800 Cabin Hill Drive, Greensburg, PA 15601-1689

Media, contact:
Fred Solomon
Manager, Corporate Communications
Phone: (724) 838-6650
Media Hotline: (888)233-3583
E-Mail: fsolomo@alleghenyenergy.com Investor contact:
Max Kuniansky
Executive Director, Investor Relations
  and Corporate Communications
Phone: (724) 838-6895
E-Mail: mkunian@alleghenyenergy.com

FOR IMMEDIATE RELEASE

Allegheny Energy Reports Second Quarter 2005 Results

GREENSBURG, Pa., July 28, 2005 — Allegheny Energy, Inc. (NYSE: AYE) today announced a consolidated net loss of $18.4 million, or $0.12 per diluted share, for the second quarter of 2005, compared with a net loss of $39.5 million, or $0.31 per diluted share, for the same period in 2004.

To provide a better understanding of core results and trends, Allegheny Energy also reported adjusted financial results, which are non-GAAP financial measures. Adjusted net income from continuing operations was $12.7 million, or $0.08 per diluted share, for the second quarter of 2005. The adjusted 2005 results exclude costs of $47.2 million (pre-tax) related to an April 2005 tender offer for the company’s 11 7/8% convertible trust preferred securities, $11.2 million (pre-tax) received from a former trading executive’s forfeited assets and insurance proceeds of $6.7 million (pre-tax) related to the 2004 extended outage at the Hatfield’s Ferry power station. Also excluded is a $12.3 million after-tax loss from discontinued operations.

For the second quarter of 2004, the adjusted net loss from continuing operations was $26.2 million, or $0.21 per diluted share. The 2004 adjusted results exclude a loss of $11.7 million (pre-tax) on the release of gas pipeline capacity and a $6.6 million after-tax loss from discontinued operations. A reconciliation of these non-GAAP financial measures to results reported in accordance with GAAP is attached to this release.

“Our core operations delivered solid results for the second quarter,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. “We also made progress in refinancing and reducing debt, signing new coal supply agreements, and completing the Pennsylvania generation bidding process. With these accomplishments and our other initiatives, we are on track to deliver significant earnings growth for 2005 and beyond.”

Second Quarter Consolidated Results

Income from continuing operations before income taxes and minority interest was $3.8 million for the second quarter of 2005, an increase of $61.3 million compared with the same period in 2004. Key factors contributing to the improved results include:

• Operating revenues increased by $105.7 million compared to the same period in 2004, largely as a result of improved performance at the power stations, the inception of market-based rates in Maryland and growth in the number of customers. Second quarter 2004 results were adversely affected by unplanned outages at the Pleasants and Hatfield's Ferry power stations.

1

•
Fuel, purchased power and transmission expense increased by $53.4 million, reflecting higher coal prices, increased coal consumption due to improved plant performance, and increased power purchases related to the inception of market-based rates in Maryland.

•
Operations and maintenance expense decreased by $32.0 million, primarily as a result of the timing and level of spending for special maintenance at power plants, lower costs for outside services and the receipt of insurance proceeds previously mentioned.

•
Other income increased by $16.6 million due primarily to the cash received from a former trading executive, as noted above.

•
Interest expense increased by $37.2 million due to costs associated with the tender offer previously mentioned. Excluding the tender offer costs, interest expense decreased by $10.0 million, reflecting benefits from debt reduction and debt refinancing.

The effective tax rate for the second quarter of 2005 was affected by adjustments related to certain state tax law changes and the anticipated filing of amended state tax returns for 2003 resulting from expected changes in the company's 2003 federal tax return.

Unplanned outages at the Pleasants and Hatfield’s Ferry power stations in the second quarter 2004 adversely affected that period’s results by approximately $59 million (pre-tax), consisting primarily of lost revenues net of fuel cost savings.

Adjusted earnings from continuing operations before interest, taxes, depreciation and amortization (adjusted EBITDA) for the second quarter of 2005 were $192.7 million, a $70.7 million increase from the second quarter of 2004. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of EBITDA to GAAP financial measures and details on the calculation of EBITDA, see the reconciliation of non-GAAP financial measures attached to this release.

