Allegheny Energy Reports Third Quarter 2005 Results

To provide a better understanding of core results and trends,Allegheny Energy also reported adjusted financial results, which arenon-GAAP financial measures. Adjusted net income from continuingoperations was $74.8 million, or $0.45 per diluted share, for thethird quarter of 2005. The adjusted 2005 results exclude costs of$32.6 million (pre-tax) for the redemption of Allegheny's 10.25% and13% Senior Notes, a $30.5 million (pre-tax) impairment chargeassociated with the planned sale of the company's Ohio serviceterritory and insurance proceeds of $11.0 million (pre-tax) related tothe 2004 extended outage at the Hatfield's Ferry power station. Alsoexcluded is a $7.8 million after-tax loss from discontinuedoperations.

For the third quarter of 2004, net income from continuingoperations was $50.6 million, or $0.37 per diluted share, excluding a$427.5 million after-tax loss from discontinued operations. Impairmentcharges associated with asset sales, which are described later in thisrelease, were the primary reason for last year's loss fromdiscontinued operations. A reconciliation of non-GAAP financialmeasures to results reported in accordance with GAAP is attached tothis release.

"I am pleased to report that our earnings were up substantially inthe third quarter. Increased output from our power plants and highermarket prices for power, together with lower recurring interestexpense, were the key drivers of our improved results," said AlleghenyEnergy Chairman, President and Chief Executive Officer Paul J.Evanson. "We completed the sale of our West Virginia natural gasoperations and Wheatland peaking facility in the third quarter, and weare running ahead of our debt reduction target. We expect to continuedelivering earnings growth well above the industry average next yearand beyond."

Third Quarter Consolidated Results

Income from continuing operations before income taxes and minorityinterest was $65.3 million for the third quarter of 2005. With theadjustments mentioned above, adjusted income from continuingoperations before income taxes and minority interest was $117.4million, an increase of $46.6 million compared with the same period in2004. Key factors contributing to the improved results include:

-- Operating revenues increased by $121.8 million compared to the same period in 2004, largely as a result of higher market prices for power, increased power plant output, and the inception of market-based rates for certain commercial and industrial customers in Maryland.

-- Fuel, purchased power and transmission expense increased by $86.5 million, reflecting higher coal costs, increased fuel consumption due to higher plant output and power purchases at market-based rates in Maryland and Ohio.

-- Operations and maintenance expense, excluding the insurance proceeds previously mentioned, increased by $2.9 million. The increase reflects higher litigation reserves, largely offset by lower special maintenance spending at power plants and lower costs for insurance and uncollectible accounts.

-- Interest expense, excluding the debt redemption costs previously mentioned, decreased by $10.9 million. The decrease reflects benefits from debt reduction and debt refinancing.

The $30.5 million pre-tax impairment charge on the planned sale ofthe Ohio service territory includes the estimated value of a relatedpower sale agreement, partly offset by proceeds in excess of the netbook value of the assets. Allegheny has agreed to sell power to thebuyer at $45 per megawatt-hour from the time of the closing throughMay 31, 2007. The $45 rate is substantially above Allegheny's currentaverage rate in Ohio, but below current market prices for power.

Adjusted earnings from continuing operations before interest,taxes, depreciation and amortization (adjusted EBITDA) for the thirdquarter of 2005 were $274.2 million, a $31.0 million increase from thethird quarter of 2004. Adjusted EBITDA is a non-GAAP financialmeasure. For a reconciliation of EBITDA to GAAP financial measures anddetails on the calculation of EBITDA, see the reconciliation ofnon-GAAP financial measures attached to this release.

