election form to the Trustee as aforesaid. In order to ensure
that such global security and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the
participant through which it owns its interest before such participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, Beneficial Owners should consult the participants through which
they own their interest to determine the respective deadlines for such
participants. All instructions given to participants from Beneficial Owners of
global securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
Beneficial Owner shall cause the participant through which it owns its
interest to transfer such Beneficial Owner's interest in the global security
or securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee.

If applicable, the Company will comply with the requirements of Section
14(e) of the 1934 Act, and the rules promulgated thereunder, and any other
securities laws or regulations in connection with any such repayment.

The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.

The Notes will be issued only in fully registered certificated or book-entry
form without coupons and, except as may otherwise be provided in the
applicable Prospectus Supplement or Pricing Supplement, in the denomination of
$1,000 or any multiple thereof. Notes issued in certificated form may be
transferred or

5
exchanged at the offices described in the immediately following
paragraphs. In the event the Notes are issued in book-entry form through the
facilities of the Depositary (as defined below), transfers or exchanges may be
similarly effected through a participating member of the Depositary.

For Notes issued in certificated form, principal and interest will be
payable, the transfer of the Notes will be registrable, and Notes will be
exchangeable for Notes bearing identical terms and provisions at the office or
agency of the Company in The City of New York designated for such purpose;
provided, however, that payment of interest, other than interest at maturity
(or on any date of redemption if a Note is redeemed prior to maturity), may be
made at the option of the Company by check mailed to the address of the person
in whose name the applicable Note is registered at the close of business on
the Regular Record Date (as hereafter defined) as shown on the security
register maintained by the Trustee. Interest will be payable on each date
specified in the Note on which an installment of interest is due and payable
(an "Interest Payment Date") and at maturity (or any date of redemption).
Notwithstanding the foregoing, if the original issue date of a Note is between
the Regular Record Date and the initial Interest Payment Date, the initial
interest payment will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered holder on such next
succeeding Regular Record Date.

6
No service charge will be made to holders of Notes for any transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or governmental charge incident to the transfer or exchange.
Transfers and exchanges of Notes may be made at the Corporate Trust Office of
the Trustee.

Interest payments shall be the amount of interest accrued from and including
the next preceding Interest Payment Date in respect of which interest has been
paid (or from and including the date of issue, if no interest has been paid
with respect to such Note), to, but excluding, the Interest Payment Date,
maturity date or date of redemption (an "Interest Accrual Period"). However,
in the case of Floating Rate Notes on which the interest rate is reset daily
or weekly, the interest payments shall include interest accrued only through
and including the Regular Record Date next preceding the applicable Interest
Payment Date, except that the interest payment on the maturity date (or any
date of redemption) will include interest accrued to, but excluding, such
date. The
principal and interest payable at maturity (or any date of redemption) on each
Note will be paid upon maturity (or any date of redemption) in immediately
available funds against presentation of the Note at the Corporate Trust Office
of The Bank of New York located at 101 Barclay Street, New York, New York.
Interest payable at maturity (or on any date of redemption) will be payable to
the person to whom the principal of the Note shall be paid. Notwithstanding
the above, a holder of $10,000,000 or more in aggregate principal amount of
Notes issued in certificated form having the same Interest Payment Date shall
be entitled to receive payments of interest by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received
by The Bank of New York on or before the Regular Record Date immediately
preceding the applicable Interest Payment Date.

The Indenture does not contain any covenants or other provisions that
specifically are intended to afford holders of the Notes special protection in
the event of a highly leveraged transaction.

BOOK-ENTRY NOTES. The Notes may be issued in whole or in part in the form of
one or more fully-registered Notes (each, a "Book-Entry Note") which will be
deposited with, or on behalf of, The Depository Trust Company, New York (the
"Depositary") and registered in the name of the Depositary's nominee. Except
as set forth below, the Book-Entry Note may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any nominee to a successor of the Depositary or a nominee of
such successor.

Upon the issuance of Notes by the Company represented by a Book-Entry Note,
the Depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Notes represented by such
Book-Entry Note to the accounts of participants. The accounts to be credited
shall be designated by the agents for such Notes, or by the Company if such
Notes are offered and sold directly by the Company. Ownership of beneficial
interests in a Book-Entry Note will be limited to participants or persons that
may hold 6
interests through participants. Ownership of beneficial interests in
a Book-
EntryBook-Entry Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary, or by
participants or persons that may hold interests through participants. The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws
may impair the ability to transfer beneficial interests in a Book-Entry Note.

So long as the Depositary for a Book-Entry Note, or its nominee, is the
registered owner of a Book-Entry Note, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Notes
represented by such Book-Entry Note for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in a Book-Entry Note
will not be entitled to have Notes represented by such Book-Entry Note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in certificated form and will not be considered the owners
or holders thereof under the Indenture.

Principal, premium, if any, and interest payments on Notes issued in book-
entry form and represented by one or more Book-Entry Notes will be made by the
Company to the Depositary or its nominee, as the case may be, as the
registered owner of the related Book-Entry Note or Notes. Neither the Company
nor the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of

beneficial ownership interests of a Book-Entry Note, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Depositary, upon receipt of any
payment of principal, premium, if any, or interest in respect of a Book-Entry
Note, will credit immediately the accounts of the related participants with
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in such Book-Entry Note as shown on the records
of the Depositary. The Company also expects that payments by participants to
owners of beneficial interests in a Book-Entry Note will be governed by
standing customer instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or
registered in "street name" and will be the responsibility of such
participants.

The Depositary has advised the Company that it is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
The Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives)
own the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. Persons who are not participants may beneficially own
securities held by the Depositary only through participants.

If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Notes in certificated formfrom in exchange for
each Book-Entry Note. In addition, the Company may at any time determine not
to have Notes represented by one or more Book-Entry Notes, and, in such event,
will issue Notes in certificated form in exchange for the Book-Entry Note or
Notes representing such Notes. Further, if the Company so specifies with
respect to a Book-Entry Note, an owner of a beneficial interest in such Book-
Entry Note may, on terms acceptable to the Company and the Depositary, receive
Notes in certified form. In any such instance, an owner of a beneficial
interest in a Book-Entry Note will be entitled to physical delivery in
certificated form of Notes equal in principal amount to such beneficial
interest and to have such Notes registered in its name. Notes so issued in
certificated form will be issued in the denomination of $1,000 or any multiple
thereof and will be issued in registered form only.

FIXED RATE NOTES

Each Fixed Rate Note will bear interest from the date of issue at the rate
per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Interest on Fixed Rate Notes will be
payable semiannually on each February 1 and August 1 Interest Payment Date and
at maturity (or any date of redemption). The "Regular Record Date" for Fixed
Rate Notes will be the fifteenth day of the month next preceding the February
1 or August 1 Interest Payment Date. Interest on the Fixed Rate Notes will be
computed on the basis of a 360-day year of twelve 30-day months. If any
Interest Payment Date or the maturity date (or any date of redemption) on a
Fixed Rate Note falls on a day that is not a Business Day (as hereafter
defined), the payment shall be made on the next Business Day as if it were
made on the date such payment was due and no interest shall accrue on the
amount so payable for the period from and after such Interest Payment Date or
the Maturity Date (or any date of redemption), as the case may be.