Second Quarter Segment Results

Delivery and Services: The Delivery and Services segment reported income from continuing operations of $16.9 million for the second quarter of 2005, a decrease of $8.5 million compared to the same quarter of the prior year. Kilowatt-hour sales increased by 0.6 percent, and operating revenues increased by $4.6 million, reflecting growth in the number of customers and higher prices, partly offset by milder weather compared to the same period in 2004. Cooling degree-days for the second quarter of 2005 were 1 percent lower than the prior year, and 30 percent above normal. The inception of market-based rates in Maryland affected both revenues and purchased power. Purchased power cost increased by $11.9 million. Interest expense increased by $14.9 million, reflecting the tender offer costs (previously mentioned) allocated to the segment. Other income increased by $4.2 million, while income taxes decreased by $10.4 million.

Generation and Marketing: The Generation and Marketing segment reported a loss from continuing operations of $23.0 million for the second quarter of 2005. For the same period in the prior year, the segment reported a loss from continuing operations of $58.2 million, reflecting the unplanned outages at Pleasants and Hatfield’s Ferry. Power plant output increased by 8.1 percent and revenues increased by $84.0 million. Fuel costs increased by $25.0 million due to increased plant output and higher coal prices. Operations and maintenance expenses decreased by $33.1 million, reflecting the shift in the level and timing of spending for special plant maintenance and the insurance proceeds previously mentioned. Other income increased $12.6 million, largely as a result of cash received from the forfeited assets of a former trading executive. Interest expense increased by $22.5 million due to tender offer costs (mentioned above) allocated to the segment. Income taxes increased $44.1 million.

2

Discontinued Operations: For the second quarter of 2005, Allegheny Energy reported an after-tax loss of $12.3 million on discontinued operations, compared to a loss of $6.6 million in the same quarter of the prior year. The 2005 results reflect a net impairment charge of $8.9 million (after-tax) on the West Virginia natural gas operations and Allegheny Energy’s Midwest generating facilities, as well as the operating performance of those assets.

Six-Month Consolidated Results

For the first six months of 2005, Allegheny reported consolidated net income of $24.2 million, or $0.16 per diluted share, as compared to a net loss of $6.2 million, or $0.05 per diluted share, for the first six months of 2004.

Results for the first half of 2004 were significantly affected by the previously mentioned outages at the Pleasants and Hatfield’s Ferry power stations. A summary of six-month results by business segment is included in the attached financial tables.

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 better 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 are 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 comment further on these results in an investor conference call at 9:30 a.m. Eastern Time on Friday, July 29, 2005. To listen to a live Internet broadcast of the call, visit www.alleghenyenergy.com. A taped replay of the call will be available after the live broadcast.

Allegheny Energy

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

3

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: 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; 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 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 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.

