Citigroup Power, Gas and Utilities Conference March 13, 2006

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CitigroupPower, Gas and Utilities
ConferenceMarch 1-3, 2006
Allegheny Energy
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Forward-Looking Statements
In addition to historical information, this
presentation contains 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 regulation
and the status of retail generation service
supply competition in states served by Allegheny
Energy's delivery business, Allegheny Power the
closing of various agreements 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 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 changes in the price of
power and fuel for electric generation general
economic and business conditions changes in
access to capital 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's competitors
changes in the weather and other natural
phenomena changes in the underlying inputs and
assumptions, including market conditions used to
estimate the fair values of commodity contracts
changes in laws and regulations applicable to
Allegheny, its markets or its activities the
loss of any significant customers and suppliers
dependence on other electric transmission and gas
transportation systems and their constraints on
availability changes in PJM, including changes
to participants 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 and registration
statements filed with the Securities and Exchange
Commission.
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Non-GAAP Financial Measures
This presentation includes non-GAAP financial
measures as defined in the Securities and
Exchange Commissions Regulation G. Where noted,
the presentation shows certain financial
information on an as adjusted basis, to exclude
the effect of certain items as described herein.
By presenting as adjusted results, management
intends to provide investors with a better
understanding of the core results and underlying
trends from which to consider past performance
and prospects for the future. Users of this
financial information should consider the types
of events and transactions for which adjustments
have been made. As adjusted information should
not be considered in isolation or viewed as a
substitute for, or superior to, net income or
other data prepared in accordance with GAAP as
measures of our operating performance or
liquidity. In addition, the as adjusted
information is not necessarily comparable to
similarly titled measures provided by other
companies. Pursuant to the requirements of
Regulation G, we have attached a table that
reconciles the non-GAAP financial measures in
this presentation to the most directly comparable
GAAP measures. The table is also available at
www.alleghenyenergy.com.
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Allegheny Energy
AlleghenyEnergy
Generation Coal-fired, PJM 48.1 million MWH
Delivery 1.5 million customers, PA-MD-WV-VA
12 months ended December 31, 2005
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Entering a Growth Phase

• Turnaround
• Restructured and
• reduced debt
• Strengthened financial reporting, internal
  controls
• Refocused on core business
• Launched high performance organization
• Returned to profitability

Growth
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Earnings Growth Drivers

• Increase Pennsylvania POLR rates
• Transition to market-based rates
• Improve plant availability
• Decrease OM expense
• Reduce interest expense

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Growth Driver Increase Pennsylvania POLR Rates
Cumulative Increase in Pre-Tax Operating Income
millions estimates
Generation Rate per MWH
8
Growth DriverTransition to Market-Based Rates
Generation Rates per MWH
Market Current
POLR Maryland, Ohio
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Growth DriverTransition to Market-Based Rates
2006 2009 State Maryland, Maryland Ohio MWH
transitioning 4.8 million 3.5 million to
market Increase in pre-tax income 90
million 60 million
Total 150 million
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Decreasing POLR Obligation
of Total Projected Output (existing contracts
only)
2006
2010
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Growth Driver Improve Plant Availability
(supercritical units)
Proforma
Actual
2008 Goal
2005
Each 1 improvement provides benefit gt10 million
Excludes extended unplanned outages at
Hatfield, Pleasants
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Achieving 91 Availability by 2008
Outage Rate (supercritical units)
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22
18
17
17
15
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Reduce planned outages
Reduce unplanned outages
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Power Plant Investment
Maintenance Spending (OM and capital millions)
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Growth DriverDecrease OM Expense
( millions)
Target
700-730
2005 775 after adjustment. 2007 Revised
target originally 700-750.
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Growth DriverReduce Interest Expense

• Reduced debt by 1.9 billion (Dec. 1, 2003 Dec.
  31, 2005)
• Refinanced approximately 2 billion in 2005
• Projected reduction in interest expense 65
  million in 2006

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Managing Risk and Limiting Exposure

• Managing regulatory/political risk
• Reducing SO2 emissions
• Contracting coal supply needs

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Exposure toSO2 Allowance Market

• SO2 Emissions
• in Excess of Allowances
• (tons estimated as of February 15, 2006)

2006 lt10,000 2007 20,000 2008 75,000
Approximately half of 2008 short position is
at Allegheny Supply and half is at Monongahela
Power.
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Reducing SO2 Emissions Action Plan
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Coal Supply Under Contract
of POLR Requirements
of Total Requirements
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Coal Costs and Usage
Average Delivered Cost/Ton (Existing contracts
only)
Usage (Tons)

• 2005 18 million
• 2006 gt19 million

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2006 Priorities

• Strong earnings growth
• Environmental stewardship
• Transmission investment
• Strengthen financial condition investment grade
  by year-end 2007

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Financial Review
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Improving Financial Results
Earnings per share diluted
As Adjusted
As Reported
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Events in Early December

• Four large units off-line from December 1 - 16
• One planned, three unplanned
• 4 to 13 days each
• Cold weather, average daily temperature 25 below
  normal
• Heavy POLR demand
• Very high PJM prices
• Highest prices of 2005
• 10 of 16 days gt 100/mwh
• Adverse impact 0.10 per share

