Allegheny Energy (AYE) 8-K Allegheny Energy Reports Financial Results for Fourth Quarter, Full Year 2008

Exhibit 99.1

NEWS RELEASE

800 Cabin Hill Drive, Greensburg, PA 15601-1650

Media contact:	Investor contact:
David Neurohr	Max Kuniansky
Director, External Communications	Executive Director, Investor Relations
Phone: (724) 838-6020	and Corporate Communications
Media Hotline: 1-888-233-3583	Phone: (724) 838-6895
E-mail:dneuroh@alleghenyenergy.com	E-mail:mkunian@alleghenyenergy.com

DRAFT — NOT FOR RELEASE 2-9-09 — PM

Allegheny Energy Reports Financial Results for Fourth Quarter, Full Year 2008

GREENSBURG, Pa., February 11, 2009— Allegheny Energy, Inc.(NYSE: AYE)today reported financial results for the three months and twelve months ended December 31, 2008.

	$ millions				Per share
	2008		2007		2008		2007
Three Months Ended December 31
Consolidated net income-GAAP	$	16.2	$	110.4	$	0.10	$	0.65
Adjusted net income		87.1		78.6		0.51		0.46
Twelve Months Ended December 31
Consolidated net income-GAAP	$	395.4	$	412.2	$	2.33	$	2.43
Adjusted net income		391.1		384.8		2.30		2.26

Adjusted net income for the fourth quarter of 2008 excludes a net unrealized pre-tax loss of $116.3 million from economic hedges that do not qualify for hedge accounting. Adjusted results for the fourth quarter of 2007 excluded earnings resulting from a litigation settlement with Merrill Lynch & Co., Inc.

Adjusted net income is a non-GAAP financial measure. For information on adjustments and the calculation of adjusted net income for all periods, see the attached reconciliations of non-GAAP financial measures.

“Earnings in the quarter benefited from increased plant output and reduced operating costs, partially offset by higher coal expense,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy.

“In 2008, we dramatically reduced regulatory uncertainty by resolving cost recovery issues in Virginia and West Virginia and obtaining key approvals for both our TrAIL transmission project and Pennsylvania rate mitigation plan. Given the state of the economy and conditions in the commodity markets, we expect 2009 to be a very challenging year. We’ll especially focus on controlling costs and maintaining strong liquidity during the year, while also completing our scrubber projects and keeping transmission expansion on track.”

Fourth Quarter Consolidated Results

Adjusted net income for the fourth quarter of 2008 increased $8.5 million compared to the same period in 2007. Key factors contributing to the results include:

• Adjusted operating revenues increased $37.8 million compared to the fourth quarter of 2007, reflecting higher generation output and the effects of marketing contracts, hedging activities and capacity prices.

• Fuel and deferred energy expense increased in total $33.3 million, reflecting higher coal costs, partially offset by a fuel and energy cost recovery clause in West Virginia.

• Operations and maintenance expense decreased $17.1 million, due to lower special maintenance expense at power plants.

• Interest expense decreased $3.5 million compared to adjusted interest expense in the fourth quarter of 2007, primarily due to lower interest rates and an increase in capitalized interest.

• Adjusted income taxes increased $19.9 million, reflecting an increase in adjusted pre-tax income and a higher effective tax rate.

Adjusted EBITDA for the fourth quarter of 2008 was $268.3 million, an increase of $24.7 million compared to adjusted EBITDA for the same quarter of the prior year. EBITDA is a non-GAAP financial measure. The calculation of EBITDA and a reconciliation of EBITDA to net income are attached to this release.

Fourth Quarter Segment Results

Three Months Ended December 31
($ millions)

	2008		2007
Generation and Marketing:
Net income — GAAP	$	7.6	$	84.4
Adjusted net income		78.5		52.6
Delivery and Services:
Net income — GAAP	$	8.6	$	26.0
Adjusted net income		8.6		26.0

Adjusted net income for the Generation and Marketing segment in the fourth quarter of 2008 excludes the unrealized losses previously discussed. The segment’s adjusted results for the fourth quarter of 2007 exclude earnings resulting from the Merrill Lynch litigation settlement. There were no adjustments in the Delivery and Services segment for the fourth quarter in either year.

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Generation and Marketing: Adjusted net income increased $25.9 million compared to the same period a year earlier. Key factors contributing to the results for the fourth quarter of 2008 include increased plant output, the effects of marketing contracts, hedging activities and capacity prices, lower special maintenance costs and lower interest expense, partially offset by higher coal costs and higher income taxes.

