Transmission incentives for PATH line approved by FERC

Greensburg, PA, Mar. 4, 2008 — Allegheny Energy Inc. announced that the Potomac-Appalachian Transmission Highline (PATH), Allegheny’s joint venture transmission project with American Electric Power, reached a regulatory milestone with the Federal Energy Regulatory Commission’s (FERC) approval of incentive rate treatment.

The incentive rate treatment is intended to encourage new investment in electric transmission lines that will improve the reliability of electric service.

The companies requested and the commission granted the following incentives:

* A return on equity of 14.3 percent, which includes a 50 basis point incentive that is conditioned on membership in the regional transmission organization, PJM Interconnection;

* Inclusion of 100 percent of construction work in progress in the rate base, which allows recovery of a return prior to the in-service date of PATH;

* Recovery of prudently incurred start-up business and administrative costs incurred prior to the time the rates go into effect; and

* Recovery of prudently incurred development and construction costs if PATH is abandoned as a result of factors beyond the control of PATH or its parent companies.

The commission plans to hold hearings on PATH’s proposed formula rate, including the cost of service formula that would be used to calculate annual revenue requirements for the project.

In 2007, PJM Interconnection, the regional grid operator for a 13-state area, approved construction of the proposed line. The project includes 244 miles of 765-kilovolt (kV) transmission from AEP’s Amos substation near St. Albans, W.Va., to Allegheny’s Bedington substation, northeast of Martinsburg, W.Va., and 46 miles of twin-circuit 500-kV transmission from Bedington to a new substation near Kemptown, southeast of Frederick, Md. Based on current plans, PATH is estimated to cost approximately $1.8 billion and Allegheny currently estimates that its total investment in the project will be approximately $1.2 billion.

PATH will seek regulatory approvals from the utility commissions in the respective states the line crosses.

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