-###-

4

ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2005			2004			2005			2004
Operating revenues	$	714,650		$	608,995		$	1,468,680		$	1,344,345
Operating expenses:
Fuel consumed in electric generation		166,139			141,092			340,026			302,804
Purchased power and transmission		108,243			79,877			213,065			160,890
Deferred energy costs, net		(1,805	)		1,209			(619	)		2,123
Operations and maintenance		200,906			232,852			363,583			433,642
Depreciation and amortization		77,358			74,850			153,769			147,837
Taxes other than income taxes		51,738			48,928			106,796			98,113
Total operating expenses		602,579			578,808			1,176,620			1,145,409
Operating income		112,071			30,187			292,060			198,936
Other income and expenses, net		21,234			4,629			26,487			12,483
Interest expense and preferred dividends:
Interest expense		128,277			91,036			254,071			210,866
Preferred dividends of subsidiary		1,260			1,260			2,519			2,519
Total interest expense and preferred dividends		129,537			92,296			256,590			213,385
Income (loss) from continuing operations before income
taxes and minority interest
		3,768			(57,480	)		61,957			(1,966	)
Income tax expense (benefit) from continuing operations		9,815			(23,948	)		33,191			(930	)
Minority interest in net income (loss) of subsidiaries		52			(720	)		467			1,139
(Loss) income from continuing operations		(6,099	)		(32,812	)		28,299			(2,175	)
Loss from discontinued operations, net of tax		(12,308	)		(6,644	)		(4,064	)		(4,003	)
Net (loss) income	$	(18,407	)	$	(39,456	)	$	24,235		$	(6,178	)
Basic weighted average common shares outstanding		156,730,744			126,971,447			147,127,707			126,970,373
Diluted weighted average common shares outstanding		156,730,744			126,971,447			150,276,429			126,970,373
Basic (loss) income per common share:
(Loss) income from continuing operations	$	(0.04	)	$	(0.26	)	$	0.19		$	(0.02	)
Loss from discontinued operations, net		(0.08	)		(0.05	)		(0.03	)		(0.03	)
Net (loss) income per common share	$	(0.12	)	$	(0.31	)	$	0.16		$	(0.05	)
Diluted (loss) income per common share:
(Loss) income from continuing operations	$	(0.04	)	$	(0.26	)	$	0.19		$	(0.02	)
Loss from discontinued operations, net		(0.08	)		(0.05	)		(0.03	)		(0.03	)
Net (loss) income per common share	$	(0.12	)	$	(0.31	)	$	0.16		$	(0.05	)

5

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

(In thousands)	June 30, 2005			December 31, 2004
ASSETS
Current Assets:
Cash and cash equivalents	$	185,790		$	189,482
Accounts receivable:
Customer		182,063			164,666
Unbilled utility revenue		137,872			145,498
Wholesale and other		50,078			32,966
Allowance for uncollectible accounts		(16,373	)		(19,854	)
Materials and supplies		99,565			100,054
Fuel		85,002			61,812
Deferred income taxes		63,662			44,590
Prepaid taxes		50,929			46,900
Assets held for sale		108,131			150,031
Collateral deposits		105,819			88,708
Commodity contracts		9,364			13,523
Restricted funds		22,295			228,857
Regulatory assets		39,120			37,626
Other		13,093			20,273
Total current assets		1,136,410			1,305,132
Property, Plant and Equipment, net:
Generation		5,692,267			5,695,851
Transmission		1,029,692			1,015,751
Distribution		3,439,574			3,366,217
Other		462,924			463,515
Accumulated depreciation		(4,426,279	)		(4,341,282	)
Subtotal		6,198,178			6,200,052
Construction work in progress		89,593			102,966
Total property, plant and equipment, net		6,287,771			6,303,018
Investments and Other Assets:
Assets held for sale		316,103			340,457
Goodwill		367,287			367,287
Investments in unconsolidated affiliates		28,835			29,991
Intangible assets		33,010			33,215
Other		46,147			46,628
Total investments and other assets		791,382			817,578
Deferred Charges:
Commodity contracts		1,817			3,667
Regulatory assets		553,945			562,843
Other		46,195			52,902
Total deferred charges		601,957			619,412
Total Assets	$	8,817,520		$	9,045,140

6

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

(In thousands)	June 30, 2005			December 31, 2004
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year	$	384,953		$	385,142
Accounts payable		201,760			223,584
Accrued taxes		89,764			112,866
Commodity contracts		47,102			40,835
Accrued interest		99,305			61,726
Liabilities associated with assets held for sale		47,472			37,471
Other		149,519			144,082
Total current liabilities		1,019,875			1,005,706
Long-term Debt		3,971,835			4,540,764
Deferred Credits and Other Liabilities:
Commodity contracts		46,307			56,501
Investment tax credit		80,136			83,307
Deferred income taxes		679,944			635,374
Obligations under capital leases		20,110			23,788
Regulatory liabilities		462,517			453,913
Adverse power purchase commitment		192,801			201,377
Liabilities associated with assets held for sale		89,295			89,356
Other		489,107			505,620
Total deferred credits and other liabilities		2,060,217			2,049,236
Minority Interest		22,085			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,      162,713,281 and 137,430,137 shares issued, and 162,663,788 and 137,380,644      shares outstanding at June 30, 2005 and December 31, 2004, respectively		203,392			171,788
Other paid-in capital		1,869,953			1,600,215
Retained deficit		(283,455	)		(307,690	)
Treasury stock		(1,756	)		(1,756	)
Accumulated other comprehensive loss		(118,626	)		(108,741	)
Total common stockholders' equity		1,669,508			1,353,816
Total Liabilities and Stockholders' Equity	$	8,817,520		$	9,045,140

