Adjusted net income for the fourth quarter of 2008 excludes a net unrealized pre-tax loss of $116.3 million from economic hedges that do not qualify for hedge accounting. Adjusted results for the fourth quarter of 2007 excluded earnings resulting from a litigation settlement with Merrill Lynch & Co., Inc.

Adjusted net income is a non-GAAP financial measure. For information on adjustments and the calculation of adjusted net income for all periods, see the attached reconciliations of non-GAAP financial measures.

“Earnings in the quarter benefited from increased plant output and reduced operating costs, partially offset by higher coal expense,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy.

“In 2008, we dramatically reduced regulatory uncertainty by resolving cost recovery issues in Virginia and West Virginia and obtaining key approvals for both our TrAIL transmission project and Pennsylvania rate mitigation plan. Given the state of the economy and conditions in the commodity markets, we expect 2009 to be a very challenging year. We’ll especially focus on controlling costs and maintaining strong liquidity during the year, while also completing our scrubber projects and keeping transmission expansion on track.”

Fourth Quarter Consolidated Results

Adjusted net income for the fourth quarter of 2008 increased $8.5 million compared to the same period in 2007. Key factors contributing to the results include:

Adjusted operating revenues increased $37.8 million compared to the fourth quarter of 2007, reflecting higher generation output and the effects of marketing contracts, hedging activities and capacity prices.

Fuel and deferred energy expense increased in total $33.3 million, reflecting higher coal costs, partially offset by a fuel and energy cost recovery clause in West Virginia.

Operations and maintenance expense decreased $17.1 million, due to lower special maintenance expense at power plants.

Interest expense decreased $3.5 million compared to adjusted interest expense in the fourth quarter of 2007, primarily due to lower interest rates and an increase in capitalized interest.

Adjusted income taxes increased $19.9 million, reflecting an increase in adjusted pre-tax income and a higher effective tax rate.

Adjusted EBITDA for the fourth quarter of 2008 was $268.3 million, an increase of $24.7 million compared to adjusted EBITDA for the same quarter of the prior year. EBITDA is a non-GAAP financial measure. The calculation of EBITDA and a reconciliation of EBITDA to net income are attached to this release.

Fourth Quarter Segment Results

Adjusted net income for the Generation and Marketing segment in the fourth quarter of 2008 excludes the unrealized losses previously discussed. The segment’s adjusted results for the fourth quarter of 2007 exclude earnings resulting from the Merrill Lynch litigation settlement. There were no adjustments in the Delivery and Services segment for the fourth quarter in either year.

Generation and Marketing: Adjusted net income increased $25.9 million compared to the same period a year earlier. Key factors contributing to the results for the fourth quarter of 2008 include increased plant output, the effects of marketing contracts, hedging activities and capacity prices, lower special maintenance costs and lower interest expense, partially offset by higher coal costs and higher income taxes.

Delivery and Services: Net income decreased $17.4 million compared to the same quarter of the prior year. Results were adversely impacted by the expiration of an earnings benefit related to stranded cost recovery, lower retail electric sales, increased interest expense and a higher effective tax rate, partially offset by revenues from transmission expansion, customer growth and favorable weather.

Twelve-Month Results

Consolidated adjusted net income for the year increased $6.3 million compared to 2007. Adjusted net income for the Generation and Marketing segment increased $72.9 million in 2008, due primarily to higher market prices and generation rates. This increase was largely offset by a $66.6 million decrease in adjusted net income in the Delivery and Services segment, reflecting a significant under-recovery of purchased power costs in Virginia. A settlement agreement approved by Virginia regulators in November 2008 provides for the recovery of purchased power costs in 2009 and beyond.

Adjusted net income for 2008 in the Generation and Marketing segment excludes unrealized gains and losses associated with economic hedges previously discussed. Adjusted net income for 2007 in the Generation and Marketing segment excludes the impact of the Merrill Lynch settlement. There were no adjustments in the Delivery and Services segment in either year.