Allegheny Energy, Inc. Announces 1998 Earnings.

HAGERSTOWN, Md.--(BUSINESS WIRE)--Jan. 22, 1999--Allegheny Energy, Inc. (NYSE: AYE) today reported an increase in 1998 earnings, before costs related to the Pennsylvania restructuring order and settlement, of $5.5 million ($.04 per share), compared with 1997 earnings. Earnings for 1998, before Pennsylvania restructuring and settlement costs, were $286.7 million ($2.34 per share), compared with $281.3 million ($2.30 per share) in 1997. The increase in 1998 earnings before Pennsylvania restructuring was due to increased kilowatt-hour (kWh) sales to regular utility customers for the year.

For 1998, the Company took an extraordinary charge of $275.4 million ($2.25 per share), net of taxes, and recorded additional costs of $23.7 million ($.19 per share), net of taxes, related to the Pennsylvania restructuring order and subsequent settlement. As a result, the Company reported a consolidated net loss of $12.4 million ($.10 per share). The extraordinary charges reflect a write-off by the Company's Pennsylvania subsidiary, West Penn Power Company, primarily in the second quarter, in connection with deregulation proceedings in Pennsylvania. The write-off reflects adverse purchase commitments and costs previously deferred for future recovery in accordance with the former regulatory environment.

"Considering the challenges of the past year, including our extraordinary restructuring-related charges in Pennsylvania and weather conditions which adversely affected our kilowatt-hour sales, our 1998 performance was quite good," said Michael P. Morrell, Senior Vice President and Chief Financial Officer. "We expect to do even better in 1999 and the years ahead, now that we have the Pennsylvania restructuring uncertainty behind us."

For the fourth quarter of 1998, consolidated income before Pennsylvania restructuring and settlement costs was $71.8 million ($.58 per share), compared with 1997 fourth quarter earnings of $77.2 million ($.63 per share). The fourth quarter included Pennsylvania settlement costs of $23.7 million ($.19 per share), net of taxes, and a $10.0 million ($.08 per share), net of taxes, increase in the extraordinary charge.

The decrease in fourth quarter earnings, excluding restructuring costs, was primarily due to a decrease in kWh sales to regular customers caused by unusually mild winter weather. -0-

     Per share earnings for the comparable 1998 and 1997 periods are:


                                         Full Year     Fourth Quarter
                                       1998     1997     1998   1997
Earnings before restructuring
 and settlement costs                 $2.34    $2.30    $ .58   $.63
Pennsylvania extraordinary charges    (2.25)       -     (.08)     -
Pennsylvania settlement costs          (.19)       -     (.19)     -
                                      ------   -----    ------  -----
   Reported (loss) earnings           $(.10)   $2.30     $.31   $.63
                                      ======   =====    ======  =====

     Allegheny Energy was very active during 1998 in a variety of
ventures aimed at increasing revenue and improving shareholder value.
The following are some of the year's milestones:

-- Restructuring and customer choice

     West Penn Power Company reached a settlement in its Pennsylvania
restructuring case which was approved by the Pennsylvania Public
Utility Commission. The agreement permits recovery of $670 million in
restructuring transition costs over 10 years and allows the Company to
issue bonds to securitize up to $670 million in transition costs,
providing 25 percent of the associated savings to shareholders. The
agreement also allows for more stranded cost recovery to be recognized
in the earlier part of the transition period and authorizes the
transfer of West Penn Power's generating assets to a non-regulated
corporate entity at book value.

-- Telecommunications

     Allegheny Communications Connect, our unregulated
telecommunications subsidiary, in a joint venture with Hyperion
Telecommunications, Inc., completed a $12 million fiber optic network
in the State College, Pa., area, which is now providing the area with
the most advanced telecommunication services available while creating
an additional revenue stream for Allegheny Energy. More projects are
under way.

-- Pennsylvania competition

     Initial customer choice in Pennsylvania resulted in Allegheny
Energy gaining more new retail customers and load than it lost to
competition. The Company's Allegheny Energy Supply business signed a
contract with the U.S. General Services Administration to supply more
than 120 million kilowatt-hours of electricity annually to federal
agencies and non-profit organizations throughout Pennsylvania.
Allegheny Energy also signed a contract with Brandywine Realty Trust
to supply electricity to its commercial properties in eastern
Pennsylvania. It will supply 120 commercial properties, representing
more than 76 million kilowatt-hours of electrical load.

