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Allegheny Files Request to Recover Purchased Power Costs in Virginia

Posted on: Wednesday, 30 April 2008, 18:00 CDT

Allegheny Energy, Inc. (NYSE: AYE) today announced that Potomac Edison Company, an Allegheny subsidiary, has filed a request with the Virginia State Corporation Commission for recovery of the cost of purchasing power for its Virginia customers.

In the filing, Potomac Edison asks for the recovery of a minimum of $73 million for the 12-month period beginning July 1, 2008. This would increase the average residential customer's electric bill approximately 29 percent. However, the company intends to develop a phase-in plan to mitigate the impact on its customers.

Potomac Edison also provided the commission with a range of alternatives that would allow the company to more fully recover the true costs of purchased power under different legal and regulatory interpretations.

"Since 2000, fuel costs have skyrocketed, yet our rates in Virginia were essentially frozen for more than seven years," said David E. Flitman, President of Allegheny Power. "As a result, we're facing a shortfall of over $100 million this year to provide generation service in Virginia. Potomac Edison is experiencing a severe and worsening cash flow problem and needs significant rate relief in 2008. Further denial of rate relief will jeopardize Potomac Edison's ability to provide safe and reliable electric service to its customers."

Since July 2007, Potomac Edison has been purchasing power at wholesale market prices to serve its Virginia customers. Due primarily to higher fuel costs, wholesale prices for electricity have risen substantially. For example, the spot prices of natural gas and coal -- two primary fuels for generating electricity -- increased by about 173 percent and 278 percent, respectively, since 2000.

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 at www.alleghenyenergy.com.

Forward-Looking Statements

In addition to historical information, this release 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: 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 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.

Source: Business Wire

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