Allegheny Energy, Inc. Reports Record 2001 Earnings Per Share-- Earnings Up 32% Over 2000 to $3.74.

Business Editors

HAGERSTOWN, Md.--(BUSINESS WIRE)--Jan. 31, 2002

Allegheny Energy, Inc. (NYSE: AYE) today reported record 2001 earnings per share of $3.74 ($448.9 million), before the cumulative effect of an accounting change, a 32 percent increase over 2000 earnings per share of $2.84 ($313.7 million), before extraordinary charges. The increase in 2001 earnings was driven by the addition of about 3,000 megawatts of generating capacity, the successful integration of a newly acquired energy trading and risk management business, and the continued steady earnings contributions from the Company's energy delivery business.

Allegheny Energy's earnings growth is especially encouraging in light of less-than-favorable operating and business conditions experienced throughout the year, according to Alan J. Noia, Chairman, President, and Chief Executive Officer.

"The past year was a good one for Allegheny Energy," says Noia, "and I am particularly pleased with our strong performance during a year when the nation, the economy, and the energy industry as a whole faced unprecedented challenges. We were able to again deliver on our promise of providing value to our shareholders, while continuing to execute what has proven to be a winning strategy for growth."

Adds Noia, "The combination of our expanding energy supply business and the strength, stability, growth, and increased efficiency of our energy delivery business has brought value for our shareholders. Our ability to produce increased earnings during difficult times demonstrates the flexibility and tenacity of our employees and the very clear focus of our management team on delivering results. Our goal is to build on this success in 2002."

Earnings for 2001 were $448.9 million ($3.74 per share), before an after-tax charge of $31.1 million ($.26 per share) associated with the cumulative effect of an accounting change due to the adoption of the Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." Earnings for 2000 were $313.7 million ($2.84 per share), before after-tax extraordinary charges of $77.0 million ($.70 per share) associated with electric utility restructuring orders. The 43 percent increase in income before special charges and 32 percent increase in earnings per share were driven by improved performance and increased net revenues in the unregulated generation operations (revenues less fuel, purchased power, and transmission by others), including the results of risk management and energy marketing activities. Earnings from regulated utility operations, after adjusting for generation asset transfers in 2000 and 2001, increased as a result of a full year's contribution of our natural gas distribution company.

Net income for 2001, which includes the cumulative effect of an accounting change, was $417.8 million ($3.48 per share). After extraordinary charges, net income for 2000 was $236.6 million ($2.14 per share).

Earnings for the fourth quarter of 2001 were $64.6 million ($.52 per share), while earnings for the fourth quarter of 2000 were $79.7 million ($.72 per share), before after-tax extraordinary charges of $6.5 million ($.06 per share) as a result of electric utility restructuring orders. This 28 percent decrease in earnings per share and 19 percent decrease in income before an extraordinary charge reflect increased shares of common stock outstanding, the effects of increased depreciation and amortization expense related to recent acquisitions, as well as the effects of uncharacteristically warm weather and reduced economic activity.

      Per share earnings for comparable 2001 and 2000 periods were:

                                         Full Year     Fourth Quarter
                                         ---------     --------------
                                        2001     2000   2001    2000

----------------------------------------------------------------------
Income before extraordinary charge
 and cumulative effect of
 accounting change                      $3.74    $2.84  $.52     $.72
----------------------------------------------------------------------
Extraordinary charges for electric
 utility restructuring orders             .00     (.70)  .00     (.06)
----------------------------------------------------------------------
Cumulative effect of accounting
 change : adoption of SFAS 133           (.26)     .00   .00      .00
----------------------------------------------------------------------
Basic consolidated earnings per share   $3.48    $2.14  $.52     $.66
----------------------------------------------------------------------

Allegheny Energy had many successes in 2001, all of which furthered our growth strategy or advanced our position as a national energy merchant. The following are highlights of 2001:

Generating Assets, Marketing, and Trading

- Allegheny Energy Supply completed the acquisition and integration of
Allegheny Energy Global Markets (AEGM), solidifying our position as a national
energy merchant. AEGM is actively marketing and trading electricity, natural
gas, and other energy commodities as part of our energy supply business.

- We expanded our generating capacity by about 3,000 megawatts (MW) through the
acquisition of 1,710 MW of natural gas-fired capacity in the Midwest and 83 MW
of coal-fired generation in Pennsylvania, the construction of an 88-MW natural
gas-fired generating facility near Chambersburg, Pa., and the implementation of
a tolling agreement for up to 1,000 MW of competitively priced electricity in
California. We also announced plans to construct a new, 630-MW natural
gas-fired merchant generating facility in St. Joseph County, Ind.

- Later this year, AEGM will expand our reach into attractive energy markets by
marketing 79 MW of energy under a long-term, natural gas tolling agreement in
New York City and 222 MW under a natural gas tolling agreement in Las Vegas,
Nev. We also entered into a joint venture with CONSOL Energy, Inc. to construct
an 88-MW coalbed methane gas-fired generating facility in Virginia, which
Allegheny Energy Supply will operate. The output will be sold into the
competitive marketplace. Projects under construction and development will give
Allegheny Energy more than 14,600 MW of total owned or controlled generating
capacity by 2005.