FLOATING RATE NOTES

Unless otherwise specified in the applicable Prospectus Supplement or
Pricing Supplement, Floating Rate Notes will be issued as described below.
Interest on Floating Rate Notes will be determined by reference to a "Base
Rate," which shall be the "Commercial Paper Rate" ("Commercial Paper Rate
Notes"), "LIBOR"

8
("LIBOR Notes"), the "TreasuryTreasury Rate" ("Treasury Rate Notes"), the "CD Rate"
("CD Rate Notes") or other interest rate formula, based upon the Index
Maturity and adjusted by a Spread or Spread Multiplier, if any, as specified
in the applicable Pricing Supplement. The "Index Maturity" is the period to
maturity of the instrument or obligation from which the Base Rate is
calculated. The "Spread" is the number of basis points above or below the Base
Rate applicable to such Floating Rate Note, and the "Spread Multiplier" is the
percentage of the Base Rate applicable to the interest rate for such Floating
Rate Note. The Spread, Spread Multiplier, Index Maturity and other variable
terms of the Floating Rate Notes are subject to change by the Company from
time to time, but no such change will affect any Floating Rate Note
theretofore issued or as to which an offer has been accepted by the Company.

The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually, as specified in the applicable
Prospectus Supplement or Pricing Supplement. The "Interest Rate Reset Date"
will be, in the case of Floating Rate Notes which reset daily, each day; in
the case of Floating Rate Notes which reset weekly, the Wednesday of each week
(with the exception of weekly reset Treasury Rate Notes which reset the
Tuesday of each week, except as specified below); in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December;December, in the case of Floating Rate Notes which reset semi-
annually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement. If any Interest Rate Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Rate Reset Date
shall be postponed to the next succeeding day that is a Business Day, except
that in the case of a LIBOR Note, if such next succeeding Business Day is in
the next succeeding calendar month, such Interest Rate Reset Date shall be the
next preceding Business Day. Unless otherwise specified in the applicable
Prospectus Supplement or Pricing Supplement, "Business Day" means any day,
other than a Saturday or Sunday, on which banks in The City of New York (and,
with respect to LIBOR Notes, the City of London) are not required or
authorized by law to close.

The interest rate applicable to each Interest Accrual Period commencing on
an Interest Rate Reset Date will be the rate determined on the "Interest Rate
Determination Date." The Interest Rate Determination Date with respect to the
Commercial Paper Rate and CD Rate will be the second Business Day preceding
the Interest Rate Reset Date. The Interest Rate Determination Date with
respect to LIBOR will be the second London Banking Date (defined in "LIBOR
Notes" below) preceding an Interest Rate Reset Date. With respect to the
Treasury Rate the Interest Rate Determination Date will be the day of the week
in which the Interest Rate Reset Date falls on which Treasury bills normally
would be auctioned; provided, however, that if as a result of a legal holiday
an auction is held on the Friday of the week preceding the Interest Rate Reset
Date, the related Interest Rate 8
Determination Date shall be such preceding
Friday; and provided, further, that if an auction shall fall on any Interest
Rate Reset Date then the Interest Rate Reset Date shall instead be the first
Business Day following such auction.

A Floating Rate Note may also have either or both of the following: (i) a
maximum limit ("Maximum Interest Rate"), or ceiling, on the rate of interest
which may accrue during any Interest Accrual Period; and (ii) a minimum limit
("Minimum Interest Rate"), or floor, on the rate of interest which may accrue
during any Interest Accrual Period. In addition to any Maximum Interest Rate
which may be applicable to any Floating Rate Note pursuant to the above
provisions, the interest rate on the Floating Rate Notes will in no event be
higher than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Under present New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
The limit does not apply to Floating Rate Notes in which $2,500,000 or more
has been invested.

The applicable Prospectus Supplement or Pricing Supplement will specify each
variable term with respect to each Floating Rate Note, including the
following: Initial Interest Rate, Interest Rate Reset Dates, Interest Payment
Dates, Index Maturity, Maturity, Maximum Interest Rate and Minimum Interest
Rate, if any, the Spread or Spread Multiplier, if any, and terms of
redemption, if any.

9
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. Except as provided below, interest will
be payable, in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
March, June, September and December of each year, as specified in the
applicable Pricing Supplement; in the case of Floating Rate Notes which reset
quarterly, on the third Wednesday of March, June, September and December of
each year; in the case of Floating Rate Notes which reset semi-annually, on
the third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; in the case of Floating Rate Notes which reset annually,
on the third Wednesday of the month specified in the applicable Pricing
Supplement; and, in each case, at maturity (or any date of redemption).

If any Interest Payment Date (other than an Interest Payment Date occurring
on the Maturity Date or a Redemption Date) for any Floating Rate Note would
fall on a day that is not a Business Day with respect to such Note, such
Interest Payment Date will be the following day that is a Business Day with
respect to such Note, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Payment
Date shall be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the Maturity Date (or any date of redemption)
of any Floating Rate Note would fall on a day that is not a Business Day, the
payment of interest and principal (and premium, if any) shall be made on the
next succeeding Business Day, and no interest on such payment shall accrue for
the period from and after the Maturity Date (or any date of redemption).

The "Regular Record Date" with respect to Floating Rate Notes will be the
date 15 calendar days (whether or not a Business Day) prior to the applicable
Interest Payment Date.

With respect to a Floating Rate Note, accrued interest is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to the date for which accrued interest is being
calculated. The interest factor for each such day is computed by dividing the
interest rate applicable to such day by 360 in the case of CD Rate Notes,
Commercial Paper Rate Notes and LIBOR Notes, or by the actual number of days
in the year in the case of Treasury Rate Notes.

All percentages resulting from any calculation on Floating Rate Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded
upward, (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on Floating RatesRate Notes will be rounded to the nearest cent (with one-half cent
being rounded upward).

9
Unless otherwise provided for in the applicable Prospectus Supplement or
Pricing Supplement,Supplement. The Bank of New York will be the "Calculation Agent." Upon
the request of the holder of any Floating Rate Note, the Trustee will provide
the interest rate then in effect and, if determined, the interest rate that
will become effective as a result of a determination made for the next
Interest Rate Reset Date with respect to such Floating Rate Note. The Company,
or the Calculation Agent, will notify the Trustee of each determination of the
interest rate applicable to any such Floating Rate Note promptly after such
determination is made. The "Calculation Date," where applicable, pertaining to
any Interest Rate Determination Date will be the tenth calendar day after such
Interest Rate Determination Date, or, if any such day is not a Business Day,
the next succeeding Business Day.

The interest rate in effect with respect to a Floating Rate Note from the
date of issue to the first Interest Rate Reset Date (the "Initial Interest
Rate") will be specified in the applicable Pricing Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement or Pricing
Supplement, the interest rate determined with respect to any Interest Rate
Determination Date will become effective on and as of the next succeeding
Interest Rate Reset Date; provided, however, the interest rate in effect for
the period from the date of issue to the first Interest Rate Reset Date will
be the Initial Interest Rate, and the interest rate in effect for the ten days
immediately prior to the maturity date (or any date of redemption) will be
that in effect on the tenth day preceding such maturity date (or such date of
redemption).Rate. The interest rate for each subsequent Interest
Rate Reset Date will be determined by the Calculation Agent as follows:

CD RATE NOTES

CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.

