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POTOMAC EDISON $75 MILLION 1ST MORTGAGE BONDS RATED 'AA-' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, March 23 /PRNewswire/ -- Potomac Edison Co.'s $75 million 5.875 percent first mortgage bonds due 2000 are rated 'AA-' by Fitch. The issue is a takedown from a previously rated shelf registration. The credit trend is stable.
 The ratings reflect sound credit fundamentals, the operating and financial strengths of its parent, Allegheny Power System, Inc., and supportive regulatory treatment for Clean Air Act (CAA) related expenditures in each of Potomac's three jurisdictions. Potomac Edison's revenues are regulated by Maryland (70.1 percent), West Virginia (15.3 percent) and Virginia (14.6 percent). Based on a recent rate increase in Maryland, and continued recovery of capital costs associated with Clean Air Act compliance, measures of bondholder protection should improve but not reach levels reflective of the rating category until 1995.
 The company recently received an $11.3 million rate increase, $15.2 million when $6 million previously collected through the clean air related surcharge is included. The commission authorized a 11.9 percent return on equity. The increase including the surcharge is 66 percent of the $23 million requested when the case was filedn? July, 1992, and 86 percent of the $17.6 million increase (12.75 percent return on equity) supported by the Potomac Edison at the end of the rate case. The revenue shortfall between the requested and authorized rate increase is due to the lower return on equity supported by the commission.
 Allegheny Power is complying with 1990 CAA Phase 1 requirements by building three scrubbers at its mine-mouth Harrison plant for $726.6 million, including allowance for funds used during construction (AFUDC). Potomac Edison's share of these costs is $233.6 million.
 Pretax coverage of interest, excluding AFUDC and subsidiary Allegheny Generating Co. interest expense, was 2.92 times (x) for the twelve months ended Sept. 30, 1992 compared to 2.82x at year end 1991. Internal cash generation funded 47.5 percent of construction expenditures for the twelve months ended September 30 compared to 48.8 percent at year end 1991. Parent equity support should enable the company to maintain its conservative capital structure, with total debt averaging about 48 percent over the next five years. Total debt was 45.1 percent at September 30. Potomac Edison received an $80 million equity infusion during the third quarter, partly with the proceeds of a June $89.1 million parent company common equity offering.
 -0- 3/23/93
 /CONTACT: Josephine Zeppieri of Fitch, 212-908-0575/
 (AYP)


CO: Potomac Edison Co.; Allegheny Power System, Inc. ST: New York IN: UTI SU: RTG

SB -- NY066 -- 9277 03/23/93 15:12 EST
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Date:Mar 23, 1993
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