Third Quarter Segment Results

Delivery and Services: The Delivery and Services segment reportedincome from continuing operations of $10.7 million for the thirdquarter of 2005, a decrease of $19.5 million compared to the samequarter of the prior year. The decrease was due to the $30.5 million(pre-tax) impairment charge on the Ohio sale and higher litigationreserves, partly offset by improved results from core operations.Operating revenues increased by $41.7 million, reflecting growth inthe number of customers and warmer weather compared to the same periodin 2004. Kilowatt-hour sales increased by 4.8 percent. Coolingdegree-days for the third quarter of 2005 were 55 percent higher thanthe prior year, and 42 percent above normal. The inception ofmarket-based rates for certain commercial and industrial customers inMaryland affected both revenues and purchased power. Purchased powercost increased by $41.5 million from the prior period. Interestexpense decreased by $6.5 million, and income tax expense decreased by$8.4 million.

Generation and Marketing: The Generation and Marketing segmentreported income from continuing operations of $32.7 million for thethird quarter of 2005, an increase of $12.1 million compared to thesame period in the prior year. Segment results were adversely affectedby a $28.6 million increase in interest expense due to the previouslymentioned debt redemption costs. Revenues increased by $78.8 million,driven by a 5.7 percent increase in power plant output and higherprices in the regional power market. Fuel costs increased by $48.4million due to higher coal prices and increased generation. Operationsand maintenance expenses decreased by $15.3 million, primarily as aresult of the insurance proceeds previously mentioned.

Discontinued Operations: For the third quarter of 2005, AlleghenyEnergy reported an after-tax loss of $7.8 million on discontinuedoperations, compared to a loss of $427.5 million in the same quarterof the prior year. The 2005 loss reflects the results of the WestVirginia natural gas operations and the Gleason generating facility.The 2004 loss was largely due to impairment charges related toAllegheny's decision to sell its Midwestern peaking facilities andWest Virginia natural gas operations. All of those sales, with theexception of Gleason, have been completed.

Nine-Month Consolidated Results

For the first nine months of 2005, Allegheny reported consolidatednet income of $59.9 million, or $0.38 per diluted share, as comparedto a net loss of $383.0 million, or a net loss of $2.97 per dilutedshare, for the same period in the prior year. Results for thenine-month period in 2004 reflected a loss from discontinuedoperations ($431.5 million after tax) and the adverse effect ofunplanned outages at the Pleasants and Hatfield's Ferry powerstations.

Adjusted net income from continuing operations was $146.1 million,or $0.90 per diluted share, for the first nine months of 2005,compared to $21.7 million, or $0.17 per diluted share, for the sameperiod in the prior year. Adjusted results for both nine-month periodsexclude the items detailed in the attached reconciliation of non-GAAPfinancial measures.

Reconciliation of Non-GAAP Financial Measures

This news release and the attached table include non-GAAPfinancial measures as defined in the Securities and ExchangeCommission's Regulation G. Where noted, we present financialinformation on an adjusted basis to exclude the effect of certainitems as described herein. By presenting adjusted results, managementintends to provide investors with a better understanding of the coreresults and underlying trends from which to consider past performanceand prospects for the future. We also present EBITDA as an additionalmeasure of our operating performance.

Users of this financial information should consider the types ofevents and transactions for which adjustments have been made. Neitherthe adjusted information nor EBITDA should be considered in isolationor viewed as substitutes for or superior to net income or other dataprepared in accordance with GAAP as measures of our operatingperformance or liquidity. In addition, neither the adjustedinformation nor EBITDA are necessarily comparable to similarly titledmeasures provided by other companies.

Pursuant to the requirements of Regulation G, we have attachedtables that reconcile non-GAAP financial measures, including thosepresented in this release, to the most directly comparable GAAPmeasures.

Investor Conference Call

Allegheny Energy will comment further on these results in aninvestor conference call at 9:30 a.m. Eastern Time on Friday, October 28, 2005. To listen to a live Internet broadcast of the call,visit www.alleghenyenergy.com. A taped replay of the call will beavailable after the live broadcast.

Allegheny Energy

Headquartered in Greensburg, Pa., Allegheny Energy is aninvestor-owned utility consisting of two major businesses. AlleghenyEnergy Supply owns and operates electric generating facilities, andAllegheny Power delivers low-cost, reliable electric service tocustomers in Pennsylvania, West Virginia, Maryland, Virginia and Ohio.For more information, visit our Web site at www.alleghenyenergy.com.