Unless otherwise specified in the applicable Prospectus Supplement or
Pricing Supplement, "CD Rate" means, with respect to any Interest Rate
Determination Date relating to a Floating Rate Note for which the interest
rate is determined with reference to the CD Rate Note (a "CD Rate Interest
Determination Date"), the rate on such date for negotiable United States
certificates of deposit having the Index Maturity specified in the applicable
Pricing Supplement as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or
any successor publication ("H.15(519)"), under the heading "CDs (Secondary
Market)," or, if not so published by 3:00 P.M., New York City time, on or
prior to the
Calculation Date, pertaining to such CD Rate Interest
Determination Date, the CD Rate will be the rate on such CD Rate Interest Determination Date for
negotiable United States certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or the Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 3:00 P.M.10:00A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable U.S.United States dollar
certificates of deposit in The City of New York (which may include the Agents
or their affiliates) selected by the Calculation Agent for negotiable United
States certificates of deposit of major United States money center banks of the highest credit
standing in the market for
negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity designatedspecified in the applicable Prospectus Supplement or Pricing
Supplement in denominations of $5,000,000;an amount that is representative for a single transaction in
that time; provided, however, that if the dealers selected
as aforesaid by the Calculation
Agent are not quoting as set forth above,mentioned in this sentence, the CD Rate determined as
of such CD Rate Interest Determination Date will remainbe the CD Rate then in effect on
such CD Rate Interest Determination Date.

COMMERCIAL PAPER RATE NOTES

Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any) specified in the applicable Pricing Supplement.

10
Unless otherwise indicatedspecified in the applicable Prospectus Supplement or
Pricing Supplement, "Commercial Paper Rate" means, with respect to any
Interest Rate Determination Date relating to a Floating Rate Note for which
the interest rate is determined with reference to the Commercial Paper Rate Note (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield
(as defined below)hereinafter defined) on such date of the rate for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as such rate
shall be published by the Board of Governors of the Federal Reserve System
in H.15(519), under the heading "Commercial Paper."Paper" or, if such heading is no
longer available and applicable, such other heading representing commercial
paper issued by non-financial entities whose bond rating is "Aa", or the
equivalent, from a nationally recognized statistical rating organization. In
the event that such rate is not published prior toby 3:00 P.M., New York City time, on
the related Calculation
Date pertaining to such Commercial Paper Rate Interest Determination Date, then the Commercial Paper Rate shall be the Money Market Yield on such
Commercial Paper Rate Interest Determination Date will be the Money Market
Yield of the rate for commercial paper ofhaving the specified Index Maturity specified in
the applicable Prospectus Supplement or Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper."Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an
Index Maturity of 30 days or 90 days, respectively). If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on suchthe related Calculation Date, such rate is not published in either H.15(519) or
Composite Quotations, then the Commercial Paper Rate shallon
such Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the Money Market Yield of the arithmetic
mean of the offered rates as ofat approximately 11:00 A.M., New York City time, on
such Commercial Paper Rate Interest Determination Date of three leading
dealers of commercial paper in The City of New York (which may include the
Agents or their affiliates) selected by the Calculation Agent for

11
commercial paper ofhaving the specified Index Maturity specified in the applicable
Prospectus Supplement or Pricing Supplement placed for an industrial issuera non-financial entity
whose bond rating is "AA,"Aa," or the equivalent, from a nationally recognized
statistical rating agency;organization; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the rateCommercial Paper Rate determined as of interest in effect forsuch Commercial Paper
Rate Interest Determination Date will be the applicable period will
remain the rate of interest thenCommercial Paper Rate in effect
on such Commercial Paper Rate Interest Determination Date.

"Money Market Yield" shall be themeans a yield (expressed as a percentage) calculated in
accordance with the following formula:

D X 360
Money Market Yield = D- X 360 X 100
------------
360 - (D X M)

where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the applicable interest period for which interest is
being calculated.

LIBOR NOTES

LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spreadspread or Spread Multiplier, if any) specified in
the applicable Pricing Supplement.

LIBOR Unless otherwise indicatedspecified in the applicable Prospectus Supplement or
Pricing Supplement, LIBOR"LIBOR" means the rate determined in accordance with the
following provisions:

(i) With respect to any Interest Rate Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR Note (a "LIBOR Interest Determination Date"), LIBOR will equalbe either: (a)
if "LIBOR Reuters" is specified in the applicable Prospectus Supplement or
Pricing Supplement, the arithmetic mean (as determined by the Calculation Agent) of the offered rates (unless the
Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Designated
LIBOR Currency having the Index Maturity specified in such Prospectus
Supplement or Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear (or, if only a single rate is required as
aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate"
is specified in the Reuters Screenapplicable Prospectus Supplement or Pricing Supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Prospectus Supplement or Pricing Supplement as the method for
calculating LIBOR, the rate for deposits in the Designated LIBOR Currency
having the Index Maturity specified in such Prospectus Supplement or
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates so
appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in clause (ii) below.

(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Reuter Monitor Money Rates ServiceDesignated LIBOR Page as specified in clause (i) above, the Calculation
Agent will request the principal London offices of each of four major
reference banks (which may include affiliates of the Agents) in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits (in United States
dollarsin the Designated
LIBOR Currency for the period of the Index Maturity specified in the
applicable Prospectus Supplement or Pricing Supplement)Supplement, commencing on the
second day on which dealings in deposits
in United States dollars are transacted in the London interbank market (a
"London Banking Day") immediately following such LIBORapplicable Interest Determination
Date; provided, however, that if fewer than two such quotations appear, the
Calculation Agent shall request the principal London office of four majorReset Date, to prime banks in the London interbank
market selected by the Calculation Agent to
provide the Calculation Agent with a quotation of their offered rates at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date for deposits (in United States dollars for the period of the applicable
Index Maturity and in a principal amount equal to an amount that is representative for a
single transaction in the Designated LIBOR Currency in such market at such
time)
commencing on the second London Banking Day immediately following such LIBOR
Interest Determination Date.time. If at least two such quotations are so provided, then LIBOR foron such
LIBOR Interest Determination Date will equalbe the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, then LIBOR
foron such LIBOR Interest Determination Date will equalbe the arithmetic mean of
the

12
rates quoted by three major banks in The City of New York, as selected by the
Calculation Agent, at approximately 11:00 A.M., New York City time,in the applicable Principal
Financial Center, on such LIBOR Interest Determination Date by three major
banks (which may include affiliates of the Agents) in such Principal
Financial Center selected by the Calculation Agent for loans in the
Designated LIBOR Currency to leading European banks, (in
United States dollars forhaving the period ofIndex
Maturity specified in the applicable Index MaturityProspectus Supplement or Pricing
Supplement and in a 11
principal amount equal to an amount that is representative for a single
transaction in the Designated LIBOR Currency in such market at such time) commencing on the second London
Banking Day following such LIBOR Interest Determination Date;time;
provided, however, that if the banks so selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, LIBOR fordetermined as of such
LIBOR Interest Determination Date will remain thebe LIBOR in effect on such LIBOR
Interest Determination Date.

"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Prospectus Supplement or Pricing Supplement as to
which LIBOR shall be calculated or, if no such currency or composite currency
is specified in the applicable Prospectus Supplement or Pricing Supplement,
United States dollars.

