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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27858; 70-8553)

Allegheny Energy, Inc.

Supplemental Order Authorizing the Issuance of Common Stock Through an Employee Stock Ownership and Savings Plan

June 17, 2004

Allegheny Energy, Inc. ("Allegheny"), a registered holding company, Hagerstown, Maryland, has filed with the Securities and Exchange Commission ("Commission") a post-effective amendment under sections 6(a) and 7 of the Public Utility Holding Company Act of 1935, as amended ("Act") and rule 54 under the Act. The Commission issued a notice concerning this post-effective amendment on March 6, 2003 (Holding Co. Act Release No. 27657).

By prior orders dated September 14, 1990 (Holding Co. Act Release No. 25150), March 17, 1987 (Holding Co. Act Release No. 24344), June 19, 1984 (Holding Co. Act Release No. 23333), June 23, 1983 (Holding Co. Act Release No. 22985), April 29, 1980 (Holding Co. Act Release No. 21542), and August 5, 1977 (Holding Co. Act Release No. 20131), the Commission authorized Allegheny to issue and sell up to 12 million shares of its common stock through its Employee Stock Ownership and Savings Plan ("ESOSP")1 and Dividend Reinvestment and Stock Purchase Plan ("DRISP").2 By order dated March 22, 1995 (Holding Co. Act Release No. 26255), the Commission also authorized Allegheny to issue up to an additional 6.025 million shares of its common stock: (1) through the ESOSP; (2) through the DRISP; and (3) to members of Allegheny's board of directors that are not (during their terms of service as a director) employees of Allegheny or any of its subsidiaries.

Under the authority granted by the prior orders, Allegheny has already issued all of the common stock that it was authorized to through the DRISP3, and it may issue only approximately 4,000 shares of its common stock through the ESOP. Now, Allegheny requests authority to issue through December 31, 2008 up to an additional 5 million shares its common stock as follows under the ESOSP.

Under its charter, Allegheny may issue up to 260 million shares of its common stock. As of April 30, 2004, 126,969,238 shares of its common stock were outstanding.

Allegheny does not satisfy the requirements of rule 53(a)(1). As of March 31, 2004, Allegheny's aggregate investment in exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs") was approximately $235 million, which was more than 50% of its consolidated retained earnings.4 By order dated December 31, 2001 (Holding Co. Act Release No. 27486, "Original Financing Order"), the Commission authorized Allegheny to invest up to $2 billion in EWGs and FUCOs.

Allegheny is no longer in compliance with the conditions set forth in the Original Financing Order. By subsequent order dated February 21, 2003 (Holding Co. Act Release No. 27652), the Commission authorized Allegheny to make additional investments in EWGs to the extent necessary to complete any project or desirable to preserve or enhance the value of Allegheny's investments or in connection with the qualification of an existing project as an EWG, as long as certain revised financing conditions were met. One of those revised financing conditions is that Allegheny must maintain a common equity ratio of at least 28%. As of March 31, 2004, Allegheny's common equity ratio is 21.6%. Consequently, Allegheny is no longer able to make any investments in EWGs and FUCOs, without further authorization from the Commission.

Allegheny currently complies with, and will comply with, rule 53(a)(2), rule 53(a)(3) and rule 53(a)(4). None of the circumstances described in rule 53(b)(1) have occurred. The circumstances described in rule 53(b)(2) and rule 53(b)(3) have occurred.

Allegheny submits that the requirements of rule 53(c) are met. The company believes that the requested authorization will not have a substantial adverse impact upon the financial integrity of Allegheny or West Penn Power Company ("West Penn"), The Potomac Edison Company ("Potomac Edison"), Monongahela Power Company ("Monongahela" and collectively, "Operating Companies"). It also states that it will maintain the ratios of common equity to total capitalization of each of the Operating Companies at not less than 30%.5 The common equity ratios of the Operating Companies will not be affected by the proposed transactions.

Applicants state that no more than $10,000 in fees, commissions, and expenses will be incurred in connection with the proposed transactions.

Applicants state that no State or federal commission, other than this Commission, has jurisdiction over the proposed transaction.

IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that the post-effective amendment is permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.


Margaret H. McFarland
Deputy Secretary


Endnotes


http://www.sec.gov/divisions/investment/opur/filing/35-27858.htm

Modified: 06/22/2004