Allegheny Power and PJM Expand Mid-Atlantic Energy Market.

Business Editors

GREENSBURG, Pa. & NORRISTOWN, Pa.--(BUSINESS WIRE)--Oct. 5, 2000

Allegheny Power, the energy delivery business of Allegheny Energy, Inc. (NYSE: AYE), and PJM Interconnection, LLC, announced today the execution of an agreement in principle to develop a new electric transmission system affiliation which will expand the Mid-Atlantic energy market. The terms of this agreement will be outlined in a filing that will be submitted on October 16 to the Federal Energy Regulatory Commission (FERC). Customers in the region will benefit from the expanded energy market and enhancements to the transmission system's reliability. Through this affiliation, PJM will expand its regional scope and demonstrate the ability of its energy market and congestion management systems to function over multiple control areas. Allegheny Power will satisfy the FERC's independence requirement for its transmission system operations while continuing to pursue the development of a large, regional, independent transmission entity.

The new concept, known as PJM West, will provide transmission service to all market participants in accordance with the requirements of FERC Order 2000 while simultaneously expanding the PJM market. The arrangement will, for the first time, expand the PJM system management concepts beyond a single control area with the potential to result in a significantly larger energy market. Those who join this alliance will benefit from the success of PJM markets and operational experience while having the ability to pursue the development of a for-profit transmission company.

"This is a truly an innovative and exciting development for Allegheny Power and PJM," said Jay S. Pifer, President of Allegheny Power. "PJM is one of the most liquid and active energy markets in the country and the PJM West initiative will benefit the customers in this region by enhancing reliability and expanding healthy wholesale and retail energy markets."

"This agreement serves as the foundation for an optimal relationship between an Independent System Operator and a for-profit transmission company and calls for addressing the seams issues which are a major concern to everyone," said Phil Harris, Chairman and CEO of PJM. "We are delighted to be working with Allegheny Power to develop this concept through PJM West. This collaborative effort truly joins the best practices of both organizations, and is a major step forward in the development of a competitive electric industry that delivers true economic value across a broad region."

The timeline set out in the agreement includes negotiation for a definitive contract to be completed by February 1, 2001, execution prior to March 1, 2001, and implementation by December 15, 2001. Under the PJM West concept, an office would be created and staffed and the PJM West Transmission Owners would transfer monitoring and functional control of their transmission systems to PJM. Additionally, the existing PJM regional market would be expanded to cover the PJM West operating territory.

Allegheny Power, an Allegheny Energy company, delivers low-cost energy to three million people in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia. For more information about Allegheny, visit www.alleghenypower.com.

The PJM Interconnection, LLC, is an Independent System Operator, administering the PJM Open Access Transmission Tariff and operating the PJM Energy Market and Capacity Markets. PJM currently administers almost eight percent of the country's electric power, with a pooled generating capacity of over 58,000 megawatts and a membership of more than 190.