Allegheny Energy, Inc. Applauds Maryland PSC Approval of Restructuring Plan; Growth Strategy to Advance in 2000 and Beyond

Business Wire, Dec 23, 1999

Business Editors

HAGERSTOWN, Md.--(BUSINESS WIRE)--December 23, 1999

Allegheny Energy, Inc. (NYSE: AYE) announced today that the Maryland Public Service Commission (PSC) approved the electric restructuring settlement for its Maryland utility subsidiary, which does business as Allegheny Power.

"We are pleased that the PSC has approved this settlement, which allows the Company to maintain and strengthen its position as a leader in the new, competitive marketplace and to promote shareholder value," says Michael P. Morrell, Allegheny Energy's Senior Vice President and Chief Financial Officer. "This fair and equitable plan will provide benefits for our shareholders and customers. For the first time ever, our Maryland customers will be able to choose the company that supplies their electricity, while also realizing a rate reduction."

The restructuring plan allows the Company to transfer its Maryland generating assets to Allegheny Energy Supply Company, LLC, its nonregulated affiliate, at book value. Morrell says the addition of these assets to Allegheny Energy Supply Company's existing portfolio of nonregulated generation will ensure that the Company continues its growth strategy of becoming a premier energy supplier of choice throughout the region.

"Our ability to offer low-cost energy - a staple of ours for most of this century - combined with our invaluable experience in customer choice in Pennsylvania, New Jersey, and other markets will serve us well as we enter the new century and a new era in the industry," Morrell explains.

The settlement, which was filed with the PSC in September following negotiations between the Company and other parties to its restructuring case, will allow nearly all of Allegheny Power's Maryland customers to choose their electric supplier starting July 1 of next year. Residential customers will also benefit from a 7 percent reduction in base rates, starting in 2002 and remaining in effect for seven years.

While approval of the plan does allow the Company to seek new customers in new markets, Allegheny Power will continue to deliver safe, reliable electricity to its 209,000 customers in Maryland's seven westernmost counties - regardless of the company they choose to supply their energy.

"While times are changing, our commitment to serving our customers remains the same," says Morrell. "Allegheny Power will always be there to meet our customers' needs, 24 hours a day, 365 days a year."

Highlights of the restructuring plan include:

-- The authorization to transfer Allegheny Power's generating assets

to a non-regulated corporate entity at book value beginning July

1, 2000.

-- The recovery of all purchased power costs incurred as a result of

Allegheny Power's contract to buy generation from the AES Warrior

Run Power Station in Cumberland, Md. The contract is an

obligation resulting from the federal Public Utility Regulatory

Policies Act of 1978.

-- The ability for all of Allegheny Power's Maryland customers,

except those with certain special contracts, to have the option

of choosing an electric generation supplier starting July 1, 2000

- two years earlier than required by the new state law. The

Company will continue to provide generation service to customers

who choose not to select a different electric supplier.

-- A reduction in base rates of 7 percent for residential customers,

effective Jan. 1, 2002, and remaining in place until Dec. 31,

2008. This reduction is well within state law requirements for

residential rate reductions of between 3 and 7.5 percent. The

settlement also preserves Allegheny Power's existing rate

agreement approved by the PSC, which continues through 2001.

-- A cap on generation rates for residential customers from Jan. 1,

2002, until Dec. 31, 2008. Generation rates for non-residential

customers are capped from Jan. 1, 2002, through Dec. 31, 2004.

-- A cap on transmission and distribution rates for all customers

from Jan. 1, 2002, through Dec. 31, 2004.

-- The establishment of a fund for the development and use of

energy-efficient technologies.

Parties to the settlement agreement include the PSC staff; the Office of People's Counsel, which represents residential electric consumers in the state; the Maryland Energy Administration; the Maryland Retailers' Association; the Mid-Atlantic Power Supply Association; Enron Energy Services, Inc.; Statoil Energy, Inc.; the U.S. Department of Defense; and other federal agencies.

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 Company, LLC, 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.