UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

Commission
File Number

Name of Registrant,
State of Incorporation,
Address of Principal Executive Offices and
Telephone Number

IRS
Employer
Identification
Number

1-267

Allegheny Energy, Inc.
(A Maryland Corporation)
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
Telephone (301) 790-3400

13-5531602

333-72498

Allegheny Energy Supply Company, LLC
(A Delaware Limited Liability Company)
4350 Northern Pike
Monroeville, Pennsylvania 15146-2841
Telephone (412) 858-1600

23-3020481

1-5164

Monongahela Power Company
(An Ohio Corporation)
1310 Fairmont Avenue
Fairmont, West Virginia 26554
Telephone (304) 366-3000

13-5229392

1-3376-2

The Potomac Edison Company
(A Maryland and Virginia Corporation)
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
Telephone (301) 790-3400

13-5323955

1-255-2

West Penn Power Company
(A Pennsylvania Corporation)
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
Telephone (724) 837-3000

13-5480882

0-14688

Allegheny Generating Company
(A Virginia Corporation)
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
Telephone (301) 790-3400

13-3079675

This combined Form 10-Q is separately filed by Allegheny Energy, Inc., Allegheny Energy Supply Company, LLC, Monongahela Power Company, The Potomac Edison Company, West Penn Power Company, and Allegheny Generating Company. Information contained in the Form 10-Q relating to Allegheny Energy Supply Company, LLC, Monongahela Power Company, The Potomac Edison Company, West Penn Power Company, and Allegheny Generating Company is filed by such registrant on its own behalf. Each of Allegheny Energy Supply Company, LLC, Monongahela Power Company, The Potomac Edison Company, West Penn Power Company, and Allegheny Generating Company makes no representation as to information relating to registrants other than itself.

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [   ]     No [ X ]

Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act).

Allegheny Energy, Inc.

Yes [ X ]

No [   ]

Allegheny Energy Supply Company, LLC

Yes [   ]

No [ X ]

Monongahela Power Company

Yes [   ]

No [ X ]

The Potomac Edison Company

Yes [   ]

No [ X ]

West Penn Power Company

Yes [   ]

No [ X ]

Allegheny Generating Company

Yes [   ]

No [ X ]

Number of shares outstanding of each class of common stock as of November 30, 2003:

Allegheny Energy, Inc

126,975,551 ($1.25 par value)

Allegheny Energy Supply Company, LLC

(a)

Monongahela Power Company

5,891,000 ($50 par value)

The Potomac Edison Company

22,385,000 ($0.01 par value)

West Penn Power Company

24,361,586 (no par value)

Allegheny Generating Company

1,000 ($1.00 par value)

(a) The registrant is a limited liability company, the interests in which are not represented by shares.

2

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Page

Item 1. Consolidated Financial Statements (Unaudited)

        Allegheny Energy, Inc.:

        Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

7

        Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

8

        Consolidated Balance Sheets as of June 30, 2003 and
          December 31, 2002

9

        Allegheny Energy Supply Company, LLC:

        Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

11

        Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

12

        Consolidated Balance Sheets as of June 30, 2003 and
          December 31, 2002

13

        Monongahela Power Company:

        Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

15

        Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

16

        Consolidated Balance Sheets as of June 30, 2003 and
          December 31, 2002

17

        The Potomac Edison Company:

        Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

19

        Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

20

        Consolidated Balance Sheets as of June 30, 2003 and
          December 31, 2002

21

        West Penn Power Company:

        Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

23

        Consolidated Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

24

        Consolidated Balance Sheets as of June 30, 2003 and
          December 31, 2002

25

        Allegheny Generating Company:

        Statements of Operations for the Three
          Months and Six Months Ended June 30, 2003 and 2002

27

        Statements of Cash Flows for the Six
          Months Ended June 30, 2003 and 2002

28

        Balance Sheets as of June 30, 2003 and
          December 31, 2002

29

        Combined Notes to the Consolidated Financial Statements

31

3

Item 2. Management's Discussion and Analysis of Financial Condition          and Results of Operations

57

Item 3. Quantitative and Qualitative Disclosures About Market Risk

91

Item 4. Controls and Procedures

92

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

 95

Item 2.  Changes in Securities and Use of Proceeds

 95

Item 3.  Default Upon Senior Securities

 95

Item 4.  Submission of Matters to Vote of Security Holders

 95

Item 5.  Other Information

 97

Item 6.  Exhibits and Reports on Form 8-K

 98

Signatures

106

4

GLOSSARY

I.

The following abbreviations and terms are used in this report to identify Allegheny Energy, Inc. and its subsidiaries:

AE

Allegheny Energy, Inc., a diversified utility holding company

AE Supply

Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary of Allegheny Energy, Inc., also a holding company

AGC

Allegheny Generating Company, an unregulated generation unit of Allegheny Energy, Inc.