"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Prospectus Supplement or Pricing Supplement, the display on the
Reuter Monitor Money Rates Service (or any successor service) on the page
specified in such Prospectus Supplement or Pricing Supplement (or any other
page as may replace such page on such service) for the purpose of displaying
the London interbank rates of major banks for the Designated LIBOR Currency,
or (b) if "LIBOR Telerate" is specified in the applicable Prospectus
Supplement or Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable Prospectus Supplement or Pricing
Supplement as the method for calculating LIBOR, the display on the Dow Jones
Telerate Service (or any successor service) on the page specified in such
Prospectus Supplement or Pricing Supplement (or any other page as may replace
such page on such service) for the purpose of displaying the London interbank
rates of major banks for the Designated LIBOR Currency.

TREASURY RATE NOTES

Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any) specified in the applicable Pricing Supplement.

Unless otherwise indicatedspecified in the applicable Prospectus Supplement or
Pricing Supplement, "Treasury Rate" means, with respect to any Interest Rate
Determination Date relating to a Floating Rate Note for which the interest
rate is determined by reference to the Treasury Rate Note (a "Treasury Rate
Interest Determination Date"), the rate applicable tofrom the most recent auction held on such Treasury
Rate Interest Determination Date (the "Auction") of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified in the
applicable Prospectus Supplement or Pricing Supplement, as such rate is
published in H.15(519) under the heading "Treasury Bills-auction average
(investment)" or, if not so published by 3:00 P.M., New York City time, on the
related Calculation Date
pertaining to such Treasury Rate Interest Determination Date, the auction average rate of such Treasury Bills
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. Treasury bills are usually
sold at auction on Monday of each week unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. In the event that the results of the
auctionAuction of Treasury bills having the specified Index Maturity specified in the
applicable Prospectus Supplement or Pricing Supplement are not reported as
provided by 3:00 P.M., New York City time, on suchthe related Calculation Date, or
if no such auctionAuction is held, in a particular week, then the Treasury Rate shallwill be calculated by the
Calculation Agent and shallwill be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury
Rate Interest Determination Date, of three leading primary United States
government securities dealers (which may include the Agents or their
affiliates) selected by the Calculation Agent for the issue of Treasury billsBills
with a remaining maturity closest to the Index Maturity specified in the
applicable Index Maturity;Prospectus Supplement or Pricing Supplement; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the rateTreasury Rate determined as of interest in effect forsuch Treasury
Rate Interest Determination Date will be the applicable
period will remain the rate of interestTreasury Rate in effect on such
Treasury Rate Interest Determination Date.

EVENTS OF DEFAULT, WAIVER AND NOTICE. An Event of Default with respect to
the Notes of a particular series (the "Series Notes") is defined in the
Indenture as (a) default in the payment of any installment of interest

on any of the Series Notes and the continuance of such default for a period of
30 days; (b) default in payment of the principal of (and premium, if any, on)
any of the Series Notes when due at maturity; (c) default in the deposit of
any sinking fund payment due under the Series Notes and the continuance of
such default for a period of 3 business days; (d) default by the Company in
the performance or breach of any other covenant or warranty contained in the
Indenture and the continuance of such default or breach for a period of 60
days after appropriate notice; (e) certain events of bankruptcy, insolvency
and reorganization of the Company; and (f) any other Event of Default
established with respect to the Series Notes. (Section 501).

The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default with respect to the Series Notes, give all the
registered holders of Series Notes then outstanding and any other holder of
Series Notes entitled under the Indenture to receive reports notice of all
incurred defaults known to it (the term default to mean any event which is or
(after notice or lapse of time) would become an Event of Default); providedprovide
that, except in the case of a default in the payment of principal of or
interest on any Series Note, the Trustee shall be protected in withholding
such notice if it determines in good faith that the withholding of such notice
is in the interest of all the holders of the Series Notes. (Section 602).

The Indenture provides that if an Event of Default with respect to the
Series Notes shall have occurred and beto continuing, either the Trustee or the
holders of at least 33% in principal amount (calculated as provided in the

Indenture) of the Series Notes may declare the principal of all of the Series
Notes and the interest accrued thereon or any lesser amount specified in the
Series Notes to be due and payable immediately. (Section 502).

Upon certain conditions, such declarations of acceleration with respect to
Series Notes may be annulled and past defaults (except for defaults in the
payment of principal, and premium (if any) or interest on such Series Notes
not theretofore cured or in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the
holder of each Series Note) may be waived with respect to the Series Notes by
the holders of not less than a majority in principal amount (calculated as
provided in the Indenture) of the Series Notes. (Section 513).

The Indenture requires that the Company file with the Trustee annually a
written statement as to the presence or absence of any defaults in the
fulfillment of its obligations under the terms thereof and as to performance
and fulfillment of obligations therein. (Section 1005). Prior to the time the
Company must provide such written statement, the holders of not less than a
majority in principal amount of the Series Notes may waive the Company's
obligation to file a written statement as to the presence or absence of any
such defaults. (Section 1006).

The Indenture provides that the holders of not less than a majority in
principal amount (calculated as provided in the Indenture) of the Series Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee by the Indenture with respect to defaults or
Events of Default with respect to the Series Notes so long as any such
direction does not conflict with any provision of the Indenture or is not
unduly prejudicial to the rights of other holders of the Series Notes.
(Section 512).

In order to require the Trustee to take action with respect to the Series
Notes, holders of at least 33% in principal amount (calculated as provided in
the Indenture) of the Series Notes shall have made a written request upon the
Trustee (Section 507). The Indenture provides that the Trustee shall be under
no obligation, subject to the duty of the Trustee during default to act with
the required standard of care, to exercise any of the rights or powers vested
in it by the Indenture at the direction of the holders of the Series Notes
unless such holders shall have offered to the Trustee reasonable security or
indemnity against expenses and liabilities. (Section 603).

MODIFICATION OF THE INDENTURE. The Indenture contains provisions permitting
the Company and the Trustee, with the consent of the holders of not less than
66 2/3% in principal amount (calculated as provided in the Indenture) of each
series of securities, including the Notes, issued and outstanding pursuant to
the Indenture

14
(the "Indenture Securities") and affected by such amendment to modify the
Indenture or any supplemental indenture or the rights of the holders of the
Indenture Securities affected by such modification; provided that no such
modification shall, without the consent of each holder of the Indenture
Securities affected thereby, change the maturity of principal of or interest
on any Indenture Security, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
amount payable upon redemption of any Indenture Security, or reduce the
overdue rate thereof or change the currency of payment of principal or
interest on any Indenture Security or reduce the percentage in principal
amount of Indenture Securities the consent of the holders of which is required
for modification or amendment of the Indenture or for waiver of certain
defaults or reduce the voting or quorum requirements under the Indenture.
(Section 902).

The Indenture also permits the Company and the Trustee to amend the
Indenture in certain circumstances without consent of the holders of any
Indenture Securities to evidence the merger of the Company or the replacement
of the Trustee and for certain other purposes. (Section 901).