Delivery and Services: Net income decreased $17.4 million compared to the same quarter of the prior year. Results were adversely impacted by the expiration of an earnings benefit related to stranded cost recovery, lower retail electric sales, increased interest expense and a higher effective tax rate, partially offset by revenues from transmission expansion, customer growth and favorable weather.

Twelve-Month Results

Consolidated adjusted net income for the year increased $6.3 million compared to 2007. Adjusted net income for the Generation and Marketing segment increased $72.9 million in 2008, due primarily to higher market prices and generation rates. This increase was largely offset by a $66.6 million decrease in adjusted net income in the Delivery and Services segment, reflecting a significant under-recovery of purchased power costs in Virginia. A settlement agreement approved by Virginia regulators in November 2008 provides for the recovery of purchased power costs in 2009 and beyond.

Segment results for 2008 were:

Twelve Months Ended December 31
($ millions)

	2008		2007
Generation and Marketing:
Net income — GAAP	$	344.3	$	294.5
Adjusted net income		340.0		267.1
Delivery and Services:
Net income- GAAP	$	51.1	$	117.7
Adjusted net income		51.1		117.7

Adjusted net income for 2008 in the Generation and Marketing segment excludes unrealized gains and losses associated with economic hedges previously discussed. Adjusted net income for 2007 in the Generation and Marketing segment excludes the impact of the Merrill Lynch settlement. There were no adjustments in the Delivery and Services segment in either year.

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Reconciliation of Non-GAAP Financial Measures

This news release and the attached table include non-GAAP financial measures as defined in the Securities and Exchange Commission’s Regulation G. Where noted, we present financial information on an adjusted basis to exclude the effect of certain items as described herein. By presenting adjusted results, management intends to provide investors with a more complete understanding of the core results and underlying trends from which to consider past performance and prospects for the future. We also present EBITDA as an additional measure of our operating performance.

Users of this financial information should consider the types of events and transactions for which adjustments have been made. Neither the adjusted information nor EBITDA should be considered in isolation or viewed as substitutes for or superior to net income or other data prepared in accordance with GAAP as measures of our operating performance or liquidity. In addition, neither the adjusted information nor EBITDA is necessarily comparable to similarly titled measures provided by other companies.

Pursuant to the requirements of Regulation G, we have attached tables that reconcile non-GAAP financial measures, including those presented in this release, to the most directly comparable GAAP measures.

Investor Conference Call

Allegheny Energy will discuss these results in a live Internet broadcast at 1:00 p.m. Eastern Standard Time on Wednesday, February 11, 2009. To listen to the broadcast, visit www.alleghenyenergy.com. A taped replay will be available after the live broadcast.

Allegheny Energy

Headquartered in Greensburg, Pa., Allegheny Energy is an investor-owned electric utility with total annual revenues of over $3 billion and more than 4,000 employees. The company owns and operates generating facilities and delivers low-cost, reliable electric service to 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia. For more information, visit the company’s Web site atwww.alleghenyenergy.com.

Forward-Looking Statements

In addition to historical information, this release may contain a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These include statements with respect to: rate regulation and the status of retail generation service supply competition in states served by Allegheny Energy’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 and procedures; capital expenditures; status and condition of plants and equipment; capacity purchase commitments; regulatory matters; and accounting issues. Forward-looking statements involve estimates, expectations and projections and, as a result, are subject to risks and uncertainties. There can be no assurance that actual results will not materially differ from expectations. Actual results have varied materially and unpredictably from past expectations. Factors that could cause actual results to differ materially include, among others, the following: plant performance and unplanned outages; changes in the price of power and fuel for electric generation; general economic and business conditions; changes in access to capital markets; complications or other factors that render it difficult or impossible to obtain necessary lender consents or regulatory authorizations on a timely basis; environmental regulations; the results of regulatory proceedings, including proceedings related to rates; changes in industry capacity, development and other activities by Allegheny Energy’s competitors; changes in the weather and other natural phenomena; changes in customer switching behavior and their resulting effects on existing and future load requirements; changes in the underlying inputs and assumptions, including market conditions used to estimate the

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fair values of commodity contracts; changes in laws and regulations applicable to Allegheny Energy, its markets or its activities; the loss of any significant customers or suppliers; dependence on other electric transmission and gas 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 accounting standard-setting bodies; and the continuing effects of global instability, terrorism and war. Additional risks and uncertainties are identified and discussed in Allegheny Energy’s reports filed with the Securities and Exchange Commission.