Allegheny

Allegheny Energy, Inc., together with its consolidated subsidiaries

Allegheny Ventures

Allegheny Ventures, Inc., a non-utility, unregulated subsidiary of Allegheny Energy, Inc.

Alliance Energy Services

Alliance Energy Services, LLC, a former indirect subsidiary of Allegheny Ventures, Inc.

Distribution Companies

Collectively, Monongahela Power Company, The Potomac Edison Company, and West Penn Power Company. The Distribution Companies do business as "Allegheny Power"

Fellon-McCord

Fellon-McCord & Associates, Inc., a former subsidiary of Allegheny Ventures, Inc.

Monongahela

Monongahela Power Company, a regulated subsidiary of Allegheny Energy, Inc.

Mountaineer

Mountaineer Gas Company, a subsidiary of Monongahela Power Company

Potomac Edison

The Potomac Edison Company, a regulated subsidiary of Allegheny Energy, Inc.

West Penn

West Penn Power Company, a regulated subsidiary of Allegheny Energy, Inc.

II.

The following abbreviations and acronyms are used in this report to identify entities and terms relevant to Allegheny's business and operations:

ARO

Asset retirement obligation

Borrowing Facilities

Agreements entered into on February 25, 2003, and March 13, 2003, by AE, AE Supply, Monongahela, and West Penn with various credit providers to refinance and restructure the majority of AE and AE Supply's short-term debt

CAAA

Clean Air Act Amendments of 1990

CDWR

California Department of Water Resources

Clean Air Act

Clean Air Act of 1970

EITF

Emerging Issues Task Force

EPA

United States Environmental Protection Agency

FASB

Financial Accounting Standards Board

FERC

Federal Energy Regulatory Commission (an independent commission within the Department of Energy)

FIN

FASB Interpretation Number

FIN 45

FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others"

FIN 46

FIN 46, "Consolidation of Variable Interest Entities"

GAAP

Generally Accepted Accounting Principles of the United States of America

KWh

Kilowatt-hour

LV Cogen

Las Vegas Cogeneration II

MW

Megawatt

5

MWh

Megawatt-hour

NSR

The New Source Performance Review Standards, or "New Source Review," applicable to facilities deemed "new" sources of emissions

PJM

PJM Interconnection, LLC, a regional transmission organization

PJM West

The commonly used name of the western extension of PJM Interconnection, LLC

PLR

Provider-of-last-resort

PURPA

Public Utility Regulatory Policies Act of 1978

SEC

United States Securities and Exchange Commission

SFAS

Statement of Financial Accounting Standards

SFAS No. 71

SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation"

SFAS No. 133

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement No. 133," and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133"

SFAS No. 142

SFAS No. 142, "Goodwill and Other Intangible Assets"

SFAS No. 143

SFAS No. 143, "Accounting for Asset Retirement Obligations"

T&D

Transmission and Distribution

Williams

Williams Energy Marketing and Trading Company

6

PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ALLEGHENY ENERGY, INC.

Consolidated Statements of Operations

Unaudited
Three Months Ended
               June 30               

Unaudited
Six Months Ended
               June 30               

(In thousands, except number of shares and per share data)

2003

2002
Restated

2003

2002
Restated

Total operating revenues

   $ 359,214 

    $784,591 

  $1,074,905 

  $1,789,698 

Cost of revenues:

  Fuel consumed for electric generation

     134,054 

     126,673 

     292,826 

     270,171 

  Purchased energy and transmission

      81,527 

     100,799 

     167,795 

     190,438 

  Natural gas purchases

      25,545 

     129,104 

     121,504 

     303,527 

  Deferred energy costs, net

      (6,965)

        (961)

     (20,624)

      14,583 

  Other

       8,413 

      13,585 

      20,186 

      39,980 

    Total cost of revenues

     242,574 

     369,200 

     581,687 

     818,699 

Net revenues

     116,640 

     415,391 

     493,218 

     970,999 

Other operating expenses:

  Operation expense

     275,454 

     255,756 

     576,182 

     495,380 

  Depreciation and amortization

      79,474 

      76,496 

     157,085 

     155,867 

  Taxes other than income taxes

      50,735 

      55,405 

     111,362 

     116,189 

    Total other operating expenses

     405,663 

     387,657 

     844,629 

     767,436 

Operating (loss) income

    (289,023)

      27,734 

    (351,411)

     203,563 

Other income and (expenses), net (Note 11)

       1,353 

      (3,966)

      81,613 

       7,023 

Interest charges and preferred dividends:

  Interest on debt and other

     122,471 

      78,187 

     223,648 

     147,993 

  Allowance for borrowed funds used during     construction and interest capitalized

      (7,809)

      (1,638)

     (13,421)

      (5,875)

  Dividends on preferred stock of subsidiaries

       1,260 

       1,259 

       2,519 

       2,518 

    Total interest charges and preferred
    dividends

     115,922 

      77,808 

     212,746 

     144,636 

Consolidated (loss) income before income
  taxes, minority interest, and cumulative
  effect of accounting change

    (403,592)

     (54,040)

    (482,544)

      65,950 

Federal and state income tax (benefit)   expense

    (167,378)

     (19,565)

    (205,396)

      23,320 

Minority interest

      (4,695)

      (1,014)

      (7,585)

          16 

Consolidated (loss) income before   cumulative effect of accounting change

    (231,519)

     (33,461)

    (269,563)

      42,614 

Cumulative effect of accounting change, net   of tax of $12,974 and $79,596, respectively

         ---

         ---  

     (20,765)

    (130,514)

Consolidated net loss

   $(231,519)

    $(33,461)

  $ (290,328)

  $  (87,900)

Average basic and diluted common shares
  outstanding

 126,883,664 

 125,436,520 

 126,719,304

 125,343,220 

Basic and diluted earnings per share:

Consolidated (loss) income before cumulative
  effect of accounting change

   $   (1.82)

    $   (.27)

  $    (2.13)

  $      .34 

Cumulative effect of accounting change, net

         ---  

         ---  

        (.16)

       (1.04)

Consolidated net loss

   $   (1.82)

    $   (.27)

  $    (2.29)

  $     (.70)

See accompanying Combined Notes to Consolidated Financial Statements.

7

ALLEGHENY ENERGY, INC.
Consolidated Statements of Cash Flows

Unaudited
Six Months Ended
               June 30               

(In thousands)

2003

2002
Restated

Cash flows from operations:

  Consolidated net loss

$ (290,328)

$  (87,900)

  Cumulative effect of accounting change, net

    20,765 

   130,514 

  Consolidated (loss) income before cumulative
    effect of accounting change

  (269,563)

    42,614 

  Reapplication of SFAS No. 71

   (75,824)

       ---  

  Depreciation and amortization

   157,085 

   155,867 

  Amortization of adverse purchase power commitments

    (9,533)

   (11,563)

  Loss (gain) on disposal of assets, net

    30,917 

   (14,897)

  Minority interest

    (7,585)

        16 

  Deferred investment credit and income taxes, net

  (142,499)

    54,480 

  Deferred energy costs, net

   (20,624)

    14,583 

  Unrealized losses (gains) on
    commodity contracts, net

   380,710 

  (123,085)

  Impairment of generating assets

       ---  

    31,190 

  Changes in certain assets and liabilities:

    Accounts receivable, net

    39,809 

     6,988 

    Materials and supplies

   (31,351)

   (22,679)

    Prepaid taxes

    (9,721)

    (5,219)

    Taxes receivable/payable, net

    96,709 

    46,753 

    Accounts payable

   (29,761)

    (2,250)

    Benefit Plans' investments

     9,916 

    13,834 

    Accrued payroll

   (18,397)

   (31,362)

    Interest accrued

     4,672 

    10,898 

    Purchased options

    11,689 

    (9,595)

    Contract termination costs

   (47,706)

       ---  

  Other, net

    (7,690)

    10,662 

    61,253 

   167,235 

Cash flows (used in) investing:

  Acquisition of electric generating facility

  (318,435)

       ---  

  Construction expenditures

  (140,539)

  (188,480)

  Proceeds from sale of businesses and assets

    46,168 

    15,902 

  (412,806)

  (172,578)

Cash flows from financing:

  Proceeds from credit facilities, notes and bonds

 1,931,507 

   728,378 

  Restricted funds on deposit with trustee

   (15,467)

     1,606 

  Payments on credit facilities, notes and bonds

  (270,928)

  (245,970)

  Cash dividends paid on common stock

       ---  

   (97,634)

  Short-term debt, net

(1,122,181)

  (335,228)

   522,931 

    51,152 

Net change in cash and temporary cash investments

   171,378 

    45,809 

  Cash and temporary investments at January 1

   204,231 

    37,980 

  Cash and temporary investments at June 30

$  375,609 

$   83,789 

See accompanying Combined Notes to Consolidated Financial Statements.