RELATIONSHIPS WITH TRUSTEE. The Bank of New York is Trusteethe trustee under
indentures for the Company's First Mortgage Bonds, 5% Convertible Debentures
due 2002.2002 and 7% Convertible Debentures due 2018, and in connection with a sale
and leaseback of the Company's Control Center. The Company has with the
Trustee and its affiliates, as it has with various other banks, a demand
deposit account and conventional and revolving credit arrangements. The TrusteeBank
of New York is the Issuing and Paying Agent for medium-term notes issued by
PCI.

PLAN OF DISTRIBUTION

The Notes may be offered on a continuous basis by the Company through
agents, each of which will agree to use its best efforts to solicit offers to
purchase the Notes. The Company may also sell the Notes to any of the agents
at negotiated discounts for such agent's own account or for resale to one or
more investors or other purchasers at varying prices related to prevailing
market prices at the time of resale, as determined by such agent.

The agents with respect to the offer and sale of any issue of the Notes will
be named in the Prospectus Supplement relating thereto. The Prospectus
Supplement will also describe the discounts and commissions to be allowed or
paid to agents and all other items constituting agents' compensation.

Agents may be entitled under agreements entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the 1933 Act. Agents may be customers of, engage in
transactions with or perform services for the Company in the ordinary course
of business.

The Notes will not be listed on any securities exchange. There currently is
no established trading market for the Notes and no assurance can be given as
to the existence or liquidity of a secondary market for the Notes in the
future.

EXPERTS

Waterhouse LLP has not carried out any significant or additional audit tests
beyond those which would have been necessary if such reports had not been
incorporated by reference.included. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Price Waterhouse LLP is not subject to the liability
provisions of Section 11 of the 1933 Act for their reports on the unaudited
consolidated financial information because each such report is not a "report"
or a "part" of the registration statement prepared or certified by Price
Waterhouse LLP within the meaning of Sections 7 and 11 of the 1933 Act.

----------------

LEGAL OPINIONS

Certain legal matters in connection with the Notes to be offered hereby will
be passed upon for the Company by Covington & Burling, 1201 Pennsylvania
Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900
Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly
employed by the Company as Senior Vice President and General Counsel. 14The
validity of the Notes is being passed upon on behalf of the Agents by Brown &
Wood LLP, New York, New York.

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses relating to the New Bonds (assuming an issuance of
$250,000,000)$125,000,000) are as follows:

Registration fee...............................................fee................................................. $ 86,20737,879
Recordation taxes.............................................. 1,146,000taxes................................................ 573,000
Rating Agency fees............................................. 75,000
Printing....................................................... 125,000fees............................................... 37,500
Printing......................................................... 62,500
Trustee's fees and expenses.................................... 90,000expenses...................................... 45,000
Fee of independent accountants................................. 45,000accountants................................... 22,500
Fees of counsel................................................ 80,000counsel.................................................. 40,000
Expenses incidental to qualification under Blue Sky Laws....... 15,000
Miscellaneous.................................................. 40,793
----------
Total........................................................ $1,703,000
==========Laws......... 7,500
Miscellaneous.................................................... 24,121
--------
Total.......................................................... $850,000
========

Estimated expenses relating to the Notes (assuming an issuance of
$250,000,000)$125,000,000) are as follows:

Registration fee................................................. $ 86,20737,879
Rating Agency fees............................................... 75,00037,500
Trustee's fees and expenses...................................... 20,00010,000
Printing......................................................... 60,00030,000
Fee of independent accountants................................... 45,00022,500
Fees of counsel.................................................. 70,00035,000
Expenses incidental to qualification under Blue Sky Laws......... 15,0007,500
Miscellaneous.................................................... 30,79319,621
--------
Total.......................................................... $402,000$200,000
========

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The By-Laws of the Company provide that the Company shall indemnify each
director or officer and each former director and officer of the Company
against expenses actually and reasonably incurred in connection with the
defense of any action, suit or proceeding by reason of his or her being or
having been such director or officer, including liabilities incurred under the
Securities Act of 1933, as amended, except in relation to matters as to which
such director or officer shall be finally adjudged in such action, suit or
proceeding to have knowingly violated the criminal law or to be liable for
willful misconduct in the performance of his or her duty to the Company; and
that such indemnification 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.

In the Underwriting Agreement and the Distribution Agreement, the
Underwritersunderwriters and agents will agree to indemnify the Company, its directors,
officers and controlling persons against certain civil liabilities that may
arise under the Securities Act of 1933 in connection with this offering.

The Company also has policies of insurance which insure officers and
directors against certain liabilities and expenses incurred by them in such
capacities.

II-1

ITEM 16. EXHIBITS.

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

1.1 --Form of Underwriting Agreement
for the New Bonds.............. Filed herewith.
1.2 --Form of Distribution Agreement
for the Medium-Term Notes...... Exh. 1-B to Registration
Statement No. 33-48325, 6/2/92.
4.1 --Form of the New Bonds......... Included in Exhibit No. 4.4.
4.2 --Form of the Medium-Term Notes. Included in Exhibit No. 4.5.
4.34.3.1 --Mortgage and Deed of Trust,
dated July 1, 1936, of the
Company to The Riggs National
Bank of Washington, D.C., as
Trustee, securing First
Mortgage Bonds of the Company, Exh. B-4 to First Amendment,
and Supplemental Indenture 6/19/36, to Registration
dated 7/1/36................... Statement No. 2-2232.
--Supplemental Indentures, to
the aforesaid Mortgage and Deed
of Trust, dated--
4.3.2 December 1, 1939 and December
10, 1939....................... Exhs. A & B to Form 8-K, 1/3/40.
4.3.3 August 1, 1940.................. Exh. A to Form 8-K, 9/25/40.
4.3.4 July 15, 1942 and August 10, Exh. B-1 to Amendment No. 2,
1942......................... 8/24/42, and B-3 to Post-
Effective Amendment, 8/31/42, to
Registration Statement No.
2-5032.
4.3.5 August 1, 1942.................. Exh. B-4 to Form 8-A, 10/8/42.
4.3.6 October 15, 1942................ Exh. A to Form 8-K, 12/7/42.
4.3.7 October 15, 1947................ Exh. A to Form 8-K, 12/8/47.
4.3.8 January 1, 1948................. Exh. 7-B to Post-Effective
Amendment No. 2, 1/28/48, to
Registration Statement No.
2-7349.
4.3.9 December 31, 1948............... Exh. A-2 to Form 10-K, 4/13/49.
4.3.10 May 1, 1949..................... Exh. 7-B to Post-Effective
Amendment No. 1, 5/10/49, to
Registration Statement No.
2-7948.
4.3.11 December 31, 1949............... Exh. (a)-1 to Form 8-K, 2/8/50.
4.3.12 May 1, 1950..................... Exh. 7-B to Amendment No. 2,
5/8/50, to Registration
Statement No. 2-8430.
4.3.13 February 15, 1951............... Exh. (a) to Form 8-K, 3/9/51.
4.3.14 March 1, 1952................... Exh. 4-C to Post-Effective
Amendment No. 1, 3/12/52, to
Registration Statement No.
2-9435.
4.3.15 February 16, 1953............... Exh. (a)-1 to Form 8-K, 3/5/53.
4.3.16 May 15, 1953.................... Exh. 4-C to Post-Effective
Amendment No. 1, 5/26/53, to
Registration Statement No.
2-10246.
4.3.17 March 15, 1954 and March 15, Exh. 4-B to Registration
1955........................... Statement No. 2-11627, 5/2/55.
4.3.18 May 16, 1955.................... Exh. A to Form 8-K, 7/6/55.
4.3.19 March 15, 1956.................. Exh. C to Form 10-K, 4/4/56.