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Increasing Free Cash Flow ( millions)
Free Cash Flow (adjusted cash from operations net
of capital expenditures)
Cash from Operations
2004 excludes OVEC proceeds and California
contract escrow release. 2005 excludes costs for
St. Joes notes redemption and convertible trust
preferred securities tender offer.
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Strengthening the Balance Sheet
Debt Outstanding ( billions year end)
Equity Ratio (year end)
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Improving Credit Statistics
Debt/EBITDA
EBITDA/Interest
Based on adjusted EBITDA and adjusted interest
for 12-month periods. Excluding securitized debt
and interest Debt/EBITDA4.3, EBITDA/interest3.0
at December 2005.
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2006 Earnings GrowthKey Drivers

• CONTRIBUTION TO PRE-TAX INCOME
• ( millions estimates)
• Pennsylvania rates 55
• Maryland transition to market 55
• Ohio territory sale 35
• Market prices positive/negative
• December 2005 adjustment 27
• Plant availability no impact
• Higher coal costs (80)
• SO2 allowance costs (10)
• Lower OM expense gt20
• Lower depreciation, capitalize OM 50
• Lower interest expense 65
• Other factors positive/negative
• 2006 vs. 2005 as adjusted

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Supplemental Information
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Earnings (Loss) Per Share

• As Reported As Adjusted
• 2003 Q1 (0.46)
  (0.32)
• Q2 (1.82) (0.23)
• Q3 (0.40) 0.11
• Q4 (0.11) (0.14)
• Year (2.80) (0.37)
• 2004 Q1 0.25 (0.03)
• Q2 (0.31) (0.21)
• Q3 (2.40) 0.37
• Q4 0.48 0.22
• Year (1.83) 0.47
• 2005 Q1 0.29
  0.39
• Q2 (0.12) 0.08
• Q3 0.21 0.45
• Q4 0.02 0.02
• Year 0.40 0.94

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EBITDA

• millions As Reported As Adjusted
• 2003 Q1 77.6
  92.9
• Q2 (203.5) 150.1
• Q3 117.3 225.3
• Q4 197.4 185.6
• Year 156.8 634.9
• 2004 Q1 247.8 175.5
• Q2 110.3 122.0
• Q3 243.2 243.2
• Q4 312.7 221.8
• Year 914.0 762.5
• 2005 Q1 261.3 261.3
• Q2 210.6 192.7
• Q3 254.7 274.2
• Q4 162.1 162.1
• Year 888.6 890.2

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The Road to Recovery
Stock Price Performance100 Invested on July 1,
2003
AYE 427
Dow Electrics 147
SP 131
2/23/2006
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Enhance Operating Performance
VISION To Be a Top Performing Utility by
Year-End 2007
Operational Excellence
Financial Performance
Customer Satisfaction
Environmental Stewardship
Shareholder Value
Engaged Employees
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Generation and MarketingOverview

• Capacity over 9,600 MW
• Primarily base load coal-fired plants
• Located in PJM (13 states)

Capacity
MWH Output
Hydro 11
Gas 1
Gas 9
Hydro 3
Oil 1
Coal 96
Coal 79
Excludes Gleason peaking unit (held for sale).
Output for year ended December 31, 2005.
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Low-Cost Generation Fleet
Allegheny has an advantaged dispatch in PJM PJM
Dispatch Cost (Ozone Season) /MWh
Oil Gas
Allegheny 951 MW
Coal
Allegheny 7,617MW
2005 Peak
Hydro
Nuclear
Allegheny 58 MW
2005 Average
Pumped Storage Allegheny 985 MW
Capacity in MW
Dispatch curve assumptions natural gas
delivered at approximately 9.00/mmBTU coal at
approximately 42.00/ton SO2 at 870/ton NOx at
2,765/ton. Expanded PJM including PJM
Traditional, PJM West, AEP, ComEd, DPL, DQE and
Virginia Power.
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Generation and MarketingPJM -- An Attractive
Market

• Worlds largest competitive power market
• 51 million people
• 700 million MWH of energy annually
• 160,000 MW of capacity
• Nations most liquid spot power market
• Model for FERCs proposed Standard Market Design
• Provides transactional flexibility contracts not
  required

Expanded PJM includes PJM Traditional, PJM West,
AEP, ComEd, DPL, DQE and Virginia Power
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Only 15 of Coal Delivered by Rail
Coal Delivery Methods 2006
Rail 15
Barge 49
Truck 21
Conveyor 15
Note Some barge coal originates on short line
railroads.
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Plant Outage DaysDecember 1-16
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PJM Prices in 2005
per MWH

Outages at 4 units
Daily average, round-the-clock, APS zone
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POLR Demand Exceeded Plant Output
Generation Shortfall and PJM Prices December
1-16, 2005
PJM Price Day-ahead APS Zone
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Delivery and ServicesOverview
Allegheny Power
West PennPower
Monongahela Power
Potomac Edison

• In 4 states (PA, WV, MD, VA)
• 1.5 million electric customers
• Load growth 2.0 compounded annually (1995-2005
  retail)

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Delivery and Services Retail Revenue Mix, 2005
By State
By Customer Class
Other 1
Residential 43
Commercial 25
Industrial 31
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Delivery and Services Competitive Rates
Residential Rates /kWh as of July 1, 2005
National Average 9.15 /kWh
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Regulatory Timeline
1 Generation rate caps include rate increases in
each year, 2006-2010. 2 One-time TD increase
can be requested through 2007. After 2007, can
request recovery of purchased power and annual
incremental TD reliability and environmental
costs, and one additional TD cost increase.