7

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

	Three months ended June 30, 2005												Three months ended June 30, 2004
(In millions)	Delivery and Services			Generation and Marketing			Eliminations			Total			Delivery and Services			Generation and Marketing			Eliminations			Total
Operating revenues	$	663.2		$	404.5		$	(353.0	)	$	714.7		$	658.6		$	320.5		$	(370.1	)	$	609.0
Fuel consumed in electric generation		--			(166.1	)		--			(166.1	)		--			(141.1	)		--			(141.1	)
Purchased power and transmission		(436.0	)		(23.2	)		350.9			(108.3	)		(424.1	)		(23.5	)		367.7			(79.9	)
Deferred energy costs, net		1.8			--			--			1.8			(1.2	)		--			--			(1.2	)
Operations and maintenance		(99.7	)		(103.3	)		2.1			(200.9	)		(98.9	)		(136.4	)		2.4			(232.9	)
Depreciation and amortization		(39.0	)		(38.4	)		--			(77.4	)		(36.6	)		(38.2	)		--			(74.8	)
Taxes other than income taxes		(31.4	)		(20.3	)		--			(51.7	)		(30.7	)		(18.2	)		--			(48.9	)
Operating income (loss)		58.9			53.2			--			112.1			67.1			(36.9	)		--			30.2
Other income and expenses, net		8.5			12.9			(0.2	)		21.2			4.3			0.3			--			4.6
Interest expense and preferred dividends		(47.3	)		(82.4	)		0.2			(129.5	)		(32.4	)		(59.9	)		--			(92.3	)
Income (loss) from continuing operations before
income taxes and minority interest		20.1			(16.3	)		--			3.8			39.0			(96.5	)		--			(57.5	)
Income tax (expense) benefit from continuing operations		(3.2	)		(6.6	)		--			(9.8	)		(13.6	)		37.5			--			23.9
Minority interest		--			(0.1	)		--			(0.1	)		--			0.8			--			0.8
Income (loss) from continuing operations		16.9			(23.0	)		--			(6.1	)		25.4			(58.2	)		--			(32.8	)
Loss from discontinued operations, net of tax		(6.5	)		(5.8	)		--			(12.3	)		(1.2	)		(5.5	)		--			(6.7	)
Net income (loss)	$	10.4		$	(28.8	)	$	--		$	(18.4	)	$	24.2		$	(63.7	)	$	--		$	(39.5	)