II-2

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

4.3 cont.4.3.20 June 1, 1956................... Exh. A to Form 8-K, 7/2/56.
4.3.21 April 1, 1957.................. Exh. 4-B to Registration
Statement No. 2-13884, 2/5/58.
4.3.22 May 1, 1958.................... Exh. 2-B to Registration
Statement No. 2-14518, 11/10/58.
4.3.23 December 1, 1958............... Exh. A to Form 8-K, 1/2/59.
4.3.24 May 1, 1959.................... Exh. 4-B to Amendment No. 1,
5/13/59, to Registration
Statement No. 2-15027.
4.3.25 November 16, 1959.............. Exh. A to Form 8-K, 1/4/60.
4.3.26 May 2, 1960.................... Exh. 2-B to Registration
Statement No. 2-17286, 11/9/60.
4.3.27 December 1, 1960 and April 3,
1961.......................... Exh. A-1 to Form 10-K, 4/24/61.
4.3.28 May 1, 1962.................... Exh. 2-B to Registration
Statement No. 2-21037, 1/25/63.
4.3.29 February 15, 1963.............. Exh. A to Form 8-K, 3/4/63.
4.3.30 May 1, 1963.................... Exh. 4-B to Registration
Statement No. 2-21961, 12/19/63.
4.3.31 April 23, 1964................. Exh. 2-B to Registration
Statement No. 2-22344, 4/24/64.
4.3.32 May 15, 1964................... Exh. A to Form 8-K, 6/2/64.
4.3.33 May 3, 1965.................... Exh. 2-B to Registration
Statement No. 2-24655, 8/16/66.
4.3.34 April 1, 1966.................. Exh. A to Form 10-K, 4/21/66.
4.3.35 June 1, 1966................... Exh. 1 to Form 10-K, 4/11/67.
4.3.36 April 28, 1967................. Exh. 2-B to Post-Effective
Amendment No. 1 to Registration
Statement No. 2-26356, 5/3/67.
4.3.37 May 1, 1967.................... Exh. A to Form 8-K, 6/1/67.
4.3.38 July 3, 1967................... Exh. 2-B to Registration
Statement No. 2-28080, 1/25/68.
4.3.39 February 15, 1968.............. Exh. II-I to Form 8-K, 3/7/68.
4.3.40 May 1, 1968.................... Exh. 2-B to Registration
Statement No. 2-31896, 2/28/69.
4.3.41 March 15, 1969................. Exh. A-2 to Form 8-K, 4/8/69.
4.3.42 June 16, 1969.................. Exh. 2-B to Registration
Statement No. 2-36094, 1/27/70.
4.3.43 February 15, 1970.............. Exh. A-2 to Form 8-K, 3/9/70.
4.3.44 May 15, 1970................... Exh. 2-B to Registration
Statement No. 2-38038, 7/27/70.
4.3.45 August 15, 1970................ Exh. 2-D to Registration
Statement No. 2-38038, 7/27/70.
4.3.46 September 1, 1971.............. Exh. 2-C to Registration
Statement No. 2-45591, 9/1/72.
4.3.47 September 15, 1972............. Exh. 2-E to Registration
Statement No. 2-45591, 9/1/72.
4.3.48 April 1, 1973.................. Exh. A to Form 8-K, 5/9/73.
4.3.49 January 2, 1974................ Exh. 2-D to Registration
Statement No. 2-49803, 12/5/73.

II-3

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

4.3 cont.4.3.50 August 15, 1974................1974................. Exhs. 2-G and 2-H to Amendment
No. 1 to Registration Statement
No. 2-51698, 8/14/74.
4.3.51 June 15, 1977..................1977................... Exh. 4-A to Form 10-K, 3/19/81.
4.3.52 July 1, 1979...................1979.................... Exh. 4-B to Form 10-K, 3/19/81.
4.3.53 June 16, 1981..................1981................... Exh. 4-A to Form 10-K, 3/19/82.
4.3.54 June 17, 1981..................1981................... Exh. 2 to Amendment No. 1,
6/18/81, to Form 8-A.
4.3.55 December 1, 1981...............1981................ Exh. 4-C to Form 10-K, 3/19/82.
4.3.56 August 1, 1982.................1982.................. Exh. 4-C to Amendment No. 1 to
Registration Statement
No. 2-78731, 8/17/82.
4.3.57 October 1, 1982................1982................. Exh. 4 to Form 8-K, 11/8/82.
4.3.58 April 15, 1983.................1983.................. Exh. 4 to Form 10-K, 3/23/84.
4.3.59 November 1, 1985...............1985................ Exh. 2-B to Form 8-A, 11/1/85.
4.3.60 March 1, 1986..................1986................... Exh. 4 to Form 10-K, 3/28/86.
4.3.61 November 1, 1986...............1986................ Exh. 2-B to Form 8-A, 11/5/86.
4.3.62 March 1, 1987..................1987................... Exh. 2-B to Form 8-A, 3/27/87.
4.3.63 September 16, 1987.............1987.............. Exh. 4-B to Registration
Statement No. 33-18229,
10/30/87.
4.3.64 May 1, 1989....................1989..................... Exh. 4-C to Registration
Statement No. 33-29382, 6/16/89.
4.3.65 August 1, 1989.................1989.................. Exh. 4 to Form 10-K, 3/28/90.
4.3.66 April 5, 1990..................1990................... Exh. 4-C to Registration
Statement No. 33-36875, 9/24/90.
4.3.67 May 21, 1991...................1991.................... Exh. 4 to Form 10-K, 3/27/92.
4.3.68 May 7, 1992....................1992..................... Exh. 4-C to Registration
Statement No. 33-48325, 6/2/92.
4.3.69 September 1, 1992.............. Exh. 4 to Form 10-K, 3/26/93.
November 1, 1992............... Exh. 4 to Form 10-K, 3/26/93.
March4.3.70 November 1, 1993..................1992................ Exh. 4 to Form 10-K, 3/26/93.
4.3.71 March 2, 1993..................1, 1993................... Exh. 4 to Form 10-K, 3/26/93.
4.3.72 March 2, 1993................... Exh. 4 to Form 10-K, 3/26/93.
4.3.73 July 1, 1993...................1993.................... Exh. 4.4 to Registration
Statement No. 33-49973, 8/11/93.
4.3.74 August 20, 1993................1993................. Exh. 4.4 to Registration
Statement No. 33-50377, 9/23/93.
4.3.75 September 29, 1993.............1993.............. Exh. 4 to Form 10-K, 3/25/94.
4.3.76 September 30, 1993.............1993.............. Exh. 4 to Form 10-K, 3/25/94.
4.3.77 October 1, 1993................1993................. Exh. 4 to Form 10-K, 3/25/94.
4.3.78 February 10, 1994..............1994............... Exh. 4 to Form 10-K, 3/25/94.
4.3.79 February 11, 1994..............1994............... Exh. 4 to Form 10-K, 3/25/94.
4.3.80 March 10, 1995................. Filed herewith.1995.................. Exh. 4.3 to Registration
Statement No. 33-61379, 7/28/95.
4.3.81 September 6, 1995............... Exh. 4 to Form 10-K, 4/1/96.
4.3.82 September 7, 1995............... Exh. 4 to Form 10-K, 4/1/96.
4.4 --Form of Supplemental Indenture
between the Registrant and The
Riggs
National Bank of Washington,
D.C.,New York, Successor
Trustee, with respect to the
New Bonds.................Bonds...................... Filed herewith.

