8-K

                                 UNITED STATES

                        SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C.   20549

                                   Form 8-K

 
                                 CURRENT REPORT

                    PURSUANT TO SECTION 13 or 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported)     December 22, 1997 

   
                        POTOMAC ELECTRIC POWER COMPANY                      
          (Exact name of registrant as specified in its charter)


District of Columbia and Virginia      1-1072            53-0127880    
 (State or other jurisdiction of    (Commission     (I.R.S. Employer
  incorporation)                     File Number)   Identification No.)


1900 Pennsylvania Avenue, N. W., Washington, D. C.             20068   
     (Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code       (202) 872-3526

                                                                       
    (Former Name or Former Address, if Changed Since Last Report)      




                                                                   PEPCO
                                                                   Form 8-K

Item 5.   Other Events.

     Exhibit 99 attached hereto is hereby incorporated by reference.

Item 7.   Financial Statements and Exhibits.

          (c)  Exhibits

          Exhibit No.        Description of Exhibit       Reference

          99                 News Release of Potomac
                             Electric Power Company and
                             Baltimore Gas and Electric
                             Company dated December 22,
                             1997........................ Filed herewith.

                                   Signatures

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

                                       Potomac Electric Power Company
                                                 (Registrant)


                                         /s/   Dennis R. Wraase
                                      By ___________________________
                                               Dennis R. Wraase 
                                          Senior Vice President and
                                           Chief Financial Officer

December 22, 1997
     DATE

EX-99

[BGE logo here]                                           [PEPCO logo here]

                           N E W S     R E L E A S E

=============================================================================

Arthur J. Slusark                              Nancy Moses
Baltimore Gas and Electric Company             Potomac Electric Power Company
(410)234-7433                                  (202)872-2680

For Immediate Release
December 22, 1997

              BGE and PEPCO Announce Cancellation of Proposed Merger

      Today the Baltimore Gas and Electric Company (BGE) and Potomac
Electric Power Company (PEPCO) announced they have decided to cancel
their proposed merger to create one of the nation's ten largest
utilities, Constellation Energy Corporation.  A $15 billion electric and
gas company, Constellation Energy would have served the needs of nearly
two million energy customers in the combined Baltimore-Washington area.

      In a joint statement, BGE's Chairman and Chief Executive Officer
Christian H. Poindexter and PEPCO's President and Chief Executive Officer
John M. Derrick, Jr., expressed their deep disappointment in having to
terminate the merger agreement, which was signed September 22, 1995.

      "As proposed, Constellation Energy would have been a strong,
successful competitor in the emerging energy market," said the two CEOs. 
"The benefits of such a company to the Baltimore-Washington region cannot
be overstated in terms of lower costs, innovative products and services,
proactive economic development, and continued commitment to the
community."

      Poindexter explained that although BGE and PEPCO had been
successful in securing the regulatory approvals needed to merge, "the
orders issued by both the Maryland and District of Columbia Public
Service Commissions contain financial conditions that make it impossible
for the two companies' investors to share in the benefits of the proposed
merger."

      BGE and PEPCO's proposed regulatory plan called for an equal
sharing of the savings between customers and shareholders.  Both the
Maryland and D.C. PSC orders returned more than the estimated total
merger savings to customers.  "We have tried unsuccessfully to obtain
reconsideration of these conditions," said Derrick and Poindexter, "but
now conclude that a favorable outcome cannot be expected within a
reasonable period, if at all."

                                      - more -



MERGER 2-2-2


      "BGE and PEPCO shareholders overwhelmingly supported the proposed
merger because it appeared to be a fair deal for everyone involved,"
added Poindexter.  "To sacrifice shareholders' interests by proceeding
with the merger under detrimental financial terms and conditions would
represent a major breach of faith."

      Poindexter and Derrick also cited efforts underway in Maryland to
restructure the electric industry as a contributing factor in their
decision to end the merger at this time.  "The Maryland Public Service
Commission and the Maryland legislature are working toward reshaping the
state's electric industry to allow for full customer choice in the near
future.  BGE and PEPCO must commit their full attention to addressing the
many complex and controversial aspects of restructuring because it is
imperative that Maryland gets electric industry restructuring right the
first time."

      Both Derrick and Poindexter emphasized that the two companies will
continue to work closely together to ensure the region's successful
transition to a competitive energy market.

      The companies have spent approximately $100 million to date on the
merger including various computer system modifications.  These costs were
to be shared equally, and the merger costs will be written off by PEPCO
and BGE in 1997.  The companies will take appropriate steps to terminate
regulatory and court proceedings shortly.

      Both CEOs said that it is a testimony to the caliber of employees
at BGE and PEPCO that, despite recent frustrating events, the merger ends
with mutual respect and positive regard.  "We came together in a spirit
of partnership and cooperation," said Poindexter and Derrick.  "Both
companies acted with integrity and put the best interests of
Constellation Energy before those of the individual companies.  We can't
thank our employees enough for the hard work and excitement they
contributed to this effort.  Despite the outcome, it has provided a
valuable learning experience for all of us, both personally and
professionally."

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