Allegheny Announces Virginia Rate Decision.

GREENSBURG, Pa. -- Allegheny Energy, Inc. (NYSE:AYE) announced that the State Corporation Commission of Virginia has issued an order granting partial recovery of increased purchased power costs.

The commission's order:

* Grants a rate adjustment effective immediately that would permit the company to collect an additional $9.5 million (pre-tax) on an annualized basis through June 30, 2008, a substantially lower amount than the $42.3 million Allegheny requested,

* Directs the company to implement deferred accounting effective immediately with respect to the over- or under-recovery of the increased purchase power costs approved in the order, and

* Directs the company to file an application with the commission on or before July 1, 2008, for proposed recovery of purchased power costs for the 12-month period beginning July 1, 2008, including for treatment of any over- or under-recovery incurred under this order.

Allegheny's filing sought recovery of costs associated with the portion of the Virginia load, or demand, above 367 megawatts (MW) - the amount of load served by the Virginia generation assets formerly owned by the company before restructuring in 2000. Allegheny's Virginia load is currently 605 MW.

The amount granted in the order is less than Allegheny requested because the commission disagreed with the company's application of a weighted-average capacity factor of about 65 percent to the 367 MW, which represents the actual operating performance of these assets.

The rate adjustment detailed in the commission's order is the first increase in Virginia residential rates in more than six years. Since 2000, the cost of natural gas and coal - two primary fuels for generating electricity - have increased by more than 70 percent and 40 percent, respectively. As a result, wholesale prices for electricity have risen substantially.

Allegheny began purchasing power at wholesale market prices for its Virginia customers on July 1, 2007. To moderate the impact of the increased costs, the company proposed a four-year rate stabilization, or phase-in, program earlier this year. The Commission denied that request. The new order is in response to the company's modified September filing.

Allegheny continues to believe it is entitled to full recovery of all purchased power costs, and maintains its appeal to the Virginia Supreme Court on that issue.

The commission's new order will result in an average residential rate increase of 4.6 percent, or $3.06 per month, effective immediately. According to the Energy Information Association, Allegheny's Virginia rates are among the lowest in the nation. After the increase permitted by the order, the average bill for a residential customer in Virginia using 1,000 kilowatts per month will be $69.67. This is well below the state average of $83 and the national average of $103.

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 over 1.5 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: rate 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; capacity purchase commitments; 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: plant performance and unplanned outages; 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 customer switching behavior and their resulting effects on existing and future load requirements; 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.