Allegheny Energy announces settlement in Mountaineer Gas rate case

GREENSBURG, Pa., July 29, 2005 (BUSINESS WIRE) — Allegheny Energy, Inc. announced that it has reached agreement with a coalition of interested parties regarding an increase in natural gas base rates, clearing the way for the sale of its West Virginia gas business.

In a joint stipulation and settlement agreement filed last night, the parties asked the Public Service Commission of West Virginia to approve the sale of Mountaineer Gas and Allegheny’s other natural gas operations in West Virginia to Mountaineer Gas Holdings, a partnership composed of IGS Utilities and affiliates of ArcLight Capital Partners. The filing also seeks approval for a modified base rate increase of $15.3 million, effective November 1, 2005, and an additional increase of $2 million on November 1, 2006. The original request was for a $23.4 million base rate increase.

Other parties to the settlement agreement include the staff of the Public Service Commission, the Consumer Advocate Division and other interested groups.

“This settlement is a tribute to the cooperative spirit of the interested parties, all of whom worked hard to create a solid road map for preserving quality delivery of natural gas service for customers throughout West Virginia,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. “At the same time, the sale of Mountaineer Gas advances our strategy of focusing on Allegheny’s core electric generation and delivery business while allowing us to further reduce our debt.”

If the sale of the West Virginia gas business is approved by regulators, Allegheny will receive approximately $130 million in cash and will transfer $87 million in debt to the buyer at the closing of the transaction. Also at that time, all employees directly assigned to Allegheny’s gas operations will transfer to the new owner. In addition, the buyer will settle certain inter-company accounts over a three-year period.

Mountaineer Gas is the largest natural gas service company in West Virginia. A hearing for both the rate and acquisition cases is scheduled before the Public Service Commission on August 23 in Charleston.

About Allegheny Energy [ www.alleghenyenergy.com ]

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.

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