Forward-Looking Statements

In addition to historical information, this release contains anumber of "forward-looking statements" as defined in the PrivateSecurities Litigation Reform Act of 1995. Words such as anticipate,expect, project, intend, plan, believe, and words and terms of similarsubstance used in connection with any discussion of future plans,actions, or events identify forward-looking statements. These includestatements with respect to: rate regulation and the status of retailgeneration service supply competition in states served by AlleghenyEnergy's distribution business, Allegheny Power; financing plans;demand for energy and the cost and availability of raw materials,including coal; provider-of-last-resort and power supply contracts;results of litigation; results of operations; internal controls andprocedures; capital expenditures; status and condition of plants andequipment; regulatory matters; and asset sales or transfers.Forward-looking statements involve estimates, expectations andprojections and, as a result, are subject to risks and uncertainties.There can be no assurance that actual results will not materiallydiffer from expectations. Actual results have varied materially andunpredictably from past expectations. Factors that could cause actualresults to differ materially include, among others, the following:changes in the price of power and fuel for electric generation;general economic and business conditions; changes in access to capitalmarkets; complications or other factors that render it difficult orimpossible to obtain necessary lender consents or regulatoryauthorizations on a timely basis; environmental regulations; anyfailure to consummate, or delay in the consummation of, anycontemplated asset sales or transfers; the results of regulatoryproceedings, including proceedings related to rates; changes inindustry capacity, development and other activities by AlleghenyEnergy's competitors; changes in the weather and other naturalphenomena; changes in the underlying inputs and assumptions, includingmarket conditions used to estimate the fair values of commoditycontracts; changes in laws and regulations applicable to AlleghenyEnergy, its markets or its activities; the loss of any significantcustomers or suppliers; dependence on other electric transmission andgas transportation systems and their constraints or availability;changes in PJM, including changes to participant rules and tariffs;the effect of accounting policies issued periodically by accountingstandard-setting bodies and accounting issues facing our company; andthe continuing effects of global instability, terrorism and war.Additional risks and uncertainties are identified and discussed inAllegheny Energy's reports filed with the Securities and ExchangeCommission.
ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per -------------------- -----------------------
share amounts) 2005 2004 2005 2004
------------------------- --------- ---------- ----------- -----------
Operating revenues $845,064 $723,279 $2,313,744 $2,067,624

Operating expenses:
Fuel consumed in electric
generation 211,428 163,136 551,454 465,940
Purchased power and
transmission 124,111 85,926 337,176 246,816
Impairment charge on Ohio
T&D assets 30,500 -- 30,500 --
Deferred energy costs,
net (4,181) (1,688) (4,800) 435
Operations and
maintenance 182,095 190,213 545,678 623,855
Depreciation and
amortization 76,724 75,057 230,493 222,894
Taxes other than income
taxes 53,300 51,552 160,096 149,665
--------- ---------- ----------- -----------
Total operating
expenses 673,977 564,196 1,850,597 1,709,605
--------- ---------- ----------- -----------
Operating income 171,087 159,083 463,147 358,019

Other income and expenses,
net 7,294 3,115 33,781 15,598

Interest expense and
preferred dividends:
Interest expense 111,803 90,112 365,874 300,978
Preferred dividends of
subsidiary 1,259 1,259 3,778 3,778
--------- ---------- ----------- -----------
Total interest expense
and preferred
dividends 113,062 91,371 369,652 304,756
--------- ---------- ----------- -----------
Income from continuing
operations before income
taxes and minority
interest 65,319 70,827 127,276 68,861

Income tax expense from
continuing operations 21,428 26,126 54,619 25,196

Minority interest in net
income (loss) of
subsidiaries 433 (5,943) 900 (4,804)
--------- ---------- ----------- -----------
Income from continuing
operations 43,458 50,644 71,757 48,469

