Fitch Rates Monongahela Power's First Mortgage Bonds `A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 17, 2001

Fitch has assigned an `A+' rating to Monongahela Power Company's (MP) new issue of $300 million first mortgage bonds maturing in 2006. The funds will be used to refinance senior debt securities, reduce short-term debt, and for other general corporate purposes. Currently Fitch rates MP's first mortgage bonds 'A+', medium term notes 'A', pollution control revenue bonds (unsecured) 'A', junior subordinated debentures (quarterly income debt securities) 'A-', preferred stock 'A-', and commercial paper 'F1'. The Rating Outlook is stable.

The new issuance slightly increases the company's leverage as the proforma Debt/Capitalization ratio as of June 30, 2001 will be 51.8% compared to the actual 49% at that date. However, MP's credit profile is still supportive of its ratings given the company's relatively stable revenue stream and the expectation that the company will sign a long term supply contract with affiliate Allegheny Energy Supply Co., LLC (AE Supply) following the transfer of all its generating assets to AE Supply in 2002. Fitch's current rating has already incorporated projected weaker future cash flow and other credit-protection measures following the expected asset transfer and required rate reduction prior to the commencement of deregulation in West Virginia. Upon completion of the asset transfer, MP will be predominantly an electric and gas transmission and distribution company.

In June 2001 the company completed the transfer of its generation assets in Ohio (352 MW) to AE Supply and expects to transfer its West Virginia (approximately 2,110 MW) generation assets in 2002 once approval is obtained from the West Virginia Public Service Commission. Final approval in West Virginia has been delayed pending resolution of a tax issue, with resolution expected in early 2002 at the earliest. MP will enter into a long-term supply agreement with AE Supply that goes into effect coincident with the asset transfer and lasts until the end of the transition period in 2007. The contract will transfer the power procurement and volume risk to AE Supply (senior unsecured debts rated `BBB+' by Fitch).

Rating concerns center on MP's indirect exposure to parent Allegheny Energy, Inc.'s increasing unregulated business activities. As AE Supply aggressively expands its generation portfolio, Allegheny Energy's cash flow from the riskier unregulated activities will also increase. Moreover, Allegheny Energy has been using its balance sheet to fund AE Supply's growth plan. Should the current plan to IPO up to 18% of AE Supply by year end 2001 not materialize, Allegheny Energy may continue to fund AE Supply's growth, resulting in the worsening of the credit profile of all Allegheny Energy companies, which includes Fitch rated entities West Penn Power Co. and The Potomac Edison Company . However, assuming that Allegheny Energy successfully implements the IPO and distributes the remainder of the company to existing shareholders in 2002, then Allegheny Energy will have sufficient proceeds to reduce debt and improve its business risk profile.

Monongahela Power Co., a wholly owned subsidiary of Allegheny Energy, Inc., is an electric and gas utility operating in West Virginia (approximately 90% of operating revenues) and a small portion of Ohio (10%). MP serves about 620,000 electric and gas customers in a service area covering 13,000 square miles.