4 th Quarter Financial Results

1. 4th Quarter Financial Results February 10, 2006

2. 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; execution of restructuring activity and liquidity enhancement plans; results of litigation; financing requirements and plans to meet those requirements; demand for energy and the cost and availability of inputs; demand for products and services; capacity purchase commitments; results of operations; capital expenditures; regulatory matters; internal controls and procedures and outstanding financial reporting obligations; and stockholder rights plans. 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. Factors that could cause actual results to differ materially include, among others, the following: execution of restructuring activity and liquidity enhancement plans; complications or other factors that render it difficult or impossible to obtain necessary lender consents or regulatory authorizations on a timely basis; general economic and business conditions; changes in access to capital markets; the continuing effects of global instability, terrorism, and war; changes in industry capacity, development, and other activities by Allegheny's competitors; changes in the weather and other natural phenomena; changes in technology; changes in the price of power and fuel for electric generation; the results of regulatory proceedings, including those related to rates; changes in the underlying inputs, including market conditions, and assumptions used to estimate the fair values of commodity contracts; changes in laws and regulations applicable to Allegheny, its markets, or its activities; environmental regulations; the loss of any significant customers and suppliers; the effect of accounting policies issued periodically by accounting standard-setting bodies; additional collateral calls; and changes in business strategy, operations, or development plans. Additional risks and uncertainties are identified and discussed in Allegheny Energy's reports filed with the Securities and Exchange Commission.

3. Non-GAAP Financial Measures This presentation includes non-GAAP financial measures as defined in the Securities and Exchange Commission’s 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.

4. Paul Evanson Chairman, President and Chief Executive Officer

5. Fourth Quarter Results Earnings per Share 20052004 As reported $0.02 $0.48 As adjusted 0.02 0.22

6. Four large units off line Heavy POLR demand Very high PJM prices Adverse impact: $0.10 per share Events in Early December

7. Availability Improvement Program On Track (supercritical units) Proforma* Actual 2008 Goal 2005 * Excludes extended unplanned outages at Hatfield, Pleasants

8. Power Plant Investment Maintenance Spending ($ millions)

9. Availability Improvement Program On Track • Over 30 improvement project teams • New vice president-operations, regional plant director • Expect lower unplanned outage rate in 2006

10. Achieving 91% Availability by 2008 Outage Rate (supercritical units) 24% 22% 18% 17% 17% 15% 9% Reduce planned outages Reduce unplanned outages

11. 2005 Accomplishments:Earnings Growth Earnings per Share 20052004 As reported $0.40 ($1.83) As adjusted 0.94 0.47

12. 2005 Accomplishments: Completed Asset Sales • West Virginia gas assets • Wheatland generating facility • Ohio service territory

13. 2005 Accomplishments:Reduced Debt • $1.9 billion since Dec. 1, 2003 • $919 million in 2005 • Refinanced nearly $2 billion • Improved credit ratings; one step below investment grade

14. 2005 Accomplishments:Controlled Costs • Reduced O&M by nearly $40 million • Outsourced information technology functions • On track to achieve O&M target of $700-750 million

15. 2005 Accomplishments:Improved Service Reliability Service Unavailability (average minutes without power)

16. 2005 Accomplishments:Managed Transition to Market • Pennsylvania rate cap extensions/increases approved • Won supply contracts in Pennsylvania, Maryland • Contracted 95% of 2006 generation

17. 2005 Accomplishments:Contracted Coal Supplies • Contracted POLR requirements through 2008 • Announced development of coal reserves

18. 2005 Accomplishments:Environmental Stewardship • West Virginia securitization legislation approved • Expect PSC decision by early April

19. Strong earnings growth Environmental stewardship 2006 Priorities

20. Strong earnings growth Environmental stewardship Transmission investments Strengthen financial condition; investment grade by year-end 2007 2006 Priorities

21. Jeffrey Serkes Senior Vice President and Chief Financial Officer

22. Financial Results3 Months Ended December 31 ($ millions except EPS)

23. Financial Results3 Months Ended December 31 ($ millions except EPS)

24. Adjustments3 Months Ended December 31 ($ millions, pre-tax) 2005 2004 OVEC gain --- ($95) Financing costs --- 9 Severance --- 4

25. Adjusted Income FromContinuing Operations3 Months Ended December 31 $ millions Diluted EPS

26. EBITDA From Continuing Operations3 Months Ended December 31 ($ millions) As reported As adjusted

27. EBITDA From Continuing OperationsYear Ended December 31 ($ millions) As reported As adjusted

28. Plant Outage DaysDecember 1-16

29. PJM Prices in 2005 $ per MWH* Outages at 4 units * Daily average, round-the-clock, APS zone

30. POLR Demand Exceeded Plant Output Generation Shortfall and PJM Prices December 1-16, 2005 PJM Price: Day-ahead APS Zone