Loss from discontinued
operations, net of tax (7,758) (427,487) (11,822) (431,489)
--------- ---------- ----------- -----------
Net income (loss) $35,700 $(376,843) $59,935 $(383,020)
--------- ---------- ----------- -----------

Common Shares Data:
Weighted average common
shares outstanding
Basic 162,711 127,117 152,379 127,020
Diluted 166,784 154,218 166,017 128,735

Basic income (loss) per
common share:
Income from continuing
operations $0.27 $0.40 $0.47 $0.38
Loss from discontinued
operations, net (0.05) (3.36) (0.08) (3.40)
--------- ---------- ----------- -----------
Net income (loss) per
common share $0.22 $(2.96) $0.39 $(3.02)
--------- ---------- ----------- -----------

Diluted income (loss) per
common share:
Income from continuing
operations $0.26 $0.37 $0.45 $0.38
Loss from discontinued
operations, net (0.05) (2.77) (0.07) (3.35)
--------- ---------- ----------- -----------
Net Income (loss) per
common share $0.21 $(2.40) $0.38 $(2.97)
--------- ---------- ----------- -----------


ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)

September 30, December 31,
(In thousands) 2005 2004
------------------------------------------- ------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $344,052 $189,482
Accounts receivable:
Customer 204,906 164,666
Unbilled utility revenue 126,287 145,498
Wholesale and other 81,707 32,966
Allowance for uncollectible accounts (16,585) (19,854)
Materials and supplies 97,228 100,054
Fuel 61,093 61,812
Deferred income taxes 102,598 44,590
Prepaid taxes 55,871 46,900
Assets held for sale 2,274 150,031
Collateral deposits 139,661 88,708
Commodity contracts 11,862 13,523
Restricted funds 22,888 228,857
Regulatory assets 42,234 37,626
Other 15,197 20,273
------------- ------------
Total current assets 1,291,273 1,305,132
------------- ------------

Property, Plant and Equipment, Net:
Generation 5,717,427 5,695,851
Transmission 1,019,052 1,015,751
Distribution 3,418,859 3,366,217
Other 446,517 463,515
Accumulated depreciation (4,468,666) (4,341,282)
------------- ------------
Subtotal 6,133,189 6,200,052
Construction work in progress 111,741 102,966
------------- ------------
Total property, plant and equipment, net 6,244,930 6,303,018
------------- ------------

Investments and Other Assets:
Assets held for sale 71,902 340,457
Goodwill 367,287 367,287
Investments in unconsolidated affiliates 28,711 29,991
Intangible assets 32,821 33,215
Other 48,165 46,628
------------- ------------
Total investments and other assets 548,886 817,578
------------- ------------

Deferred Charges:
Commodity contracts 1,608 3,667
Regulatory assets 552,220 562,843
Other 40,423 52,902
------------- ------------
Total deferred charges 594,251 619,412
------------- ------------
Total Assets $8,679,340 $9,045,140
------------- ------------

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(unaudited)

September 30, December 31,
(In thousands) 2005 2004
------------------------------------------- ------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year $78,415 $385,142
Accounts payable 252,945 223,584
Accrued taxes 114,575 112,866
Commodity contracts 98,456 40,835
Accrued interest 105,049 61,726
Liabilities associated with assets held
for sale 1,718 37,471
Other 143,021 144,082
------------- ------------
Total current liabilities 794,179 1,005,706
------------- ------------

Long-term Debt 4,153,615 4,540,764

Deferred Credits and Other Liabilities:
Commodity contracts 35,787 56,501
Investment tax credit 78,551 83,307
Deferred income taxes 710,665 635,374
Obligations under capital leases 18,266 23,788
Regulatory liabilities 454,603 453,913
Adverse power purchase commitment 188,512 201,377
Liabilities associated with assets held
for sale 9,220 89,356
Other 455,368 505,620
------------- ------------
Total deferred credits and other
liabilities 1,950,972 2,049,236
------------- ------------