-###-

5

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three Months Ended						Year Ended
	December 31,						December 31,
(In thousands, except per share amounts)	2008			2007			2008				2007
Operating revenues	$	707,836		$	786,321		$	3,385,916			$	3,307,020
Operating expenses:
Fuel		286,619			221,730			1,080,861				930,788
Purchased power and transmission		92,831			99,586			395,566				393,182
Deferred energy costs, net		(35,641	)		(4,060	)		(63,697	)			(10,108	)
Operations and maintenance		164,021			181,136			674,914				687,050
Depreciation and amortization		67,446			67,559			273,912				277,014
Taxes other than income taxes		55,173			53,552			214,855				211,806
Total operating expenses		630,449			619,503			2,576,411				2,489,732
Operating income		77,387			166,818			809,505				817,288
Other income (expense), net		6,944			9,188			22,287				36,778
Interest expense and preferred dividends of subsidiary		56,842			5,603			231,936				187,926
Income before income taxes and minority interest		27,489			170,403			599,856				666,140
Income tax expense		11,548			59,325			203,966				250,805
Minority interest in net income (loss) of subsidiaries		(267	)		668			443				3,121
Net income	$	16,208		$	110,410		$	395,447			$	412,214
Common share data:
Weighted average common shares outstanding:
Basic		169,133			166,607			168,459				166,022
Diluted		169,891			169,752			169,991				169,468
Basic income per common share	$	0.10		$	0.66		$	2.35		��	$	2.48
Diluted income per common share	$	0.10		$	0.65		$	2.33			$	2.43
Dividends per common share	$	0.15		$	0.15		$	0.60			$	0.15

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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(unaudited)

	As of December 31,
(In thousands)	2008			2007
ASSETS
Current Assets:
Cash and cash equivalents	$	362,145		$	258,750
Accounts receivable:
Customer		188,309			195,545
Unbilled utility revenue		122,695			110,569
Wholesale and other		69,580			57,626
Allowance for uncollectible accounts		(13,280	)		(14,252	)
Materials and supplies		115,107			103,075
Fuel		128,238			72,506
Deferred income taxes		68,510			286,440
Prepaid taxes		44,766			48,343
Collateral deposits		43,983			59,527
Derivative assets		112,360			29
Restricted funds		36,787			47,501
Regulatory assets		150,700			73,299
Other		74,532			16,001
Total current assets		1,504,432			1,314,959
Property, Plant and Equipment, Net:
Generation		6,107,344			5,992,919
Transmission		1,171,716			1,126,657
Distribution		3,944,068			3,761,438
Other		463,377			452,525
Accumulated depreciation		(4,994,099	)		(4,795,925	)
Subtotal		6,692,406			6,537,614
Construction work in progress		1,309,790			658,966
Total property, plant and equipment, net		8,002,196			7,196,580
Investments and Other Assets:
Goodwill		367,287			367,287
Restricted funds—Fort Martin scrubber project		133,346			347,023
Investments in unconsolidated affiliates		27,955			27,875
Other		19,695			15,974
Total investments and other assets		548,283			758,159
Deferred Charges:
Regulatory assets		687,696			601,603
Other		67,335			35,288
Total deferred charges		755,031			636,891
Total Assets	$	10,809,942		$	9,906,589

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

(unaudited)