	Six months ended June 30, 2005												Six months ended June 30, 2004
(In millions)	Delivery and Services			Generation and Marketing			Eliminations			Total			Delivery and Services			Generation and Marketing			Eliminations			Total
Operating revenues	$	1,402.6		$	821.4		$	(755.3	)	$	1,468.7		$	1,379.9		$	742.8		$	(778.4	)	$	1,344.3
Fuel consumed in electric generation		--			(340.0	)		--			(340.0	)		--			(302.8	)		--			(302.8	)
Purchased power and transmission		(921.1	)		(43.0	)		751.0			(213.1	)		(892.6	)		(41.6	)		773.3			(160.9	)
Deferred energy costs, net		0.6			--			--			0.6			(2.1	)		--			--			(2.1	)
Operations and maintenance		(184.2	)		(183.6	)		4.3			(363.5	)		(204.7	)		(234.1	)		5.1			(433.7	)
Depreciation and amortization		(77.1	)		(76.7	)		--			(153.8	)		(73.7	)		(74.1	)		--			(147.8	)
Taxes other than income taxes		(66.0	)		(40.8	)		--			(106.8	)		(63.8	)		(34.3	)		--			(98.1	)
Operating income		154.8			137.3			--			292.1			143.0			55.9			--			198.9
Other income and expenses, net		12.2			14.6			(0.3	)		26.5			11.5			1.0			--			12.5
Interest expense and preferred dividends		(77.0	)		(179.8	)		0.2			(256.6	)		(65.6	)		(147.8	)		--			(213.4	)
Income (loss) from continuing operations before
income taxes and minority interest		90.0			(27.9	)		(0.1	)		62.0			88.9			(90.9	)		--			(2.0	)
Income tax (expense) benefit from continuing   operations		(23.4	)		(9.8	)		--			(33.2	)		(35.5	)		36.4			--			0.9
Minority interest		--			(0.5	)		--			(0.5	)		--			(1.1	)		--			(1.1	)
Income (loss) from continuing operations		66.6			(38.2	)		(0.1	)		28.3			53.4			(55.6	)		--			(2.2	)
Income (loss) from discontinued operations, net of tax		4.3			(8.5	)		0.1			(4.1	)		9.8			(13.8	)		--			(4.0	)
Net income (loss)	$	70.9		$	(46.7	)	$	--		$	24.2		$	63.2		$	(69.4	)	$	--		$	(6.2	)

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

THREE MONTHS ENDED JUNE 30, 2005	INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST			NET (LOSS) INCOME			DILUTED (LOSS) INCOME PER SHARE
Calculation of Adjusted Income (Loss):
Income (Loss) - GAAP basis	$	3.8		$	(18.4	)	$	(0.12	)
Adjustments:
Loss from discontinued operations1					12.3
Expense related to conversion of trust preferred securities2		47.2			29.8
Cash receipt from former trading executive's forfeited assets3		(11.2	)		(6.9	)
Receipt of Hatfield power station insurance proceeds4		(6.7	)		(4.1	)
Adjusted Income	$	33.1		$	12.7		$	0.08
Calculation of Adjusted EBITDA:
Net Loss - GAAP basis				$	(18.4	)
Loss from discontinued operations					12.3
Interest expense and preferred dividends					129.5
Income tax expense					9.8
Depreciation and amortization					77.4
EBITDA from continuing operations					210.6
Cash receipt from former trading executive's forfeited assets					(11.2	)
Receipt of Hatfield power station insurance proceeds					(6.7	)
Adjusted EBITDA from continuing operations				$	192.7

THREE MONTHS ENDED JUNE 30, 2004	LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST			NET LOSS			DILUTED LOSS PER SHARE
Calculation of Adjusted Loss:
Loss - GAAP basis	$	(57.5	)	$	(39.5	)	$	(0.31	)
Adjustments:
Loss from discontinued operations					6.6
Loss on release of gas pipeline capacity5		11.7			6.7
Adjusted Loss	$	(45.8	)	$	(26.2	)	$	(0.21	)
Calculation of Adjusted EBITDA:
Net Loss - GAAP basis				$	(39.5	)
Loss from discontinued operations					6.6
Interest expense and preferred dividends					92.3
Income tax benefit					(24.0	)
Depreciation and amortization					74.9
EBITDA from continuing operations					110.3
Loss on release of gas pipeline capacity					11.7
Adjusted EBITDA from continuing operations				$	122.0

FOOTNOTES:

1	This amount includes a net after-tax charge of $8.9 million relating to adjustments to the carrying values of assets held-for-sale.
2	This amount is included in Interest expense on the Consolidated Statement of Operations.
3	This amount is included in Other income 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 Purchased power and transmission on the Consolidated Statement of Operations.