Minority Interest 22,301 21,618

Preferred Stock of Subsidiary 74,000 74,000

Common Stockholders' Equity:
Common stock--$1.25 par value per share,
260,000,000 shares authorized,
162,865,654 and 137,430,137 shares
issued, and 162,816,161 and 137,380,644
shares outstanding at September 30, 2005
and December 31, 2004, respectively 203,582 171,788
Other paid-in capital 1,875,551 1,600,215
Accumulated deficit (247,753) (307,690)
Treasury stock (1,756) (1,756)
Accumulated other comprehensive loss (145,351) (108,741)
------------- ------------
Total common stockholders' equity 1,684,273 1,353,816
------------- ------------
Total Liabilities and Stockholders' Equity $8,679,340 $9,045,140
------------- ------------


ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
RESULTS BY BUSINESS SEGMENT
(unaudited)

Three months ended
September 30, 2005
----------------------------------------
Delivery Generation
and and
(In millions) Services Marketing Eliminations Total
----------------------------- -------- ---------- ------------ -------
Operating revenues $731.0 $496.4 $(382.4) $845.0

Fuel consumed in electric
generation -- (211.5) (211.5)
Purchased power and
transmission (485.2) (18.5) 379.6 (124.1)
Impairment charge on Ohio T&D
assets (30.5) -- -- (30.5)
Deferred energy costs, net 4.2 -- -- 4.2
Operations and maintenance (112.1) (72.8) 2.8 (182.1)
Depreciation and amortization (38.2) (38.5) -- (76.7)
Taxes other than income taxes (32.9) (20.4) -- (53.3)
-------- ---------- ------------ -------
Total operating expenses (694.7) (361.7) 382.4 (674.0)
-------- ---------- ------------ -------
Operating income 36.3 134.7 -- 171.0
Other income and expenses, net 4.7 3.0 (0.4) 7.3
Interest expense and
preferred dividends (25.0) (88.5) 0.4 (113.1)
-------- ---------- ------------ -------
Income from continuing
operations before income
taxes and minority interest 16.0 49.2 -- 65.2
Income tax expense from
continuing operations (5.3) (16.1) -- (21.4)
Minority interest -- (0.4) -- (0.4)
-------- ---------- ------------ -------
Income from continuing
operations 10.7 32.7 -- 43.4
Loss from discontinued
operations, net of tax (6.8) (0.9) -- (7.7)
-------- ---------- ------------ -------
Net income (loss) $3.9 $31.8 $-- $35.7
-------- ---------- ------------ -------


Three months ended
September 30, 2004
-----------------------------------------
Delivery Generation
and and
(In millions) Services Marketing Eliminations Total
---------------------------- -------- ---------- ------------ --------
Operating revenues $689.3 $417.6 $(383.6) $723.3

Fuel consumed in electric
generation -- (163.1) -- (163.1)
Purchased power and
transmission (443.7) (23.4) 381.2 (85.9)
Impairment charge on Ohio
T&D assets -- -- -- --
Deferred energy costs, net 1.7 -- -- 1.7
Operations and maintenance (104.5) (88.1) 2.4 (190.2)
Depreciation and
amortization (37.4) (37.7) -- (75.1)
Taxes other than income
taxes (32.9) (18.7) -- (51.6)
-------- ---------- ------------ --------
Total operating expenses (616.8) (331.0) 383.6 (564.2)
-------- ---------- ------------ --------
Operating income 72.5 86.6 -- 159.1
Other income and expenses, net 2.9 0.4 (0.2) 3.1
Interest expense and
preferred dividends (31.5) (59.9) 0.1 (91.3)
-------- ---------- ------------ --------
Income from continuing
operations before income
taxes and minority interest 43.9 27.1 (0.1) 70.9
Income tax expense from
continuing operations (13.7) (12.4) -- (26.1)
Minority interest -- 5.9 -- 5.9
-------- ---------- ------------ --------
Income from continuing
operations 30.2 20.6 (0.1) 50.7
Loss from discontinued
operations, net of tax (25.2) (402.4) 0.1 (427.5)
-------- ---------- ------------ --------
Net income (loss) $5.0 $(381.8) $-- $(376.8)
-------- ---------- ------------ --------


ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
RESULTS BY BUSINESS SEGMENT
(unaudited)

Nine months ended
September 30, 2005
-------------------------------------------
Delivery Generation
and and
(In millions) Services Marketing Eliminations Total
-------------------------- --------- ---------- ------------ ---------
Operating revenues $2,133.6 $1,317.8 $(1,137.7) $2,313.7

Fuel consumed in electric
generation -- (551.5) -- (551.5)
Purchased power and
transmission (1,406.3) (61.5) 1,130.6 (337.2)
Impairment charge on Ohio
T&D assets (30.5) -- -- (30.5)
Deferred energy costs, net 4.8 -- -- 4.8
Operations and maintenance (296.3) (256.4) 7.1 (545.6)
Depreciation and
amortization (115.3) (115.2) -- (230.5)
Taxes other than income
taxes (98.9) (61.2) -- (160.1)
--------- ---------- ------------ ---------
Total operating
expenses (1,942.5) (1,045.8) 1,137.7 (1,850.6)
--------- ---------- ------------ ---------
Operating income 191.1 272.0 -- 463.1
Other income and expenses,
net 16.9 17.6 (0.7) 33.8
Interest expense and
preferred dividends (102.0) (268.3) 0.6 (369.7)
--------- ---------- ------------ ---------
Income (loss) from
continuing operations
before income taxes and
minority interest 106.0 21.3 (0.1) 127.2
Income tax (expense)
benefit from continuing
operations (28.7) (25.9) -- (54.6)
Minority interest -- (0.9) -- (0.9)
--------- ---------- ------------ ---------
Income (loss) from
continuing operations 77.3 (5.5) (0.1) 71.7
Loss from discontinued
operations, net of tax (2.5) (9.4) 0.1 (11.8)
--------- ---------- ------------ ---------
Net income (loss) $74.8 $(14.9) $-- $59.9
--------- ---------- ------------ ---------


Nine months ended
September 30, 2004
-------------------------------------------
Delivery Generation
and and
(In millions) Services Marketing Eliminations Total
-------------------------- --------- ---------- ------------ ---------
Operating revenues $2,069.2 $1,160.4 $(1,162.0) $2,067.6

Fuel consumed in electric
generation -- (465.9) -- (465.9)
Purchased power and
transmission (1,336.3) (65.0) 1,154.5 (246.8)
Impairment charge on Ohio
T&D assets -- -- -- --
Deferred energy costs, net (0.4) -- -- (0.4)
Operations and maintenance (309.2) (322.2) 7.5 (623.9)
Depreciation and
amortization (111.1) (111.8) -- (222.9)
Taxes other than income
taxes (96.7) (53.0) -- (149.7)
--------- ---------- ------------ ---------
Total operating
expenses (1,853.7) (1,017.9) 1,162.0 (1,709.6)
--------- ---------- ------------ ---------
Operating income 215.5 142.5 -- 358.0
Other income and expenses,
net 14.4 1.4 (0.2) 15.6
Interest expense and
preferred dividends (97.1) (207.7) 0.1 (304.7)
--------- ---------- ------------ ---------
Income (loss) from
continuing operations
before income taxes and
minority interest 132.8 (63.8) (0.1) 68.9
Income tax (expense)
benefit from continuing
operations (49.2) 24.0 -- (25.2)
Minority interest -- 4.8 -- 4.8
--------- ---------- ------------ ---------
Income (loss) from
continuing operations 83.6 (35.0) (0.1) 48.5
Loss from discontinued
operations, net of tax (15.4) (416.2) 0.1 (431.5)
--------- ---------- ------------ ---------
Net income (loss) $68.2 $(451.2) $-- $(383.0)
--------- ---------- ------------ ---------


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share data)
(unaudited)

INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES AND DILUTED
THREE MONTHS ENDED MINORITY INCOME
SEPTEMBER 30, 2005 INTEREST NET INCOME PER SHARE
----------------------------------------------------------------------
Calculation of Adjusted Income:
Income - GAAP basis $65.3 $35.7 $0.21
=============

Adjustments:
Loss from discontinued
operations 7.8
Receipt of Hatfield power
station insurance proceeds(1) (11.0) (6.8)
Redemption costs of 10.25% and
13.0% Senior Notes(2) 32.6 20.1
Impairment charge on Ohio T&D
assets 30.5 18.0
---------------------------------------------------------
Adjusted Income $117.4 $74.8 $0.45
======================================================================

Calculation of Adjusted EBITDA:
Net Income - GAAP basis $35.7
Loss from discontinued
operations 7.8
Interest expense and preferred
dividends 113.1
Income tax expense 21.4
Depreciation and amortization 76.7
---------------------------------------------------------
EBITDA from continuing
operations 254.7
Receipt of Hatfield power
station insurance proceeds (11.0)
Impairment charge on Ohio T&D
assets 30.5
---------------------------------------------------------
Adjusted EBITDA from continuing
operations $274.2
=========================================================


INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES AND DILUTED
THREE MONTHS ENDED MINORITY NET (LOSS)(LOSS) INCOME
SEPTEMBER 30, 2004 INTEREST INCOME PER SHARE
----------------------------------------------------------------------
Calculation of Adjusted Income
(Loss):
Income (Loss) - GAAP basis $70.8 $(376.8) $(2.40)
=============

Adjustments:
Loss from discontinued
operations 427.4
---------------------------------------------------------
Adjusted Income $70.8 $50.6 $0.37
======================================================================

Calculation of Adjusted EBITDA:
Net Loss - GAAP basis $(376.8)
Loss from discontinued
operations 427.4
Interest expense and preferred
dividends 91.4
Income tax expense 26.1
Depreciation and amortization 75.1
---------------------------------------------------------
EBITDA from continuing
operations 243.2
No adjustments --
---------------------------------------------------------
Adjusted EBITDA from continuing
operations $243.2
=========================================================

FOOTNOTES:
(1) This amount is included in operations and maintenance expense on
the Consolidated Statement of Operations.
(2) This amount is included in interest expense on the Consolidated
Statement of Operations.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share data) (unaudited)

INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES AND DILUTED
NINE MONTHS ENDED MINORITY INCOME
SEPTEMBER 30, 2005 INTEREST NET INCOME PER SHARE
----------------------------------------------------------------------
Calculation of Adjusted Income:
Income - GAAP basis $127.3 $59.9 $0.38
=============

Adjustments:
Loss from discontinued
operations 11.8
Interest expense related to
Merrill Lynch summary
judgment(1) 38.5 24.3
Expense related to conversion of
trust preferred securities(2) 47.2 29.8
Cash receipt from former trading
executive's forfeited
assets(3) (11.2) (6.9)
Receipt of Hatfield power
station insurance proceeds(4) (17.7) (10.9)
Redemption costs of 10.25% and
13.0% Senior Notes(2) 32.6 20.1
Impairment charge on Ohio T&D
assets 30.5 18.0
---------------------------------------------------------
Adjusted Income $247.2 $146.1 $0.90
======================================================================

Calculation of Adjusted EBITDA:
Net Income - GAAP basis $59.9
Loss from discontinued
operations 11.8
Interest expense and preferred
dividends 369.7
Income tax expense 54.6
Depreciation and amortization 230.5
---------------------------------------------------------
EBITDA from continuing
operations 726.5
Cash receipt from former trading
executive's forfeited assets (11.2)
Receipt of Hatfield power
station insurance proceeds (17.7)
Impairment charge on Ohio T&D
assets 30.5
---------------------------------------------------------
Adjusted EBITDA from continuing
operations $728.1
=========================================================