	As of December 31,
(In thousands, except share amounts)	2008			2007
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	—		$	10,000
Long-term debt due within one year		93,848			95,367
Accounts payable		374,229			380,688
Accrued taxes		119,520			83,580
Payable to PJM for FTRs		110,774			—
Derivative liabilities		22,153			14,117
Regulatory liabilities		69,208			4,029
Accrued interest		58,048			65,583
Security deposits		46,166			38,976
Other		109,643			95,163
Total current liabilities		1,003,589			787,503
Long-term Debt		4,115,921			3,943,947
Deferred Credits and Other Liabilities:
Derivative liabilities		11,886			12,815
Income taxes payable		75,669			68,050
Investment tax credit		65,768			69,353
Deferred income taxes		1,276,244			1,345,953
Obligations under capital leases		39,511			38,765
Regulatory liabilities		522,741			488,393
Pension and other postretirement employee benefit plan liabilities		578,440			324,320
Adverse power purchase commitment		132,334			149,799
Other		132,185			129,098
Total deferred credits and other liabilities		2,834,778			2,626,546
Minority Interest		4,864			13,241
Common Stockholders’ Equity:
Common stock—$1.25 par value per share, 260 million shares authorized and 169,413,887 and 167,273,069 shares issued at December 31, 2008 and 2007, respectively		211,767			209,091
Other paid-in capital		1,952,440			1,924,072
Retained earnings		731,657			444,177
Treasury stock at cost—49,493 shares		(1,756	)		(1,756	)
Accumulated other comprehensive loss		(43,318	)		(40,232	)
Total common stockholders’ equity		2,850,790			2,535,352
Total Liabilities and Stockholders’ Equity	$	10,809,942		$	9,906,589

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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

RESULTS BY BUSINESS SEGMENT

THREE MONTHS ENDED DECEMBER 31, 2008 and 2007

(unaudited)

	Delivery			Generation
	and			and
2008 (In millions)	Services			Marketing			Eliminations			Total
Operating revenues	$	707.1		$	437.2		$	(436.5	)	$	707.8
Fuel		—			286.6			—			286.6
Purchased power and transmission		501.2			26.2			(434.6	)		92.8
Deferred energy costs, net		(0.5	)		(35.1	)		—			(35.6	)
Operations and maintenance		88.3			77.6			(1.9	)		164.0
Depreciation and amortization		39.6			27.8			—			67.4
Taxes other than income taxes		36.2			19.0			—			55.2
Total operating expenses		664.8			402.1			(436.5	)		630.4
Operating income		42.3			35.1			—			77.4
Other income (expense), net		4.9			2.0			—			6.9
Interest expense		25.1			31.7			—			56.8
Income before income taxes and minority interest		22.1			5.4			—			27.5
Income tax expense (benefit)		13.8			(2.2	)		—			11.6
Minority interest in net income of subsidiaries		(0.3	)		—			—			(0.3	)
Net income	$	8.6		$	7.6		$	—		$	16.2
2007 (In millions)
Operating revenues	$	700.4		$	510.4		$	(424.5	)	$	786.3
Fuel		—			221.7			—			221.7
Purchased power and transmission		491.3			30.9			(422.6	)		99.6
Deferred energy costs, net		(2.3	)		(1.7	)		—			(4.0	)
Operations and maintenance		85.9			97.1			(1.9	)		181.1
Depreciation and amortization		40.7			26.9			—			67.6
Taxes other than income taxes		34.5			19.0			—			53.5
Total operating expenses		650.1			393.9			(424.5	)		619.5
Operating income		50.3			116.5			—			166.8
Other income (expense), net		5.8			5.0			(1.6	)		9.2
Interest expense and preferred dividends		18.6			(11.4	)		(1.6	)		5.6
Income before income taxes and minority interest		37.5			132.9			—			170.4
Income tax expense		11.5			47.8			—			59.3
Minority interest in net income of subsidiaries		—			0.7			—			0.7
Net income	$	26.0		$	84.4		$	—		$	110.4

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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES

RESULTS BY BUSINESS SEGMENT

YEAR ENDED DECEMBER 31, 2008 and 2007

(unaudited)