-- Other activities

     In 1998, we signed multi-year contracts with estimated revenues
totaling $145 million with eight wholesale customers in Maryland,
Pennsylvania, Virginia, and West Virginia. Our Maryland utility
subsidiary reached a settlement approved by the Maryland Public
Service Commission that will enable it to recover significant costs
associated with the AES/Warrior Run co-generation project in Western
Maryland. The settlement allows the Company to recover about $60
million annually in power purchases.
     AYE is a registered public utility holding company which includes
three electric utility subsidiaries doing business as Allegheny Power:
Monongahela Power Company, The Potomac Edison Company, and West Penn
Power Company. AYE subsidiaries annually provide approximately 43
billion kWh of electricity to more than 1.4 million customers in
Maryland, Ohio, Pennsylvania, Virginia, and West Virginia. AYE also
owns unregulated subsidiaries, which invest in energy-related and
telecommunication projects, including energy marketing activities.


                       ALLEGHENY ENERGY EARNINGS
                          FOURTH QUARTER 1998


Three months ended December 31, 1998       1998                1997


Sales to regular utility
 customers, gigawatt-hours (Note 1)       10,607              10,755

Revenues ($000)
   Regular Utility Customers (Note 2)  $ 531,151            $562,733
   Other Utility Revenues                 17,662              20,981
   Nonutility Revenues                    27,894              32,922
                                    ---------------     --------------
      Total                            $ 576,707            $616,636
                                    ===============     ==============

Consolidated income before
 restructuring and settlement
 costs ($000)                           $ 71,892             $77,214
Pennsylvania extraordinary
 charges ($000) (Note 3)                  (9,980)                  -
Pennsylvania settlement
 costs ($000)                            (23,748)                  -
                                    ---------------     --------------
Consolidated net income ($000)          $ 38,164             $77,214
                                    ===============     ==============

Basic and diluted earnings per
 average share (Note 4)
   Before restructuring and
    settlement costs                      $ 0.58               $0.63
   Pennsylvania extraordinary
    charges                              ($ 0.08)                  -
   Pennsylvania settlement costs         ($ 0.19)                  -
                                    ---------------     --------------
   Consolidated net income                $ 0.31               $0.63
                                    ===============     ==============

Average common shares
 outstanding (000)                       122,436             122,436


Year ended December 31, 1998               1998                1997


Sales to regular utility
 customers, gigawatt-hours (Note 1)       42,649              41,470

Revenues ($000)
   Regular Utility Customers (Note 2) $2,204,463          $2,196,618
   Other Utility Revenues                124,987              87,079
   Nonutility Revenues                   246,986              85,794
                                    ---------------     --------------
      Total                           $2,576,436          $2,369,491
                                    ===============     ==============

Consolidated income before
 restructuring and settlement
 costs ($000)                          $ 286,756            $281,296
Pennsylvania extraordinary
 charges ($000) (Note 3)                (275,426)                  -
Pennsylvania settlement
 costs ($000)                            (23,748)                  -
                                    ---------------     --------------
Consolidated net (loss)
 income ($000)                         ($ 12,418)           $281,296
                                    ===============     ==============

Basic and diluted earnings
 per average share (Note 4)
   Before restructuring and
    settlement costs                       $2.34               $2.30
   Pennsylvania extraordinary charges      (2.25)                  -
   Pennsylvania settlement costs           (0.19)                  -
                                    ---------------     --------------
   Consolidated net (loss) income         ($0.10)              $2.30
                                    ===============     ==============
Average common shares
 outstanding (000)                       122,436              122,208

Note 1: Excludes bulk power transaction sales.

Note 2: 1998 retail revenues are reduced by a 2.5% rate refund ($25.1

million) for Pennsylvania customers as a result of the

settlement agreement.

Note 3: Costs after taxes, determined to be unrecoverable as a result

of deregulation proceedings in Pennsylvania.

Note 4: Basic and diluted earnings per share are the same.