- Allegheny Energy Supply announced that it is participating along with Salt
River Project and Sempra Energy Resources in an Open Season to determine the
viability of the proposed Desert Crossing Gas Storage and Transportation
System, a natural gas storage and pipeline system that would serve growing
energy markets in the Southwest. During an Open Season, customers interested in
acquiring natural gas storage capacity or transmission capacity on a pipeline
submit bids setting out the terms under which they will agree to purchase the
capacity. If sufficient interest is expressed, Allegheny and the other sponsors
could decide to move forward with the project, which could be operational in
2004.

Regulated Operations

- Allegheny Power, our energy delivery business, and the

Pennsylvania-New Jersey-Maryland (PJM) Interconnection took

steps to create PJM West, an independent Regional Transmission

Organization that will develop a new electric transmission

affiliation to expand the Mid-Atlantic energy market. PJM West

will manage our strategically located transmission assets,

reduce network congestion, and enhance system reliability,

while meeting new federal requirements.

- Allegheny Power continues to rank among the national leaders

in customer satisfaction in major independent surveys. For the

third consecutive year, Allegheny Power ranked second in the

East according to the JD Power and Associates Residential

Customer Satisfaction Study; we ranked 13th nationally. In

addition, Allegheny Power ranked second nationally in the

American Customer Satisfaction Index that ranks the 30 largest

investor-owned natural gas and electric companies in the

nation on various attributes of customer satisfaction.

- To further our commitment to customers, we added new

residential and commercial products and services and

introduced online bill presentment and payment. Residential

customers in Pennsylvania were offered a pilot program that

uses internet-based technology to lower their energy costs,

while reducing our need to purchase high-cost power during

times of peak demand. A similar Generation Buy-Back Program

reduces the demand for electricity in peak periods, encourages

market development, and offers business customers a choice in

managing their energy use.

Unregulated Operations

- Allegheny Energy completed the acquisition of Fellon-McCord &

Associates, Inc., a natural gas and electricity consulting and

management services firm, and Alliance Energy Services

Partnership, a provider of natural gas and other

energy-related services to large commercial and industrial

customers. These acquisitions added gas procurement and

management services to Allegheny Energy's current offerings,

firmly establishing our ability to provide comprehensive

energy-related solutions to customers in markets throughout

the country.

- Allegheny announced the introduction of internet and

high-speed data services for business and residential

customers in Westmoreland County, Pa.

Other Highlights

- Our financial performance landed Allegheny Energy on the

Fortune 500 list of America's largest corporations, the Forbes

"Platinum 400" list, the Standard & Poor's (S&P) 500 index,

and the Barron's 500 list.

- Allegheny elected two new members to its Board of Directors.

They are James J. Hoecker, a past Chairman of the Federal

Energy Regulatory Commission, and Ted J. Kleisner, President

and Managing Director of The Greenbrier and President of The

Greenbrier Resort Management Company in Lewisburg, W.Va.

- Alan J. Noia, Chairman of the Board, President, and Chief

Executive Officer, was named "CEO of the Year" as part of the

Platts 2001 Financial Times Global Energy Awards. Allegheny

Energy was also a runner-up for "Energy Company of the Year."

Noia was also elected to serve on the Electric Power Research

Institute's Board of Directors.

- Allegheny Energy sold 14.26 million shares of common stock and

netted approximately $667 million, which added equity capital

to support several acquisitions in 2000 and 2001 and for other

corporate purposes.

- In the environmental arena, Allegheny Energy Supply dedicated

our second biomass co-firing demonstration project that

embraces our environmental philosophy by reducing emissions

and qualifying a portion of Albright Power Station's output as

renewable generation. We launched a pilot project to

demonstrate the feasibility of revegetating strip-mined land

for carbon sequestration, which is the absorption of carbon

dioxide by trees and vegetation to reduce its concentration in

the atmosphere. We also received the West Virginia Business

Environmental Leadership Award for the Gypsum Processing

Facility at Pleasants Power Station that converts generating

plant waste into synthetic gypsum that is sold to make

wallboard.

- Allegheny Energy awarded $300,000 in TechConnect Classroom

Technology Grants to help schools in the region improve math

and science education.

IPO Update

- Due to economic and energy industry changes, Allegheny Energy

has elected not to proceed with its proposed initial public

offering (IPO) of Allegheny Energy Supply. As previously

noted, the transaction was subject to market and other

conditions. In light of current market conditions, the Company

believes that the IPO would not be in the best interests of

our shareholders. We believe value can best be created by

maintaining our balanced integrated portfolio of

energy-related businesses and advancing our proven growth

strategy.