	Delivery			Generation
(In millions)	and			and
2008	Services			Marketing			Eliminations			Total
Operating revenues	$	2,846.7		$	2,279.2		$	(1,740.0	)	$	3,385.9
Fuel		—			1,080.9			—			1,080.9
Purchased power and transmission		2,023.8			103.9			(1,732.1	)		395.6
Deferred energy costs, net		7.3			(71.0	)		—			(63.7	)
Operations and maintenance		355.5			327.2			(7.9	)		674.8
Depreciation and amortization		162.2			111.7			—			273.9
Taxes other than income taxes		141.8			73.1			—			214.9
Total operating expenses		2,690.6			1,625.8			(1,740.0	)		2,576.4
Operating income		156.1			653.4			—			809.5
Other income (expense), net		15.1			9.7			(2.5	)		22.3
Interest expense		95.9			138.5			(2.5	)		231.9
Income before income taxes and minority interest		75.3			524.6			—			599.9
Income tax expense		23.8			180.3			—			204.1
Minority interest in net income of subsidiaries		0.4			—			—			0.4
Net income	$	51.1		$	344.3		$	—		$	395.4
2007
Operating revenues	$	2,829.2		$	2,141.3		$	(1,663.5	)	$	3,307.0
Fuel		—			930.8			—			930.8
Purchased power and transmission		1,939.2			108.1			(1,654.1	)		393.2
Deferred energy costs, net		(2.8	)		(7.3	)		—			(10.1	)
Operations and maintenance		342.5			353.9			(9.4	)		687.0
Depreciation and amortization		162.4			114.6			—			277.0
Taxes other than income taxes		134.0			77.8			—			211.8
Total operating expenses		2,575.3			1,577.9			(1,663.5	)		2,489.7
Operating income		253.9			563.4			—			817.3
Other income (expense), net		16.2			26.8			(6.2	)		36.8
Interest expense and preferred dividends		74.0			120.2			(6.2	)		188.0
Income before income taxes and minority interest		196.1			470.0			—			666.1
Income tax expense		78.4			172.4			—			250.8
Minority interest in net income of subsidiaries		—			3.1			—			3.1
Net income	$	117.7		$	294.5		$	—		$	412.2

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONSOLIDATED DATA FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(in millions, except per share data)
(unaudited)

	INCOME BEFORE
THREE MONTHS ENDED	INCOME TAXES AND				DILUTED INCOME
DECEMBER 31, 2008	MINORITY INTEREST		NET INCOME		PER SHARE
Calculation of Adjusted Income:
Income — GAAP Basis	$	27.5	$	16.2	$	0.10
Adjustments:
Net unrealized loss associated with economic hedges1		116.3		70.9
Adjusted Income	$	143.8	$	87.1	$	0.51
Calculation of Adjusted EBITDA:
Net Income — GAAP basis			$	16.2
Interest expense				56.8
Income tax expense				11.6
Depreciation and amortization				67.4
EBITDA				152.0
Net unrealized loss associated with economic hedges1				116.3
Adjusted EBITDA			$	268.3

	INCOME BEFORE
THREE MONTHS ENDED	INCOME TAXES AND						DILUTED INCOME
DECEMBER 31, 2007	MINORITY INTEREST			NET INCOME			PER SHARE
Calculation of Adjusted Income:
Income — GAAP Basis	$	170.4		$	110.4		$	0.65
Adjustments:
Merrill Lynch interest accrual reversal and minority interest expense removal2		(54.7	)		(31.8	)
Adjusted Income	$	115.7		$	78.6		$	0.46
Calculation of Adjusted EBITDA:
Net Income — GAAP basis				$	110.4
Interest expense					5.6
Income tax expense					59.3
Depreciation and amortization					67.6
EBITDA					242.9
Merrill Lynch minority interest expense removal2					0.7
Adjusted EBITDA				$	243.6

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
SEGMENT DATA FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(in millions)
(unaudited)

	DELIVERY AND SERVICES				GENERATION AND MARKETING
	INCOME BEFORE				INCOME BEFORE
THREE MONTHS ENDED	INCOME TAXES AND		NET		INCOME TAXES AND		NET
DECEMBER 31, 2008	MINORITY INTEREST		INCOME		MINORITY INTEREST		INCOME
Calculation of Adjusted Income:
Income — GAAP Basis	$	22.1	$	8.6	$	5.4	$	7.6
Adjustments:
Net unrealized loss associated with economic hedges1		—		—		116.3		70.9
Adjusted Income	$	22.1	$	8.6	$	121.7	$	78.5

	DELIVERY AND SERVICES				GENERATION AND MARKETING
	INCOME BEFORE				INCOME BEFORE
THREE MONTHS ENDED	INCOME TAXES AND		NET		INCOME TAXES AND			NET
DECEMBER 31, 2007	MINORITY INTEREST		INCOME		MINORITY INTEREST			INCOME
Calculation of Adjusted Income:
Income — GAAP Basis	$	37.5	$	26.0	$	132.9		$	84.4
Adjustments:
Merrill Lynch interest accrual reversal and minority interest expense removal2		—		—		(54.7	)		(31.8	)
Adjusted Income	$	37.5	$	26.0	$	78.2		$	52.6

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONSOLIDATED DATA FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(in millions, except per share data)
(unaudited)