10

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

SIX MONTHS ENDED JUNE 30, 2005	INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST			NET INCOME			DILUTED INCOME PER SHARE
Calculation of Adjusted Income:
Income - GAAP basis	$	62.0		$	24.2		$	0.16
Adjustments:
Loss from discontinued operations1					4.1
Interest expense related to Merrill Lynch summary judgment2		38.5			24.3
Expense related to conversion of trust preferred securities3		47.2			29.8
Cash receipt from former trading executive's forfeited assets4		(11.2	)		(6.9	)
Receipt of Hatfield power station insurance proceeds5		(6.7	)		(4.1	)
Adjusted Income	$	129.8		$	71.4		$	0.48
Calculation of Adjusted EBITDA:
Net Income - GAAP basis				$	24.2
Loss from discontinued operations					4.1
Interest expense and preferred dividends					256.6
Income tax expense					33.2
Depreciation and amortization					153.8
EBITDA from continuing operations					471.9
Cash receipt from former trading executive's forfeited assets					(11.2	)
Receipt of Hatfield power station insurance proceeds					(6.7	)
Adjusted EBITDA from continuing operations				$	454.0

SIX MONTHS ENDED JUNE 30, 2004	LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST			NET LOSS			DILUTED LOSS PER SHARE
Calculation of Adjusted Loss:
Loss - GAAP basis	$	(2.0	)	$	(6.2	)	$	(0.05	)
Adjustments:
Loss from discontinued operations					(4.0	)
Gain on California contract escrow release 6		(68.1	)		(39.2	)
Write-off of 2003 financing costs 3		14.1			8.1
Gain on land sale, New York office space charge, net 7		(4.2	)		(2.4	)
Loss on release of gas pipeline capacity 8		11.7			6.7
Adjusted Loss9	$	(48.5	)	$	(29.0	)	$	(0.23	)
Calculation of Adjusted EBITDA:
Net Loss - GAAP basis				$	(6.2	)
Loss from discontinued operations					4.0
Interest expense and preferred dividends					213.4
Income tax benefit					(0.9	)
Depreciation and amortization					147.8
EBITDA from continuing operations					358.1
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 operations9				$	297.5

FOOTNOTES:

1	This amount includes a net after-tax charge of $9.5 million relating to adjustments to the carrying values of assets held-for-sale.
2	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 an additional $2.8 million of interest accrued in the second quarter.
3	These amounts are included in Interest expense on the Consolidated Statements of Operations.
4	This amount is included in Other income on the Consolidated Statement of Operations.
5	This amount is included in Operations and maintenance expense on the Consolidated Statement of Operations.
6	This amount is included in Operating revenues on the Consolidated Statement of Operations.
7	These amounts are included in Operations and maintenance expense and Other income, net, on the Consolidated Statement of Operations.
8	This amount is included in Purchased power and transmission on the Consolidated Statement of Operations.
9	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).

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

ADJUSTED INTEREST EXPENSE AND PREFERRED DIVIDENDS	THREE MONTHS ENDED JUNE 30, 2005			THREE MONTHS ENDED JUNE 30, 2004
Interest expense and preferred dividends of subsidiary:
As reported	$	129.5		$	92.3
Expense related to conversion of trust preferred securities		(47.2	)		--
As Adjusted	$	82.3		$	92.3

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Allegheny Energy, Inc. and Subsidiaries
Operating Statistics

Unaudited
Three Months Ended June 30,

	2005		2004		Change
Delivery and Services:
Electricity sales (million kWh, including wholesale)		11,369		11,300		+0.6%
Usage per customer (kWh):
Residential		2,596		2,614		-0.7%
Commercial		14,738		14,751		-0.1%
Industrial		190,797		192,836		-1.1%
Natural gas sales (Mmcf)		3,430		3,229		+6.2%
Generation and Marketing:
Generation (million kWh)		11,052		10,218		+8.2%

Unaudited
Six Months Ended June 30,

	2005		2004		Change
Delivery and Services:
Electricity sales (million kWh, including wholesale)		23,869		23,687		+0.8%
Usage per customer (kWh):
Residential		6,169		6,169		-0.4%
Commercial		29,678		29,485		+0.7%
Industrial		374,899		378,563		-1.0%
Natural gas sales (Mmcf)		16,086		17,520		-8.2%
Generation and Marketing:
Generation (million kWh)		23,349		22,449		+4.0%

14