Allegheny Energy

Investor Meeting and

Hatfield Power Station Tour

September 27-28, 2006

2

Forward-Looking StatementsIn 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 (“PLR”) 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; 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 customer switching behavior and their resulting effects on exisitng and future PLR load requirements; 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 pronouncements 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. These forward-looking statements speak only as of the date of this document. Allegheny Energy undertakes no obligation to update its forward-looking statements to reflect events or circumstances after the date of this document.

Paul Evanson

Chairman, President and Chief Executive Officer

4

Activities

TODAY

GENERATION OVERVIEWJoe Richardson

AVAILABILITY IMPROVEMENT PROGRAMLeo Rajter

QUALITY IMPROVEMENTMike Adams

Open dialogue

7:30 pm – Board bus for dinner

TOMORROW

7:00 am Check out; breakfast

7:30 Board bus

8:30 Arrive Hatfield

11:00 Depart Hatfield

12:15 pm Lunch at hotel; open dialogue

1:30 Adjourn

5

Earnings Growth Drivers

Increase Pennsylvania POLR rates

Transition to market-based rates

Improve plant availability

Decrease O&M expense

Reduce interest expense

Expand transmission system

6

$20

$25

$30

$35

$40

$45

$50

$55

2005 2006 2007 2008 2009 2010

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2006 2007 2008 2009 2010

Generation Rate$ per MWH

Cumulative Increase inPre-Tax Operating Income

$ millions; estimates

Growth Driver: Increase Pennsylvania POLR Rates

7

Growth Driver:Transition to Market-Based Rates

2006 2009

State Maryland, MarylandOhio

MWH transitioning 4.8 million 3.5 millionto market

Increase in pre-tax income $90 million $60 million

Total: $150 millionTotal: $150 million

8

91%

85%83%

76%

82%78%

83%

2002 2003 2004 2005 2008Goal

Supercritical Coal Units

Each 1% improvement provides benefit >$10 million

2006Goal

Growth Driver: Improve Plant Availability

2007Goal

9

$1,186

$985

$818$758* <$730

2002 2003 2004 2005 2006 2007

$700-730

Growth Driver:Decrease O&M Expense

Target

* 2005 = $775 after adjustment

($ millions)

10

Growth Driver:Reduce Interest Expense

Reduced debt by $2.1 billion (Dec. 1, 2003 – June 30, 2006)

Refinanced $1.5 billion in 2006 (through June 30)

Projected reduction in interest expense: $65 million in 2006

11

Growth Driver:Expand Transmission System

PJM approved ~210-mile line

Cost: over $850 million (preliminary estimate)

80% of spending in 2009-2011

In service 2011

FERC approved incentive rate treatment

12

Approved Transmission Line

MMtt.. SSttoorrmm

MMeeaaddooww BBrrooookk

LLoouuddoouunn

PPrreexxyy

550022 JJuunnccttiioonn

Existing Substation

New Substation

Existing Lines

New 500 kV Line

13

Other Growth Opportunities

Demand growing faster than capacity additions

Increasing marginal heat rate

Gas generation increasingly setting PJM prices

Tightening reserve margins

Improving capacity prices

Additional transmission investment

Joe Richardson

Chief Operating Officer - Generation

Allegheny’s Generation Fleet

HatfieldHatfield

16

96% of Output is Coal-Fired

Excludes Gleason peaking unit (held for sale). Output for year ended December 31, 2005.

Supercritical Coal79%

Gas1%

Hydro3%

Hydro11%

Gas9%

Supercritical Coal63%

Output (MWH)

Total Capacity:9,670 MW

Other Coal16%

Other Coal17%

Oil1%

Coal96%

17

Supercritical Coal Units Provide 79% of Output

CAPACITY HEAT RATESTATION (MW) SCRUBBERS SCRs (BTU/KWH)*

Harrison 1,972 Yes Yes 10,0003 units

Pleasants 1,300 Yes Yes 10,1002 units

Hatfield 1,710 Planned -- 9,9003 units

Fort Martin 1,107 Planned -- 9,6002 units

* Site average

18

Generation Priorities

Achieve 91% availability by 2008

Achieve top quartile spending

Improve environmental performance

Improve upon top quartile safety

Drive High Performance Organization

19

Achieve 91% Availability

2002 2003 2004 2005 2006 2007 2008

Outage Factor(supercritical units)

22%

24%

17% 17%

15%

9%

Reduce planned outages

Reduce unplanned outages

18%

Goal

20

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1996 1998 2000 2002 2004 2006 2008 2010

Sp

en

din

g, $

mill

ion

s

0%

2%

4%

6%

8%

10%

12%

14%

Un

pla

nn

ed

Ou

tag

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ac

tor,

%

Improving Performance, Reducing Spending

O&M and Capital*

Unplanned outage factor

High PerformanceUnder-investment Re-investment

Reduce spending

* Special maintenance O&M and capital for supercritical coal units. Excludes environmental spending.

