Allegheny Power Completes Fourth Auction for Post-2010 Electricity Supply in Pennsylvania

Allegheny Power, the electricity delivery unit of Allegheny Energy, Inc. (NYSE: AYE), announced today that the Pennsylvania Public Utility Commission approved the results of Allegheny’s fourth auction to purchase power for its customers for 2011 and beyond.

Generation rate caps in Pennsylvania expire on December 31, 2010. Allegheny now has contracts for 67 percent of the generation supply needed to serve its residential customers next year. If the average prices of the remaining auctions were to be the same as the average of the first four auctions, a typical Pennsylvania residential customer’s bill in 2011 would increase $7.74, or 8.5 percent over 2010 levels, assuming usage of 1,000 kilowatt-hours (KWh) per month.

For small and mid-sized non-residential customers, the typical increase in rates in 2011 would be even less – just 0.6 percent and 2.0 percent, respectively, assuming consistent results in future auctions. Allegheny Power has now purchased nearly half of the generation supply needed for these customers in 2011. Actual rates will not be available until all supply purchases are completed and prices are averaged together.

“We continue to anticipate a smooth transition to market-based rates for our customers,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. “We now have two-thirds of next year’s residential power needs under contract at attractive pricing. As a result, our customers can expect only a modest increase in their bills when the generation rate caps expire.”

Seven contracts were awarded in this auction, representing approximately 2.5 million megawatt-hours (MWh) of generation supply, or eight percent of the auction purchases authorized by the Commission for periods following the rate cap expiration. The results of the auction were:

For residential customers:

One 17-month contract
One 29-month contract
Average weighted retail generation price: $62.27/MWh
For non-residential customers:

Four 17-month contracts
One 29-month contract
Average weighted retail generation price: $65.26/MWh
Included in the average weighted retail generation pricing are energy, capacity, Pennsylvania gross receipts taxes, line losses, renewable energy requirements, ancillary services and other provisions. The contracts awarded today begin on January 1, 2011.

The winning suppliers were selected from among eight competitive bidders. An independent monitoring firm, Boston Pacific Company, Inc., oversaw the process for Allegheny Power. Four more auctions are scheduled: two in 2010 and two in 2012. The multiple auctions are designed to shield customers against overexposure to market conditions at any single point in time.

Allegheny has a Commission-approved plan in place to ease the transition to market-based rates following the expiration of rate caps. For more information on the company’s rate mitigation plan, visit the company’s Web site at www.alleghenypower.com, click on the Watt Watchers icon and visit the Pennsylvania section.

Allegheny Power’s Watt Watchers program offers information and programs to help its customers manage their electricity bills and use energy wisely. For more information and tips on using energy more efficiently, visit the Watt Watchers area of the company’s Web site at www.alleghenypower.com

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