II-4

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

4.5 --Form of Indenture between the
Registrant and The Bank of New
York, Trustee, with respect to Exh. 4 to Form 8-K, 6/21/90.
the Medium-Term Notes.........Notes..........
5 --Opinion of William T.
Torgerson.....................Torgerson...................... Filed herewith.

II-4

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

12 --Computation of Ratios...........Ratios......... Exh. 12 to Form 10-Q, 7/28/95.8/13/97.
15 --Letter re Unaudited Financial
Information......................Information.................... Filed herewith.
23.1 --Consent of Price Waterhouse
LLP.LLP............................ Filed herewith.
23.2 --Consent of William T.
Torgerson.Torgerson...................... Contained in Exhibit 5.
23.3 --Consent of Covington &
Burling..Burling........................ Filed herewith.
24 --Power of Attorney...............Attorney............. Filed herewith.
25.1 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act
of 1939 of The Riggs National Bank of Washington, D.C.,New
York, with respect to the New
Bonds.................Bonds.......................... Filed herewith.
25.2 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act
of 1939 of The Bank of New
York, with respect to the Medium-Term Exh. 26-B to Registration
Notes............................Medium-Term Notes.............. Statement No. 33-48325, 6/2/92.

- --------
* The exhibits referred to in this column by specific designations and date
have heretofore been filed with the Securities and Exchange Commission under
such designations and are hereby incorporated herein by reference. The Forms
8-A, 8-K and 10-K referred to above were filed by the Company under the
Commission's File No. 1-1072 and the Registration Statements referred to are
registration statements of the Company.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by these paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-5
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934

II-5
(and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the By-Laws of the registrant or
Virginia or District of Columbia Law, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted against the registrant by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

II-6

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, WHO ISTHEREUNTO DULY
AUTHORIZED, TO SIGN, IN THE CITY OF WASHINGTON, DISTRICT OF COLUMBIA, ON THE 28TH13TH DAY
OF JULY, 1995.AUGUST, 1997.

Potomac Electric Power Company
(Registrant)

Edward F. Mitchell*
By __________________________________
(EDWARD F. MITCHELL, CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE
OFFICER)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.

(i) Principal Executive Officers:

Edward F. Mitchell* Chairman of the
- ------------------------------------- Board and Chief
(EDWARD F. MITCHELL) Executive Officer

John M. Derrick, Jr.* President and
- ------------------------------------- Director
(JOHN M. DERRICK, JR.)

(ii) Principal Financial Officer:

H. L. Davis* Vice Chairman and
- ------------------------------------- Chief Financial July 28, 1995
(H. LOWELL DAVIS) Officer and
Director
(iii) Principal Accounting Officer:

D. R.D.R. Wraase* Senior Vice August 13, 1997
- ------------------------------------- President Financeand Chief
(DENNIS R. WRAASE) and AccountingFinancial Officer

(iv) Directors:

Roger R. Blunt, Sr.* Director
- -------------------------------------
(ROGER R. BLUNT, SR.)

II-7
A. James Clark* Director
- -------------------------------------
(A. JAMES CLARK)

II-7

H.L. Davis* Director
- -------------------------------------
(H. LOWELL DAVIS)

Richard E. Marriott* Director
- -------------------------------------
(RICHARD E. MARRIOTT)

David O. Maxwell* Director
- -------------------------------------
(DAVID O. MAXWELL)

Floretta D. McKenzie* Director
- -------------------------------------
(FLORETTA D. MCKENZIE)

Ann D. McLaughlin* Director
- ------------------------------------- July 28, 1995August 13,
(ANN D. MCLAUGHLIN) 1997

Peter F. O'Malley* Director
- -------------------------------------
(PETER F. O'MALLEY)

Louis A. Simpson* Director
- -------------------------------------
(LOUIS A. SIMPSON)

A. Thomas Young* Director
- -------------------------------------
(A. THOMAS YOUNG)

Peyton G. Middleton, Jr.Ellen Sheriff Rogers
*By: ________________________________
(PEYTON G. MIDDLETON, JR.,
ATTORNEY-IN-FACT)(ELLEN SHERIFF ROGERS, ATTORNEY-
IN-FACT)

II-8
EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

1.1 --Form of Underwriting Agreement
for the New Bonds.............. Filed herewith.
1.2 --Form of Distribution Agreement
for the Medium-Term Notes...... Exh. 1-B to Registration
Statement No. 33-48325, 6/2/92.
4.1 --Form of the New Bonds......... Included in Exhibit No. 4.4.
4.2 --Form of the Medium-Term Notes. Included in Exhibit No. 4.5.
4.3 --Mortgage and Deed of Trust,
dated July 1, 1936, of the
Company to The Riggs National
Bank of Washington, D.C., as
Trustee, securing First
Mortgage Bonds of the Company, Exh. B-4 to First Amendment,
and Supplemental Indenture 6/19/36, to Registration
dated 7/1/36................... Statement No. 2-2232.
--Supplemental Indentures, to
the aforesaid Mortgage and Deed
of Trust, dated--
December 1, 1939 and December
10, 1939....................... Exhs. A & B to Form 8-K, 1/3/40.
August 1, 1940.................. Exh. A to Form 8-K, 9/25/40.
July 15, 1942 and August 10, Exh. B-1 to Amendment No. 2,
1942......................... 8/24/42, and B-3 to Post-
Effective Amendment, 8/31/42, to
Registration Statement No.
2-5032.
August 1, 1942.................. Exh. B-4 to Form 8-A, 10/8/42.
October 15, 1942................ Exh. A to Form 8-K, 12/7/42.
October 15, 1947................ Exh. A to Form 8-K, 12/8/47.
January 1, 1948................. Exh. 7-B to Post-Effective
Amendment No. 2, 1/28/48, to
Registration Statement No.
2-7349.
December 31, 1948............... Exh. A-2 to Form 10-K, 4/13/49.
May 1, 1949..................... Exh. 7-B to Post-Effective
Amendment No. 1, 5/10/49, to
Registration Statement No.
2-7948.
December 31, 1949............... Exh. (a)-1 to Form 8-K, 2/8/50.
May 1, 1950..................... Exh. 7-B to Amendment No. 2,
5/8/50, to Registration
Statement No. 2-8430.
February 15, 1951............... Exh. (a) to Form 8-K, 3/9/51.
March 1, 1952................... Exh. 4-C to Post-Effective
Amendment No. 1, 3/12/52, to
Registration Statement No.
2-9435.
February 16, 1953............... Exh. (a)-1 to Form 8-K, 3/5/53.
May 15, 1953.................... Exh. 4-C to Post-Effective
Amendment No. 1, 5/26/53, to
Registration Statement No.
2-10246.
March 15, 1954 and March 15, Exh. 4-B to Registration
1955........................... Statement No. 2-11627, 5/2/55.
May 16, 1955.................... Exh. A to Form 8-K, 7/6/55.
March 15, 1956.................. Exh. C to Form 10-K, 4/4/56.

