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Pepco to Transform Vehicle Fleet to Hybrids and Alternative Fuels

May 18, 2007

WASHINGTON, D.C. --Pepco Holdings, Inc. (NYSE:POM) today said it will transform its 2,000-vehicle fleet to more environmentally friendly technologies by using electric hybrids and alternatively fueled vehicles to reduce its fuel bill and curb greenhouse gas emissions.

“The way we do business has a direct impact on our community and the environment, and the public concern about global warming can no longer be ignored,” said Dennis R. Wraase, PHI’s Chairman, President and Chief Executive Officer.

PHI now has a mix of more than 80 alternative-fueled trucks, including a 42-foot hybrid electric bucket truck, and several hybrid cars and SUVs. Thirty additional hybrid cars and SUVs will join the fleet this year, with about half already ordered. PHI also plans to convert all of its truck fueling facilities in four Mid-Atlantic States to emission-reducing biodiesel fuel, which is a blend of 20 percent soybean oil and 80 percent low-sulfur diesel. Fueling facilities in the Pepco service area have already converted to biodiesel. <[p> Wraase said the fleet will be transformed over time as vehicles wear out, initially replacing the equipment with hybrid and alternative-fuel vehicles, and later with even newer technology as it becomes available commercially. He noted that the company will continue to participate in several pilot programs to evaluate the potential for new vehicle technologies to reduce costs, make more efficient use of off-peak power and reduce emissions. The evaluation will also consider other alternative fuels such as natural gas and E85, a blend of 85 percent ethanol and 15 percent gasoline.

Existing hybrids use both an electric motor and a standard gasoline engine. The developing technologies still in the pilot stage include all-electric vehicles that run on batteries charged by plugging into household current and by regenerative braking; plug-in hybrid electrics that are recharged overnight when power is cheaper, and fuel cell vehicles that run on hydrogen fuel.

Although the purchase price of hybrid vehicles is greater than that of conventional vehicles, PHI expects the investment in these vehicles to pay off in reduced fuel costs and lower carbon emissions.

The hybrid bucket truck entered the Pepco fleet earlier this year as part of a year-long pilot program to assess its performance and reliability under typical working conditions. Its fuel economy is estimated in the range of 40 percent to 60 percent better than conventional bucket trucks.

About PHI: Pepco Holdings, Inc., headquartered in Washington, D.C., delivers electricity and natural gas to about 1.9 million customers in Delaware, the District of Columbia, Maryland, New Jersey and Virginia. Through its subsidiaries Pepco, Delmarva Power and Atlantic City Electric, PHI delivers regulated electricity and natural gas service. PHI provides competitive wholesale generation services through Conectiv Energy and retail energy products and services through Pepco Energy Services.

PIN and J.D. Power and Associates data suggest that the small car market -- both new and used -- will continue to strengthen as fuel prices escalate.

"The recent strength of the small vehicle segments -- pricing, styling and an increasing number of new models -- is receiving an additional boost from high gas prices," said Bob Schnorbus, chief economist at J.D. Power and Associates. "We're expecting the small vehicle segments to continue to grow, regardless of gas prices, but higher gas prices certainly will help these segments relative to others."

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