Fitch Rates Monongahela's $70MM FMBs 'BBB'; Affirms Existing Ratings.

NEW YORK -- Fitch Ratings has assigned a rating of 'BBB' to the $70 million of 5.375% first mortgage bonds (FMBs) due October of 2015 that will be issued by Monongahela Power Company (MPC) on Oct. 17, 2005. The proceeds are anticipated to be used to redeem $70 million of 7.625% FMBs due 2025. The new bonds will rank equally with existing senior secured debt. At the same time, Fitch has affirmed the existing ratings of MPC. The Rating Outlook is Stable. See the full list of ratings affected by the rating action below.

The ratings of MPC reflect the benefits of ownership of interests in a fleet of a predominantly coal fired generation plants in PJM, the lack of competition in its West Virginia franchise service area, a stable capital structure and adequate liquidity, as well as improvement in the credit quality of the parent and Allegheny Energy Supply affiliate. MPC had $49 million of cash and cash equivalents on hand as of June 30, 2005 and can supplement internal liquidity through participation in a money pool with affiliates West Penn Power and Potomac Edison. Fitch anticipates the $300 million of bonds due in October of 2006 will be refinanced in a routine manner. MPC has $15.5 million of long-term debt maturities in 2007 and no debt maturing in 2008-2009.

Fitch's rating concerns include increasing prices for fuel and transmission in a historically less favorable regulatory environment in West Virginia, increasing capital spending needs for plant upgrades and risks associated with emissions-related legal proceedings. MPC continues to operate under a moratorium of the fuel cost adjustment mechanism in West Virginia. MPC is considering using a utility tariff securitization bond to fund the estimated $340 million construction cost of a scrubber for the Fort Martin, West Virginia plant, subject to West Virginia Public Service Commission and other approvals, which would enable the pollution control upgrades to be done more quickly.

The ratings also incorporate risks associated with affiliate rating linkage to Allegheny Energy Supply, LLC. (AE Supply, rated 'B+' with a Positive Outlook by Fitch) that result from joint ownership and operation of generating plants. However, the risk of ratings contagion from these linkages has been reduced through improvement in AE Supply's credit quality. MPC's generation assets consist of minority ownership in plants that are majority owned by AE Supply and pledged to its lenders. MPC supplies power to small commercial and residential customers in Ohio majority through a power purchase agreement with AE Supply and it supplies power to large commercial and industrial customers (including street lighting) in Ohio through direct purchase from PJM. Following closure of the transaction for the sale of the Ohio assets, MPC will continue to service its former customers in Ohio by selling power to Columbus Southern under a contract that will expire in May 2007. Fitch's Stable Rating Outlook includes an expectation that MPC will generate approximately $100 million of funds from operations in 2006 from core electric utility operations in West Virginia.

MPC sold Mountaineer Gas Company in September 2005. Cash proceeds received at closing were $161 million and the buyer also assumed $87 million of the company's debt. Mountaineer has been a persistent drag on MPC's profitability. In addition, MPC has reached agreement to sell its Ohio assets and expects to close the transactions by year-end 2005. The anticipated sale of the Ohio portion of MPC's service territory to Columbus Southern for approximately $55 million is anticipated to improve profit margins and will put an end to long running disputes with the Ohio Public Service Commission over the transition to market rates.

Ratings affirmed with a Stable Rating Outlook:

-- Senior secured debt 'BBB';

-- Senior unsecured debt 'BBB-';

-- Preferred Stock 'BB+'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.