INCOME FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES AND DILUTED
NINE MONTHS ENDED MINORITY NET (LOSS)(LOSS) INCOME
SEPTEMBER 30, 2004 INTEREST INCOME PER SHARE
----------------------------------------------------------------------
Calculation of Adjusted Income
(Loss):
Income (Loss) - GAAP basis $68.9 $(383.0) $(2.97)
=============

Adjustments:
Loss from discontinued
operations 431.5
Gain on California contract
escrow release(5) (68.1) (39.2)
Write-off of 2003 financing
costs(2) 14.1 8.1
Gain on land sale, New York
office space charge, net(6) (4.2) (2.4)
Loss on release of gas pipeline
capacity(7) 11.7 6.7
---------------------------------------------------------
Adjusted Income(8) $22.4 $21.7 $0.17
======================================================================

Calculation of Adjusted EBITDA:
Net Loss - GAAP basis $(383.0)
Loss from discontinued
operations 431.5
Interest expense and preferred
dividends 304.8
Income tax expense 25.2
Depreciation and amortization 222.9
---------------------------------------------------------
EBITDA from continuing
operations 601.4
Gain on California contract
escrow release (68.1)
Gain on land sale, New York
office space charge, net (4.2)
Loss on release of gas pipeline
capacity 11.7
---------------------------------------------------------
Adjusted EBITDA from continuing
operations(8) $540.8
=========================================================

FOOTNOTES:

(1) This amount is included in interest expense on the Consolidated
Statement of Operations. This amount represents the estimated
interest owed to Merrill Lynch from March 16, 2001 thru March 31,
2005. It does not include interest accrued subsequent to March 31,
2005.
(2) These amounts are included in interest expense on the Consolidated
Statements of Operations.
(3) This amount is included in other income and expenses, net, on the
Consolidated Statement of Operations.
(4) This amount is included in operations and maintenance expense on
the Consolidated Statement of Operations.
(5) This amount is included in operating revenues on the Consolidated
Statement of Operations.
(6) These amounts are included in other income and expenses, net, and
operations and maintenance expense on the Consolidated Statement
of Operations.
(7) This amount is included in purchased power and transmission on the
Consolidated Statement of Operations.
(8) Not adjusted for $9.2 million of charges related to Allegheny
Ventures for write-downs of inventory and discontinued product
($4.3 million), equity interests ($2.3 million) and adjustments in
revenue recognition for a percentage of completion contract
($2.6 million).


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions)
(unaudited)

THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
ADJUSTED EXPENSES 2005 2004
----------------------------------------------------------------------
Operations and maintenance:
As reported $182.1 $190.2

Receipt of Hatfield power station
insurance proceeds 11.0 --
----------------------------------------------------------------------
As Adjusted $193.1 $190.2
======================================================================

Interest expense and preferred dividends
of subsidiary:
As reported $113.1 $91.4

Redemption costs of 10.25% and 13.0%
Senior Notes (32.6) --
----------------------------------------------------------------------
As Adjusted $80.5 $91.4
======================================================================


Allegheny Energy, Inc. and Subsidiaries
Operating Statistics

Unaudited
Three Months Ended September 30,

2005 2004 Change
-------- -------- ------
Delivery and Services:
Electricity sales (million kWh, including
wholesale) 12,247 11,683 4.8%
Usage per customer (kWh):
Residential 3,251 2,869 13.3%
Commercial 16,392 15,696 4.4%
Industrial 178,101 187,088 -4.8%

Generation and Marketing:
Generation (million kWh) 13,188 12,479 5.7%

Unaudited
Nine Months Ended September 30,

2005 2004 Change
-------- -------- ------
Delivery and Services:
Electricity sales (million kWh, including
wholesale) 36,117 35,371 2.1%
Usage per customer (kWh):
Residential 9,420 9,064 3.9%
Commercial 46,078 45,185 2.0%
Industrial 552,996 565,673 -2.2%

Generation and Marketing:
Generation (million kWh) 36,574 34,929 4.7%