Goal

21

Achieve Top Quartile Spending

Supercritical Spending per MWH*

$5.32

$6.98$6.38

$6.00

$4.70

2003 2004 2005 2006 Benchmark

INDUSTRY TOP QUARTILEALLEGHENY

* Base O&M, special maintenance O&M and maintenance capital

22

SO2

COST* IN REDUCTION*($ Millions) SERVICE (000 tons/yr)

Pleasants Bypass $110 2008 30

Hatfield Scrubbers ~$650 2009 145

Ft. Martin Scrubbers $500 - 550 2009 92

* Estimates

ImproveEnvironmental Performance

23

Scrubber Costs: Reasons for Increase

Site-specific challenges

Topography

Restricted construction space

Increased material handling costs

Fugitive dust constraints limit truck usage

Long pipe conveyors to disposal sites

Higher material and labor costs

24

Scrubber Status Summary

Hatfield:

Signed contracts with Babcock & Wilcox, Washington Group

Received construction permit

Fort Martin:

Seeking approval to securitize additional costs

Pending: contracts with vendors

25

Improve Environmental Performance

0

50

100

150

200

250

300

350

400

2005 2010

SO2 Emissions (thousands of tons)

70%reduction

26

3.13

2.07 1.961.66

2.67

2003 2004 2005 Benchmark20068 mos.

ALLEGHENY INDUSTRY TOP QUARTILE (COAL)

Incident Rate

Improving Safety

27

Creating a High Performance Organization

An engaged, capable workforce with increased involvement

Strengthening employees’ capabilities in key areas:

Results management

Measures, information and analysis

End-to-end process management

Leadership and people

28

Chief Operating Officer – Generation

Joseph H. Richardson

VP Supply Operations

Leo C. Rajter

VP Construction & Engineering Services

Michael V. Herriott

VP Market Optimization & Dispatch

Thomas J. Kalup

General Manager, Fuel Logistics & Operations

James H. Longacre

Regional Director– Peter J. Kotsenas

Regional Director– C. Allen McDonald

Regional Director– Kevin C. Geraghty

Regional Director– Daniel G. Shearer

Regional Director– George J. Farah

Director, Outage Planning – Anthony J. Catanese

Appointed in past 2 years

Generation Leadership

VP QualityMike Adams

Leo Rajter

Vice President, Supply Operations

30

Improving Availability: Conducting Extended Planned Outages

At all supercriticial units; 7 to 14 weeks

Hatfield Unit 3 outage underway

Key activities:

Assessing equipment condition

Inspecting and repairing boilers

Completing preventive maintenance tasks

Planning for future work

31

2005

Ft. Martin 2

COMPLETED PLANNED

Harrison 1 Harrison 3

Hatfield 1 Hatfield 3Hatfield 3

Pleasants 2

Ft. Martin 1 Hatfield 2

Harrison 2 Pleasants 1

2006 2007

Improving Availability: Conducting Extended Planned Outages

Tourtomorrow

32

Major availability projects: Replace waterwall, mixed pass panels, boiler slope

panels with laser cladding Replace reheat outlet header Replace secondary superheater inlet, outlet banks Replace horizontal reheat, reheat inlet header Core maintenance work

O&M: $16 million

Capital: $25 million

Goal: reduce unplanned outage factor from 16% to 5%

Hatfield Unit 3: Outage Scope

33

Unplanned Outage Factor Units Which Completed Extended Outages

Planned Outages: Results

6%5%

1%

6%*

13%

9%

14%

11%

Harrison #1 Ft. Martin #2 Hatfield #1 Harrison #3

5%*

12%

Average, 4 Units

Pre-outage Post-outage

* Including transformer failure: Harrison 1 = 10%, average = 6%. Post-outage average is time weighted.