	INCOME BEFORE
YEAR ENDED	INCOME TAXES AND						DILUTED INCOME
DECEMBER 31, 2008	MINORITY INTEREST			NET INCOME			PER SHARE
Calculation of Adjusted Income:
Income — GAAP Basis	$	599.9		$	395.4		$	2.33
Adjustments:
Net unrealized gain associated with economic hedges3		(7.0	)		(4.3	)
Adjusted Income	$	592.9		$	391.1		$	2.30
Calculation of Adjusted EBITDA:
Net Income — GAAP basis				$	395.4
Interest expense					231.9
Income tax expense					204.1
Depreciation and amortization					273.9
EBITDA					1,105.3
Net unrealized gain associated with economic hedges3					(7.0	)
Adjusted EBITDA				$	1,098.3

	INCOME BEFORE
YEAR ENDED	INCOME TAXES AND						DILUTED INCOME
DECEMBER 31, 2007	MINORITY INTEREST			NET INCOME			PER SHARE
Calculation of Adjusted Income:
Income — GAAP Basis	$	666.1		$	412.2		$	2.43
Adjustments:
Merrill Lynch net interest accrual reversal and minority interest expense removal4		(51.5	)		(27.4	)
Adjusted Income	$	614.6		$	384.8		$	2.26
Calculation of Adjusted EBITDA:
Net Income — GAAP basis				$	412.2
Interest expense					188.0
Income tax expense					250.8
Depreciation and amortization					277.0
EBITDA					1,128.0
Merrill Lynch minority interest expense removal4					3.1
Adjusted EBITDA				$	1,131.1

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

13

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
SEGMENT DATA FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(in millions)
(unaudited)

	DELIVERY AND SERVICES				GENERATION AND MARKETING
	INCOME BEFORE				INCOME BEFORE
YEAR ENDED	INCOME TAXES AND		NET		INCOME TAXES AND			NET
DECEMBER 31, 2008	MINORITY INTEREST		INCOME		MINORITY INTEREST			INCOME
Calculation of Adjusted Income:
Income — GAAP Basis	$	75.3	$	51.1	$	524.6		$	344.3
Adjustments:
Net unrealized gain associated with economic hedges3		—		—		(7.0	)		(4.3	)
Adjusted Income	$	75.3	$	51.1	$	517.6		$	340.0

	DELIVERY AND SERVICES				GENERATION AND MARKETING
	INCOME BEFORE				INCOME BEFORE
YEAR ENDED	INCOME TAXES AND		NET		INCOME TAXES AND			NET
DECEMBER 31, 2007	MINORITY INTEREST		INCOME		MINORITY INTEREST			INCOME
Calculation of Adjusted Income:
Income — GAAP Basis	$	196.1	$	117.7	$	470.0		$	294.5
Adjustments:
Merrill Lynch net interest accrual reversal and minority interest expense removal4		—		—		(51.5	)		(27.4	)
Adjusted Income	$	196.1	$	117.7	$	418.5		$	267.1

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

14

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(in millions)
(unaudited)

	THREE MONTHS			THREE MONTHS
ADJUSTED OPERATING REVENUE	ENDED DEC 31, 2008			ENDED DEC 31, 2007
Operating revenue:
As reported	$	707.8		$	786.3
Adjustments:
Net unrealized loss associated with economic hedges1		116.3			—
Adjusted operating revenue	$	824.1		$	786.3
ADJUSTED EXPENSES
Interest expense:
As reported	$	56.8		$	5.6
Adjustments:
Merrill Lynch interest accrual reversal2		—			54.7
Adjusted interest expense	$	56.8		$	60.3
Income tax expense:
As reported	$	11.6		$	59.3
Adjustments:
Income taxes related to net unrealized loss associated with economic hedges1		45.4			—
Income taxes related to Merrill Lynch interest accrual reversal2		—			(22.2	)
Adjusted income tax expense	$	57.0		$	37.1
Minority interest expense (after tax):
As reported	($	0.3	)	$	0.7
Adjustments:
Merrill Lynch minority interest expense removal2		—			(0.7	)
Adjusted minority interest expense	($	0.3	)	$	—

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

15

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(in millions)
(unaudited)

