Allegheny Energy Sale of $600 Million in Transition Bonds Will Advance Unregulated Generating Subsidiary Plan.

HAGERSTOWN, Md.--(BUSINESS WIRE)--Nov. 16, 1999--

Allegheny Energy, Inc. (NYSE: AYE) today announced the sale by a subsidiary of $600 million in transition bonds which will help advance the Company's plans to form an unregulated generating subsidiary (Genco), the foundation of its long-term growth strategy.

According to Michael P. Morrell, Allegheny Energy Senior Vice President and Chief Financial Officer, the Company will use the bonds to securitize a portion of the transition costs associated with the move by its Pennsylvania utility subsidiary, West Penn Power Company (West Penn), to a competitive generation market.

"The completion of the securitization will better position Allegheny Energy in the competitive energy market," Morrell says. "We will be able to transfer 3,722 megawatts of West Penn's generating assets to the unregulated Genco, a significant step toward achieving our long-range growth strategy. We plan to continue to be a leader in the electric generation business by competitively producing and marketing power in deregulated markets through our Genco.

"In addition, the securitization provides an added measure of certainty to our transition cost recovery in Pennsylvania," he adds. "The overall cost of capital will be reduced, replacing existing debt and equity with lower-cost debt, which should result in improved earnings per share going forward."

West Penn Power Funding LLC, a special purpose entity created by West Penn, issued the transition bonds. The proceeds from the bonds will fund a reduction in West Penn's capitalization, including the purchase of Allegheny Energy common stock, the already-completed repurchase of West Penn preferred stock, and the retirement of debt.

The $600 million in transition bonds are part of West Penn's restructuring settlement approved by the Pennsylvania Public Utility Commission (PUC) in 1998. The settlement required that 75 percent of the savings achieved from the bond sale be passed through to West Penn's customers, reducing the competitive transition charge, a temporary charge designed to collect a company's transition costs in a competitive environment.

The transition bonds will be supported by an Intangible Transition Charge (ITC) that will replace a portion of the competitive transition charge customers now pay. The proceeds from the ITC will be used to pay the principal and interest on these transition bonds, as well as other associated expenses. The combination of the new ITC and the reduced competitive transition charge will reduce customers' rates.

The transition bonds are backed by pledges in the qualified rate order from the Pennsylvania PUC and in Pennsylvania's Electricity Generation Customer Choice and Competition Act that the securities will be paid in full, including principal, interest, and financing costs.

The bonds are rated AAA -- the highest investment grade rating -- by Standard & Poors, Moody's Investors Service, and Fitch IBCA and have varying average lives ranging from one to eight years. The weighted average cost of the transition bonds is 6.887 percent, as is shown in the table below. -0-

       Class     Principal   Average   Coupon    Price     Yield
                  Amount      Life      Rate
               ($ millions)  (Years)
-------------- ------------ --------- -------- ---------- --------
A-1              $ 74           1.0    6.32%    99.99608   6.366%
-------------- ------------ --------- -------- ---------- --------
A-2              $172           3.0    6.33%    99.98112   6.689%
-------------- ------------ --------- -------- ---------- --------
A-3              $198           5.5    6.81%    99.99111   6.868%
-------------- ------------ --------- -------- ---------- --------
A-4              $156           7.8    6.98%    99.99609   7.040%
-------------- ------------ --------- -------- ---------- --------
Total            $600
-------------- ------------ --------- -------- ---------- --------

-0-

A syndicate of underwriters, led by Morgan Stanley Dean Witter and including Goldman Sachs & Co., PNC Capital Markets Inc., Bank of America, and Pryor, McClendon, Counts & Co., Inc., handled the bond offering.

Allegheny Energy, Inc. is a diversified energy company headquartered in Hagerstown, Md. The Allegheny Energy family includes Allegheny Power, which delivers electric energy to about three million people in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia; Allegheny Energy Supply, which operates and markets competitive retail and wholesale electric generation and operates regulated electric generation for its affiliates; and Allegheny Ventures, which actively invests in and develops energy-related and telecommunications projects. For more information, check our web site at www.alleghenyenergy.com.