34

Outage Planning Results

Supercritical Outage Days8 Months Ended August 2006

100

120

140

160

180

200

Planned Actual

Due to:

• Improved planning

• Experience

• Contractor incentives

Due to:

• Improved planning

• Experience

• Contractor incentives

$5-10 million benefit100% of planned outage scope completed

35

Strengthening Processes

Fund highest-value projects

Optimize fleet-wide outage schedule

Reduce duration of forced outages

Reduce problem resolution cycle time

Improve root cause analysis

Enhance predictive/preventive maintenance

36

Strengthening Preventive Maintenance Skills

Expanding predictive maintenance skills to know what is going to break before it breaks

Strengthening preventive maintenance program through conversion to new computerized maintenance management software

Expanding non-destructive examination of boiler components to better plan for timely replacement

Motor Thermography Scan

FL3 - 3B Condensate Pump-Special3BCP-S - M1H vs M1V

Orbit Display 06-Jun-06 15:17:02

P-PX= 7.08 P-PY= 4.84 LOAD = 100.0 RPM = 1190. (19.84 Hz)

-5 -4 -3 -2 -1 0 1 2 3 4 5

-5

-4

-3

-2

-1

0

1

2

3

4

5

M1H in Mils

M1V

in

Mil

s

Vibration Orbit Analysis

37

Hatfield Power Station:

Key Facts

In service 1969-1971

Coal delivery: barge

Coal: uses ~3.9 million tons/year

75% Northern Appalachian (primarily from PA, WV)

25% Powder River Basin

~170 employees

38

2003 2004 2005 2006 2007 2008

Outage Factor

Hatfield: Performance Improvement Opportunity

Unplanned

Planned

29%

33%

25%

18%

10%

15%

Goal

Coal Silo

Pulverizer

Water Heater

Condenser

Turbine Generator

Stack

Water Pump

Transformer

Lines

Boiler

Burner

Cooling System

Power Generation Process

Pre

cip

itat

ors

SC

Rs

Scr

ub

ber

s

Steam

40

Tour Stops and Safety Notes

Boiler

Control room

Turbine hall

Roof

Coal handling

Safety reminders:

Hardhats, safety glasses and ear protection are required inside the plant

41

Mike Adams

Vice President, Quality

42

Quality Approachand Improvement Focus

4

28

22

2004 2005 2006

Generation Improvement Teams

Reduced Planned Outages Reduce Frequency Reduce Duration

Reduced Unplanned Outages Reduce Frequency

Teams eliminating/mitigating root causes

Reduce Duration Teams with focus on reducing time

of outage

Practical application of tools and techniques

All levels of employees involved

Carefully selected/aligned teams to performance goals

Upper quartile performance in key measures

43

PrioritizingImprovement Opportunities

43%

70%

90%98% 100%

0

2

4

6

Boiler Turbine Generator Balance ofPlant

Other

0%

20%

40%

60%

80%

100%

Unplanned Outages: Cause Categories

2004 2005

Fo

rced

Ou

tag

e F

acto

r %

58%

74%

87%94%

100%

0

2

4

6

Boiler Generator Turbine Balance ofPlant

Other

0%

20%

40%

60%

80%

100%

Ou

tag

es E

xpla

ined

%

Priority: BoilerPriority: Boiler

44

PrioritizingImprovement Opportunities

Boiler: Cause Categories (2005)

60%

76%

91%96%

100%

0

1

2

3

Waterwall Superheater Reheater Other boilertube leaks

Economizer

0%

20%

40%

60%

80%

100%

Stratification and prioritization within boiler Stratification and prioritization within boiler

Fo

rced

Ou

tag

e F

acto

r %

Ou

tag

es E

xpla

ined

%

45

Reducing Durationof Tube Leak Outages

2004 2005Q1-Q2

2006

Unplanned Outages Due to Waterwall Tube Leaks

Ho

urs

per

occ

urr

ence

Reduced the average time of outage by 35%

Reducing the variation (increase predictability) of time per occurrence

Reduced the average time of outage by 35%

Reducing the variation (increase predictability) of time per occurrence

Average return time

35%

Occurrences

Q3

2006

46

Sustaining the Gains

Depth and breadth of leadership and employees Fact-based decision-making culture Robust performance management system End-to-end process management Persistent focus on continuous improvement

High performance, top performing utility Predictable upper quartile performance High performance, top performing utility Predictable upper quartile performance

Allegheny Energy