Allegheny Energy, Inc. is a diversified energy company headquartered in Hagerstown, Md. It has been named to the Fortune 500 list, the Standard and Poor's 500 index, and the Forbes "Platinum 400" list. The Allegheny Energy family includes Allegheny Power, which delivers electric energy and natural gas to about three million people in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia; Allegheny Energy Supply Company, LLC, which develops, owns, and operates electric generating facilities and supplies and trades energy and energy-related commodities in selected domestic retail and wholesale markets; and Allegheny Ventures, which invests in and develops telecommunications and energy-related projects. For more information, visit our web site at www.alleghenyenergy.com.

Allegheny plans to hold its analyst conference call to discuss earnings results at 11:00 a.m. (Eastern Standard Time) on February 1, 2002. Investors, the news media, and others may listen to a live internet broadcast of the call at www.alleghenyenergy.com or www.streetevents.com by clicking on an available audio link. The call will also be archived for replay purposes for 10 business days after the live broadcast on both of these web sites. Supporting financial data will also be available on the Company's web site for review.

Certain statements contained herein constitute forward-looking statements with respect to Allegheny Energy, Inc. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Allegheny Energy to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors may affect Allegheny Energy's operations, markets, products, services, prices, capital expenditures, development activities, and future plans. Such factors include, among others, the following: changes in general, economic, and business conditions; changes in the price of electricity and natural gas; changes in industry capacity; changes in technology; changes in financial and capital market conditions; changes in political and social conditions, deregulation activities and the movement toward competition in the states served by our operations; the effect of regulatory and legislative decisions; the consequences of the separation of the operations of Allegheny Energy; regulatory approvals and conditions; the loss of any significant customers; litigation; and changes in business strategy or business plans.

                       ALLEGHENY ENERGY EARNINGS
                          FOURTH QUARTER 2001


Three months ended          December 31      2001            2000
----------------------------------------------------------------------
Sales to regulated electric
 customers,
 gigawatt-hours (Note 1)                    11,234           11,615

Revenues ($000) (Note 2)
Regulated Electric Revenues              $ 593,748        $ 593,026
Regulated Other Revenues                    28,945           33,215
Regulated Gas Revenues                      68,518           78,132
Unregulated Generation
 and Energy Marketing                    1,266,563          504,292
Allegheny Ventures                         105,379           12,616
                                      -------------   --------------
Total ($000)                           $ 2,063,153      $ 1,221,281
                                      =============   ==============

Consolidated income before
 extraordinary charge ($000)              $ 64,567         $ 79,706
Ohio and Virginia extraordinary
 charges (Note 3)                                -           (6,518)
                                      -------------   --------------
Consolidated net income ($000)            $ 64,567         $ 73,188
                                      =============   ==============

Basic earnings per average share
 Before extraordinary charge                $ 0.52           $ 0.72
Ohio and Virginia extraordinary
 charges (Note 3)                                -            (0.06)
                                     -------------   --------------
Basic consolidated
 earnings per share                         $ 0.52           $ 0.66
                                      =============   ==============
Diluted consolidated
 earnings per share                         $ 0.52           $ 0.66
                                      =============   ==============
Average common shares
 outstanding (000)                         125,059          110,436



Twelve months ended          December 31     2001            2000
----------------------------------------------------------------------
Sales to regulated electric
 customers,
 gigawatt-hours (Note 1)                    45,381           44,856

Revenues ($000) (Note 2)
Regulated Electric Revenues            $ 2,395,029      $ 2,303,491
Regulated Other Revenues                   123,520          100,201
Regulated Gas Revenues                     235,070          103,580
Unregulated Generation
 and Energy Marketing                    7,486,207        1,482,291
Allegheny Ventures                         139,105           22,289
                                      -------------   --------------
Total ($000)                          $ 10,378,931      $ 4,011,852
                                      =============   ==============

Consolidated income before
 extraordinary charge and
 cumulative effect of
 accounting change ($000)                $ 448,922        $ 313,652
Ohio, Virginia, and West Virginia
 extraordinary charges (Note 3)                  -          (77,023)
Cumulative effect of
 accounting change (Note 4)                (31,147)               -
                                      -------------   --------------
Consolidated net income ($000)           $ 417,775        $ 236,629
                                      =============   ==============

Basic earnings per average share
 Before extraordinary charge and
  cumulative effect of
  accounting change ($000)                  $ 3.74           $ 2.84
Ohio, Virginia, and West Virginia
 extraordinary charges (Note 3)                  -            (0.70)
Cumulative effect of
 accounting change (Note 4)                  (0.26)               -
                                      -------------   --------------
Basic consolidated
 earnings per share                         $ 3.48           $ 2.14
                                      =============   ==============
Diluted consolidated
 earnings per share                         $ 3.47           $ 2.14
                                      =============   ==============
Average common shares
 outstanding (000)                         120,104          110,436


      Note 1: Excludes bulk power transaction sales.

      Note 2: Excludes intercompany sales between regulated and
            unregulated.

      Note 3: Cost after taxes determined to be unrecoverable as a
            result of deregulation proceedings in Ohio, Virginia, and
            West Virginia.

      Note 4: Adoption of SFAS 133, Accounting for Derivative
            Instruments and Hedging Activities