FERC Approves Settlement Agreement for Trans-Allegheny Interstate Line Company

Agreement Sets Formula Rates for TrAIL and Other
Transmission-Related Projects
GREENSBURG, Pa.--(Business Wire)--
Allegheny Energy, Inc. (NYSE: AYE) announced today that the
Federal Energy Regulatory Commission (FERC) has approved a settlement
agreement that establishes formula rates for the proposed
Trans-Allegheny Interstate Line (TrAIL) and other related transmission
projects.

The settlement agreement, filed earlier this year by Allegheny
Energy's subsidiary, Trans-Allegheny Interstate Line Company
(TrAILCo), includes the following:

-- an incentive return on equity rate of 12.7 percent for the
TrAIL project;

-- an incentive return on equity rate of 12.7 percent for the
static VAR compensator installed at the existing Black Oak
Substation, and

-- a return on equity rate of 11.7 percent for any other projects
TrAILCo may undertake for which no incentive return has been
requested.

The settlement agreement, called "fair and reasonable and in the
public interest" by FERC in its order, resolves all issues associated
with establishing the transmission cost of service formula for
TrAILCo.

Incentive rate treatment is intended to encourage new investment
in electric transmission projects that will improve the reliability of
electric service.

The TrAIL project will span portions of southwestern Pennsylvania,
West Virginia and Virginia. TrAILCo is seeking regulatory approvals
from the utility commissions in those states and expects a decision by
the West Virginia Public Service Commission by early August. State
regulators in Pennsylvania and Virginia are also expected to issue
decisions later this year.

Allegheny Energy

Headquartered in Greensburg, Pa., Allegheny Energy is an
investor-owned electric utility with total annual revenues of over $3
billion and more than 4,000 employees. The company owns and operates
generating facilities and delivers low-cost, reliable electric service
to 1.6 million customers in Pennsylvania, West Virginia, Maryland and
Virginia. For more information, visit the company's Web site at
www.alleghenyenergy.com.

Forward-Looking Statements

In addition to historical information, this release contains a
number of "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Words such as anticipate,
expect, project, intend, plan, believe, and words and terms of similar
substance used in connection with any discussion of future plans,
actions, or events identify forward-looking statements. These include
statements with respect to: regulation and the status of retail
generation service supply competition in states served by Allegheny
Energy's distribution business, Allegheny Power; financing plans;
demand for energy and the cost and availability of raw materials,
including coal; provider-of-last-resort and power supply contracts;
results of litigation; results of operations; internal controls and
procedures; capital expenditures; status and condition of plants and
equipment; regulatory matters; and accounting issues. Forward-looking
statements involve estimates, expectations and projections and, as a
result, are subject to risks and uncertainties. There can be no
assurance that actual results will not materially differ from
expectations. Actual results have varied materially and unpredictably
from past expectations. Factors that could cause actual results to
differ materially include, among others, the following: changes in the
price of power and fuel for electric generation; general economic and
business conditions; changes in access to capital markets;
complications or other factors that render it difficult or impossible
to obtain necessary lender consents or regulatory authorizations on a
timely basis; environmental regulations; the results of regulatory
proceedings, including proceedings related to rates; changes in
industry capacity, development and other activities by Allegheny
Energy's competitors; changes in the weather and other natural
phenomena; changes in the underlying inputs and assumptions, including
market conditions used to estimate the fair values of commodity
contracts; changes in laws and regulations applicable to Allegheny
Energy, its markets or its activities; the loss of any significant
customers or suppliers; dependence on other electric transmission and
gas transportation systems and their constraints or availability;
changes in PJM, including changes to participant rules and tariffs;
the effect of accounting policies issued periodically by accounting
standard-setting bodies; and the continuing effects of global
instability, terrorism and war. Additional risks and uncertainties are
identified and discussed in Allegheny Energy's reports filed with the
Securities and Exchange Commission.

Allegheny Energy, Inc.
Media contact
David Neurohr, Director, External Communications,
724-838-6020
Media Hotline: 888-233-3583
E-mail: dneuroh@alleghenyenergy.com
or
Investor contact
Max Kuniansky, Executive Director, Investor Relations
and Corporate Communications, 724-838-6895
E-mail: mkunian@alleghenyenergy.com

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