31. ($ millions) Better 2005 2004(Worse) Total operating revenues $724 $688 $36 Financial Results 3 Months Ended December 31

32. Key Drivers of Revenue Increase 3 Months Ended December 31 ($ millions) Better (Worse) Maryland: market-based rates $39 Ohio: Supply contract expiration 22 Increased plant output 18

33. 2005 2004 Plant Output Up 2.6% Despite Outages (MWH millions)

34. 2005 2004 Utility MWH Sales Up 2.6% from 4th Quarter 2004 (MWH millions)

35. Key Drivers of Revenue Increase 3 Months Ended December 31 ($ millions) Better (Worse) Maryland: market-based rates $39 Ohio: Supply contract expiration 22 Increased plant output 18 Customer growth 9 PJM purchases, higher market prices (50) All other (2) TOTAL INCREASE IN REVENUES $36

36. ($ millions) Better 2005 2004(Worse) Total operating revenues $724 $688 $36 Operating expenses 650 457 (193) Operating income $ 74 $231 ($157) Key factors - operating expenses: OVEC gain ($95) Fuel, purchased power, deferred energy (80) O&M (17) Financial Results 3 Months Ended December 31

37. Operating Expense3 Months Ended December 31 ($ millions) Better 2005 2004(Worse) Fuel and deferred energy $188 $147 ($41) Key factors: • Higher coal costs ($29) • Higher gas costs (6)

38. Coal cost increased ~$5/ton Burned ~300,000 more tons Coal plant output increased 437,000 MWH Increased output from lower-margin subcritical units Increased Coal Costs

39. Coal Plant Output3 Months ended December 31 (MWH millions)

40. Operating Expense3 Months Ended December 31 ($ millions) Better 2005 2004(Worse) Fuel and deferred energy $188 $147 ($41) Purchased power 121 82 (39) TOTAL $309 $229 ($80) Key factors: • Higher coal costs ($29) • Higher gas costs (6) • Purchased power, MD and OH (35)

41. O&M Expense 4th Quarter 2005 Year-to-Year Better/(Worse) $ millions ($19) Increased special maintenance (9) Snowstorm 6 Lower outside services 4 Severance costs in 2004 1 All other ($17) TOTAL INCREASE IN O&M EXPENSE

42. Operating Expense3 Months Ended December 31 ($ millions) Better 2005 2004(Worse) Fuel, purchased power, deferred energy $309 $229 ($80) Operations and maintenance 212 195 (17) Depreciation and amortization 78 77 (1) Taxes other than income taxes 52 51 (1) Ohio/OVEC sales (1) (95) (94) TOTAL OPERATING EXPENSE $650 $457 ($193)

43. Reduced Interest Expense 3 Months Ended December 31 ($ millions) Better 2005 2004(Worse) Operating income $74 $231 ($157) Interest expense: As reported 71 100 Financing costs --- (9) As adjusted $71 $91 $20 Key factors – interest expense: • Lower debt balance • Lower rates

44. Strengthening the Balance Sheet Debt Outstanding ($ billions; year end) Equity Ratio (year end)

45. Improving Credit Statistics Debt/EBITDA* EBITDA/Interest* 9.0 >4.0 6.5 2.8 4.6 2.0 <3.5 1.5 Dec. Dec. Dec. Target Dec. Dec. Dec. Target 2003 2004 2005 2003 2004 2005 * Based on adjusted EBITDA and adjusted interest for 12-month periods. Excluding securitized debt and interest: Debt/EBITDA = 4.3, EBITDA/Interest = 3.0 at December 2005.

46. Effective tax rate = 77% Includes $7 million charge Charge reduced EPS by $0.04 Income Taxes, Q4 2005

47. Income, Continuing Operations 3 Months Ended December 31 Better 2005 2004(Worse) As reported: - $ millions $3 $81 ($78) - Per share 0.02 0.53 (0.51) As adjusted: per share 0.02 0.22 (0.20)

48. Cash FlowPeriods ending December 31, 2005 ($ millions) 3 Months12 Months Net cash from operations: As reported $153 $486 As adjusted* --- 563 Capital expenditures (102) (306) FREE CASH FLOW $51 $257 * Excludes costs for St. Joe’s senior notes redemption and convertible trust preferred securities tender offer.

49. Increasing Free Cash Flow ($ millions) Adjusted Cash from Operations net of Capital Expenditures

50. 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 O&M expense >20 Lower depreciation, capitalize O&M >50 Lower interest expense 65 Other factors positive/negative * 2006 vs. 2005 as adjusted 2006 Earnings Growth:Key Drivers