	YEAR ENDED			YEAR ENDED
ADJUSTED OPERATING REVENUE	DEC 31, 2008			DEC 31, 2007
Operating revenue:
As reported	$	3,385.9		$	3,307.0
Adjustments:
Net unrealized gain associated with economic hedges3		(7.0	)		—
Adjusted operating revenue	$	3,378.9		$	3,307.0
ADJUSTED EXPENSES
Interest expense:
As reported	$	231.9		$	187.9
Adjustments:
Merrill Lynch interest accrual reversal4		—			51.5
Adjusted interest expense	$	231.9		$	239.4
Income tax expense:
As reported	$	204.1		$	250.8
Adjustments:
Income taxes related to net unrealized gain associated with economic hedges3		2.7			—
Income taxes related to Merrill Lynch interest accrual reversal4		—			(21.0	)
Adjusted income tax expense	$	206.8		$	229.8
Minority interest expense (after tax):
As reported	$	0.4		$	3.1
Adjustments:
Merrill Lynch minority interest expense removal4		—			(3.1	)
Adjusted minority interest expense	$	0.4		$	—

See accompanying Notes to Reconciliation of Non-GAAP Financial Measures

16

Notes to Reconciliation of Non-GAAP Financial Measures:

(1)	Consists of unrealized losses of $131.2 million on financial transmission rights (“FTRs”), $5.2 million of unrealized losses on power hedges, and a $20.1 million unrealized gain associated with a hedging strategy pertaining to a natural gas transportation contract. These unrealized mark-to-market gains and losses were included in operating revenues on the Consolidated Statements of Income.
(2)	Represents the reversal of all accrued interest related to the Merrill Lynch dispute and the removal of the 4th quarter minority interest expense associated with Merrill Lynch ownership in AE Supply. These items were included in interest expense and minority interest on the Consolidated Statements of Operations.
(3)	Consists of unrealized losses of $41.2 million on financial transmission rights (“FTRs”), $19.7 million of unrealized gains on power hedges, and a $28.5 million unrealized gain associated with a hedging strategy pertaining to a natural gas transportation contract. These unrealized mark-to-market gains and losses were included in operating revenues on the Consolidated Statements of Income.
(4)	Represents the reversal of all accrued interest related to the Merrill Lynch dispute, net of interest expense recorded during the 1st and 2nd quarters of 2007 and the removal of the minority interest expense associated with Merrill Lynch ownership in AE Supply for the full year 2007. These items were included in interest expense and minority interest on the Consolidated Statements of Operations.

17

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
OPERATING STATISTICS
(unaudited)
Three Months Ended December 31,

	2008			2007			Change
DELIVERY AND SERVICES:
Retail electricity sales (million KWH)		11,169			11,361			-1.7	%
Usage per customer (KWH):
Residential		3,222			3,176			1.4	%
Commercial		15,125			15,333			-1.4	%
Industrial		145,458			156,555			-7.1	%
GENERATION AND MARKETING:
Total generation (million KWH):
Supercritical coal		10,247			8,757			17.0	%
Other coal		845			1,366			-38.1	%
Gas		44			98			-55.1	%
Hydro and other		416			523			-20.5	%
Total		11,552			10,744			7.5	%
Net capacity factor:
Supercritical coal		76	%		65	%		11.0	%
All coal		67	%		61	%		6.0	%
Equivalent availability factor:
Supercritical coal		92	%		77	%		15.0	%
All coal		89	%		77	%		12.0	%
DEGREE DAYS:
Heating		2,032			1,747			16.3	%
Cooling		5			64			-92.2	%

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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
OPERATING STATISTICS (cont.)
(unaudited)
Twelve Months Ended December 31,

	2008			2007			Change
DELIVERY AND SERVICES:
Retail electricity sales (million KWH)		44,192			44,901			-1.6	%
Usage per customer (KWH):
Residential		12,507			12,765			-2.0	%
Commercial		60,632			62,038			-2.3	%
Industrial		587,718			605,109			-2.9	%
GENERATION AND MARKETING:
Total generation (million KWH):
Supercritical coal		39,550			39,042			1.3	%
Other coal		4,805			5,917			-18.8	%
Gas		318			956			-66.7	%
Hydro and other		1,928			2,320			-16.9	%
Total		46,601			48,235			-3.4	%
Net capacity factor:
Supercritical coal		75	%		74	%		1.0	%
All coal		68	%		69	%		-1.0	%
Equivalent availability factor:
Supercritical coal		88	%		83	%		5.0	%
All coal		86	%		82	%		4.0	%
DEGREE DAYS:
Heating		5,324			5,144			3.5	%
Cooling		772			1,032			-25.2	%

19