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 23, 2003    

POTOMAC ELECTRIC POWER COMPANY

(Exact name of registrant as specified in its charter)

District of Columbia and Virginia	001-01072	53-0127880
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

701 Ninth Street, 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)

Item 5.     Other Events

On December 23, 2003, the United States District Court for the Northern District of Texas, Fort Worth Division, issued a Memorandum Opinion and Order denying the motion of Mirant Corporation and certain of its subsidiaries (collectively, “Mirant”), as debtors in possession, to reject certain obligations to Potomac Electric Power Company (“Pepco”) relating to two power purchase agreements with third party generators. Pepco is a wholly owned subsidiary of Pepco Holdings, Inc. (“PHI”).

As more fully described in the Forms 10-Q, as amended, of PHI and Pepco for the quarter ended September 30, 2003, Pepco is a party to (i) power purchase agreements with FirstEnergy Corp., formerly Ohio Edison (“FirstEnergy”), and Allegheny Energy, Inc. under which Pepco is obligated to purchase from FirstEnergy 450 megawatts of capacity and energy annually through December 2005 (the “FirstEnergy PPA”) and (ii) a power purchase agreement with Panda-Brandywine, L.P. (“Panda”) under which Pepco is obligated to purchase from Panda 230 megawatts of capacity and energy annually through 2021 (the “Panda PPA”). In each case, the purchase price is substantially in excess of current market prices. As a part of an Asset Purchase and Sale Agreement entered into in 2000 pursuant to which Pepco sold substantially all of its generation assets to Mirant, Pepco entered into a “back-to-back” arrangement with Mirant. Under this arrangement, Mirant is obligated, among other things, to purchase from Pepco the capacity and energy that Pepco is obligated to purchase under the FirstEnergy PPA and the Panda PPA at a price equal to the price Pepco is obligated to pay under the PPAs (the “PPA-Related Obligations”).

In its December 23, 2003 Order, the District Court held that the Federal Energy Regulatory Commission has exclusive jurisdiction to regulate sales of electric energy at wholesale in interstate commerce, and accordingly denied Mirant’s motion to reject the PPA-Related Obligations. The District Court decision is subject to appeal. Mirant is continuing to perform the PPA-Related Obligations.

A copy of PHI’s press release, dated December 26, 2003, is attached hereto as Exhibit 99 and is hereby incorporated by reference.

Item 7.     Financial Statements and Exhibits

(c) Exhibits

Exhibit No.	Description of Exhibit	Reference
99	Press Release of Pepco Holdings, Inc. dated as of December 26, 2003.	Filed herewith

2

Pepco

Form 8-K

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)
By:	/s/    KIRK J. EMGE
	Kirk J. Emge General Counsel

December 29, 2003

DATE

EX-99

Exhibit 99

Pepco Holdings, Inc.
NEWS RELEASE	701 Ninth Street NW
	Washington, DC 20068
	Media Relations: 202-872-2680
	www.pepcoholdings.com
	NYSE: POM
FOR IMMEDIATE RELEASE	Media Contact: Tom Welle
December 26, 2003	(202) 872-2680
	Investors Contact: Ernie Bourscheid
	(202) 872-2797

Federal Judge Denies Mirant’s Request to Terminate Pepco Contracts

On December 23, 2003, The Honorable John McBryde, Judge of the United States District Court for the Northern District of Texas, Fort Worth Division, issued a Memorandum Opinion and Order denying bankrupt Mirant Corp.’s request to reject two power purchase agreements under which Mirant had committed to reimburse Pepco for the cost of electricity supplied to Pepco under power purchase agreements with third party generators. Pepco is a subsidiary of Pepco Holdings, Inc. (NYSE: POM).

Pepco and the Federal Energy Regulatory Commission (FERC) opposed Mirant’s attempt to use the bankruptcy laws to terminate the agreements on the grounds that Mirant could not terminate its obligations without prior FERC approval. Judge McBryde agreed and declined to issue injunctive relief requested by Mirant. He further ordered Mirant to show cause by January 5, 2004 why all injunctive relief previously granted by the bankruptcy court should not be dissolved.

Pepco believes the Court’s opinion is just, proper and in accordance with the law, and assumes that Mirant will continue to perform its obligations under these agreements, as it has since the commencement of its bankruptcy proceeding.

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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.

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