Pepco and Conectiv See Witt Report as Blueprint for Positive Change in Enhancing Customer Service

Tuesday, January 13, 2004

Pepco Holdings, Inc. (PHI) today announced it is acting immediately on recommendations in a report released today by James Lee Witt Associates. PHI commissioned the report to review its response to Hurricane Isabel, and to determine how to better respond to customer needs during critical times.

"Improving customer service and reliability are our top priorities," said PHI Chief Executive Officer Dennis Wraase. "While it is encouraging that independent experts confirmed our belief that we met industry standards for responding to such a situation, we recognize our customers expectmore. This report challenges us to go beyond normal utility practice,and we intend to use it as a blueprint for positive change," Wraasecontinued. "This is an opportunity for Pepco and Conectiv to becomea leader in community emergency response."

Among the report's findings is the recommendation that Pepco and Conectivadopt advanced emergency planning processes similar to those used by the federal government and many local agencies throughout the country, bu tnot generally followed by utility companies.

The report findings supplement PHI's internal review that looked at the company's response and made recommendations for improvements. Some of the recommendations are already in the process of being implemented. These include:

enhanced computer systems to more effectively handle high volumes of data in emergencies;
an improved process for estimating restoration times;
a revised procedure for handling downed wires;
a community outreach program to seek customer input on restoration priorities and other reliability-related policy matters; and
pilot programs to install new technology to improve reliability.

Additionally, the Witt report recommends organizational changes to provide more visibility to the emergency management function. Wraase last week named as Vice President, Emergency Preparedness, Michael W. Maxwell, an engineer with extensive experience in transmission, distribution and emergency operations. In this role, he will enhance emergency planning and coordination with governmental agencies, public works departments and other service providers. Maxwell will report to Tom Shaw, PHI Executive Vice President with responsibility for both Pepco and Conectiv Power Delivery. Shaw will spearhead overall efforts to implement the recommendations across the companies. Teams are being assigned to address all major areas and develop an overall schedule to complete the key recommendations. Over the next few months the company will provide more details as they are fully developed.

Summary of PHI Plans

Generally, PHI finds that the recommendations in the Witt report have merit. PHI plans the following activities to address both the Witt report and other recommendations, recognizing that our regulators may have additional items they want us to address. Many of these activities will require collaboration with other groups and agencies across PHI's multi-jurisdictional service territory. However, work has already begun on several of these activities, and others will be implemented over the coming months and years.

Emergency Management

Emergency response plan, assignments and organization are being revised to reflect lessons learned. A position at the vice president level has been created to oversee the revision and execution of the plan.
Coordination, training and drill exercises with local governments and emergency management organizations are being expanded. Initial contacts will be completed by the end of March and our goal is to hold a practice drill before summer.
The process for responding to downed wires will be improved throughmore extensive field inspection, reporting, dispatch, management and enhanced coordination with local governments and other utilities. An enhanced Pepco procedure has been implemented to ensure that all wires down are responded to as promptly as possible.
PHI will support government agencies in helping make customers with special needs and critical facilities such as traffic signals less vulnerable to the effects of power outages. Contacts are being made with appropriate local authorities.

Customers

Computer systems have been enhanced at both companies to increase the volume of data that can be processed in emergencies. This enables us to provide more up-to-date information to customers and manage restoration crews more efficiently.
An improved process for estimating restoration times and providing crew location information to customers is being developed at Pepco and Conectiv, with the goal of being in place by June.
Both Pepco and Conectiv are increasing customer service staff to handle customer calls.
Plans are being developed to make expanded emergency planning information available to customers in advance of storms, in coordination with emergency management agencies.

Community

Pepco and Conectiv are contacting community representatives, government agencies and customers throughout the service area to obtain their input on restoration priorities, restoration coordination and other policy matters. The goal is to complete initial contact by the end of March.
Programs to enhance reliability are being expanded, with a focus on areas that have experienced the most frequent repeat outages. Pepco and Conectiv will analyze each situation, initiate corrective actions and present options to the community for input as appropriate. Options may include tree trimming and tree replacement, selective undergrounding of power lines and other steps to improve the reliability of the electrical distribution system.

We are also looking at newly identified technology and infrastructure enhancements that could be implemented over the next several years. For example, we are considering options to:

Install technology to remotely detect downed wires.
Expand use of automated switches so that power can be restored remotely without sending a crew.
Evaluate new devices that can provide real time information on outages without having to depend on our customers to call us to pin point individual outages.

Over the next few months PHI will firm up these plans and provide more details as soon as possible.

Editor''s Note: To hear a digital replay of the press conference,call 877-519-4471, PIN 4425861. The replay will be available for 24-hours, beginning at 12:00p.m. on January 13, 2004.

About PHI: Pepco Holdings, Inc.is a diversified energy company with headquarters in Washington, D.C. Its principal operations consist of Pepco and Conectiv Power Delivery, which deliver 50,000 gigawatt-hours of power to more than 1.8 million customers in Washington, Delaware, Maryland, New Jersey and Virginia. PHI engages in regulated utility operations by delivering electricity and natural gas, and provides competitive energy and energy products and services to residential and commercial customers.

Forward-Looking Statements: Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law. These statements contain management's beliefs based on information currently available to management and on various assumptions concerning future events. Forward-looking statements are not a guarantee of future performance or events. They are subject to a number of uncertainties and other factors, many of which are outside the company's control. Factors that could cause actual results to differ materially from those in the forward-looking statements herein include general economic, business and financing conditions; availability and cost of capital; changes in laws, regulations or regulatory policies; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors. These uncertainties and factors could cause actual results to differ materially from such statements. PHI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results and prospects of PHI.