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

4.3 cont. June 1, 1956................... Exh. A to Form 8-K, 7/2/56.
April 1, 1957.................. Exh. 4-B to Registration
Statement No. 2-13884, 2/5/58.
May 1, 1958.................... Exh. 2-B to Registration
Statement No. 2-14518, 11/10/58.
December 1, 1958............... Exh. A to Form 8-K, 1/2/59.
May 1, 1959.................... Exh. 4-B to Amendment No. 1,
5/13/59, to Registration
Statement No. 2-15027.
November 16, 1959.............. Exh. A to Form 8-K, 1/4/60.
May 2, 1960.................... Exh. 2-B to Registration
Statement No. 2-17286, 11/9/60.
December 1, 1960 and April 3,
1961.......................... Exh. A-1 to Form 10-K, 4/24/61.
May 1, 1962.................... Exh. 2-B to Registration
Statement No. 2-21037, 1/25/63.
February 15, 1963.............. Exh. A to Form 8-K, 3/4/63.
May 1, 1963.................... Exh. 4-B to Registration
Statement No. 2-21961, 12/19/63.
April 23, 1964................. Exh. 2-B to Registration
Statement No. 2-22344, 4/24/64.
May 15, 1964................... Exh. A to Form 8-K, 6/2/64.
May 3, 1965.................... Exh. 2-B to Registration
Statement No. 2-24655, 8/16/66.
April 1, 1966.................. Exh. A to Form 10-K, 4/21/66.
June 1, 1966................... Exh. 1 to Form 10-K, 4/11/67.
April 28, 1967................. Exh. 2-B to Post-Effective
Amendment No. 1 to Registration
Statement No. 2-26356, 5/3/67.
May 1, 1967.................... Exh. A to Form 8-K, 6/1/67.
July 3, 1967................... Exh. 2-B to Registration
Statement No. 2-28080, 1/25/68.
February 15, 1968.............. Exh. II-I to Form 8-K, 3/7/68.
May 1, 1968.................... Exh. 2-B to Registration
Statement No. 2-31896, 2/28/69.
March 15, 1969................. Exh. A-2 to Form 8-K, 4/8/69.
June 16, 1969.................. Exh. 2-B to Registration
Statement No. 2-36094, 1/27/70.
February 15, 1970.............. Exh. A-2 to Form 8-K, 3/9/70.
May 15, 1970................... Exh. 2-B to Registration
Statement No. 2-38038, 7/27/70.
August 15, 1970................ Exh. 2-D to Registration
Statement No. 2-38038, 7/27/70.
September 1, 1971.............. Exh. 2-C to Registration
Statement No. 2-45591, 9/1/72.
September 15, 1972............. Exh. 2-E to Registration
Statement No. 2-45591, 9/1/72.
April 1, 1973.................. Exh. A to Form 8-K, 5/9/73.
January 2, 1974................ Exh. 2-D to Registration
Statement No. 2-49803, 12/5/73.

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

4.3 cont. August 15, 1974................ Exhs. 2-G and 2-H to Amendment
No. 1 to Registration Statement
No. 2-51698, 8/14/74.
June 15, 1977.................. Exh. 4-A to Form 10-K, 3/19/81.
July 1, 1979................... Exh. 4-B to Form 10-K, 3/19/81.
June 16, 1981.................. Exh. 4-A to Form 10-K, 3/19/82.
June 17, 1981.................. Exh. 2 to Amendment No. 1,
6/18/81, to Form 8-A.
December 1, 1981............... Exh. 4-C to Form 10-K, 3/19/82.
August 1, 1982................. Exh. 4-C to Amendment No. 1 to
Registration Statement
No. 2-78731, 8/17/82.
October 1, 1982................ Exh. 4 to Form 8-K, 11/8/82.
April 15, 1983................. Exh. 4 to Form 10-K, 3/23/84.
November 1, 1985............... Exh. 2-B to Form 8-A, 11/1/85.
March 1, 1986.................. Exh. 4 to Form 10-K, 3/28/86.
November 1, 1986............... Exh. 2-B to Form 8-A, 11/5/86.
March 1, 1987.................. Exh. 2-B to Form 8-A, 3/27/87.
September 16, 1987............. Exh. 4-B to Registration
Statement No. 33-18229,
10/30/87.
May 1, 1989.................... Exh. 4-C to Registration
Statement No. 33-29382, 6/16/89.
August 1, 1989................. Exh. 4 to Form 10-K, 3/28/90.
April 5, 1990.................. Exh. 4-C to Registration
Statement No. 33-36875, 9/24/90.
May 21, 1991................... Exh. 4 to Form 10-K, 3/27/92.
May 7, 1992.................... Exh. 4-C to Registration
Statement No. 33-48325, 6/2/92.
September 1, 1992.............. Exh. 4 to Form 10-K, 3/26/93.
November 1, 1992............... Exh. 4 to Form 10-K, 3/26/93.
March 1, 1993.................. Exh. 4 to Form 10-K, 3/26/93.
March 2, 1993.................. Exh. 4 to Form 10-K, 3/26/93.
July 1, 1993................... Exh. 4.4 to Registration
Statement No. 33-49973, 8/11/93.
August 20, 1993................ Exh. 4.4 to Registration
Statement No. 33-50377, 9/23/93.
September 29, 1993............. Exh. 4 to Form 10-K, 3/25/94.
September 30, 1993............. Exh. 4 to Form 10-K, 3/25/94.
October 1, 1993................ Exh. 4 to Form 10-K, 3/25/94.
February 10, 1994.............. Exh. 4 to Form 10-K, 3/25/94.
February 11, 1994.............. Exh. 4 to Form 10-K, 3/25/94.
March 10, 1995................. Filed herewith.
4.4 --Form of Supplemental
Indenture between the
Registrant and The Riggs
National Bank of Washington,
D.C., Trustee, with respect to
the New Bonds................. Filed herewith.
4.5 --Form of Indenture between the
Registrant and The Bank of New
York, Trustee, with respect to Exh. 4 to Form 8-K, 6/21/90.
the Medium-Term Notes.........
5 --Opinion of William T.
Torgerson..................... Filed herewith.

EXHIBIT NO. DESCRIPTION OF EXHIBIT REFERENCE*
----------- ---------------------- ----------

12 --Computation of Ratios........... Exh. 12 to Form 10-Q, 7/28/95.
15 --Letter re Unaudited Financial
Information...................... Filed herewith.
23.1 --Consent of Price Waterhouse LLP. Filed herewith.
23.2 --Consent of William T. Torgerson. Contained in Exhibit 5.
23.3 --Consent of Covington & Burling.. Filed herewith.
24 --Power of Attorney............... Filed herewith.
25.1 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act of
1939 of The Riggs National Bank
of Washington, D.C., with respect
to the New Bonds................. Filed herewith.
25.2 --Form T-1 Statement of
Eligibility and Qualification
under the Trust Indenture Act of
1939 of The Bank of New York,
with respect to the Medium-Term Exh. 26-B to Registration
Notes............................ Statement No. 33-48325, 6/2/92.