8

ALLEGHENY ENERGY, INC.
Consolidated Balance Sheets

               Unaudited               

(In thousands)

June 30
2003

December 31
2002

ASSETS

  Current assets:

    Cash and temporary cash investments

 $   375,609 

 $   204,231 

    Accounts receivable:

      Billed:

        Customer

     310,831 

     316,260 

        Energy trading and other

      98,159 

      93,700 

      Unbilled

     118,658 

     166,055 

      Allowance for uncollectible accounts

     (42,327)

     (29,645)

    Materials and supplies (at average cost):

      Operating and construction

     110,386 

     111,267 

      Fuel

     105,006 

      74,768 

    Taxes receivable

      50,739 

     185,691 

    Deferred income taxes

      56,625 

      46,102 

    Commodity contracts

     113,169 

     156,313 

    Prepaid taxes

      59,678 

      49,957 

    Assets held for sale

       8,000 

       9,259 

    Restricted funds

      22,818 

       2,351 

    Other, including current portion of regulatory assets

     123,659 

      77,563 

   1,511,010 

   1,463,872 

  Property, plant, and equipment:

    In service, at original cost

  11,233,210 

  10,976,166 

    Construction work in progress

     497,894 

     380,959 

  11,731,104 

  11,357,125 

    Accumulated depreciation

  (4,612,315)

  (4,474,551)

   7,118,789 

   6,882,574 

  Investments and other assets:

    Excess of cost over net assets acquired (Goodwill)

     367,287 

     367,287 

    Benefit plans' investments

      24,265 

      47,309 

    Unregulated investments

      54,356 

      56,393 

    Intangible assets

      38,648 

      38,648 

    Other

      35,756 

      22,685 

     520,312 

     532,322 

  Deferred charges:

    Commodity contracts

     637,121 

   1,055,160 

    Regulatory assets

     569,495 

     558,811 

    Other

     141,480 

     107,540 

   1,348,096 

   1,721,511 

Total assets

 $10,498,207 

 $10,600,279 

See accompanying Combined Notes to Consolidated Financial Statements.

9

ALLEGHENY ENERGY, INC.
Consolidated Balance Sheets (Continued)

               Unaudited               

(In thousands)

June 30
2003

December 31
2002

LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities:

    Short-term debt

   $     9,785 

  $ 1,131,966 

    Long-term debt due within one year

       542,250 

      257,200 

    Debentures, notes, and bonds reclassified
      to current

     5,084,746 

    3,662,201 

    Accounts payable

       314,378 

      380,019 

    Taxes accrued - other

        58,807 

       97,049 

    Adverse power purchase commitments

        18,552 

       19,064 

    Commodity contracts

       154,360 

      191,186 

    Interest accrued

        67,283 

       62,611 

    Other, including current portion of
      regulatory liabilities

       126,725 

      189,537 

     6,376,886 

    5,990,833 

  Long-term debt

       115,954 

      115,944 

  Deferred credits and other liabilities:

    Commodity contracts

       578,328 

      590,546 

    Unamortized investment credit

        93,004 

       96,183 

    Deferred income taxes

       947,739 

    1,079,151 

    Obligation under capital leases

        37,242 

       39,054 

    Regulatory liabilities

        53,322 

      111,967 

    Adverse power purchase commitments

       227,126 

      236,147 

    Other

       338,632 

      313,106 

     2,275,393

    2,466,154 

  Minority interest

        12,889 

       21,841 

  Preferred stock of subsidiary

        74,000 

       74,000 

  Stockholders' equity:

    Common stock

       158,761 

      158,261 

    Other paid-in capital

     1,448,302 

    1,446,180 

    Retained earnings

        67,561 

      357,889 

    Treasury stock

        (1,179)

         (411)

    Accumulated other comprehensive loss

       (30,360)

      (30,412)

     1,643,085 

    1,931,507 

  Commitments and contingencies (Note 15)

Total liabilities and stockholders' equity

   $10,498,207 

  $10,600,279 

See accompanying Combined Notes to Consolidated Financial Statements.

10

ALLEGHENY ENERGY SUPPLY COMPANY, LLC, AND SUBSIDIARIES
Consolidated Statements of Operations

          Unaudited          

          Unaudited          

Three Months Ended
June 30

Six Months Ended
June 30

(In thousands)

2003

2002
Restated

2003

2002
Restated

Total operating revenues

   $ (30,173)

    $264,225 

   $ 180,999 

    $688,303 

Cost of revenues:

  Fuel consumed for electric generation

     102,853 

      98,495 

     224,567 

     211,444 

  Purchased energy and transmission

      25,411 

      42,580 

      61,255 

      98,535 

  Natural gas purchases

         ---  

         ---  

         ---  

         ---  

    Total cost of revenues

     128,264 

     141,075 

     285,822 

     309,979 

Net revenues

    (158,437)

     123,150 

    (104,823)

     378,324 

Other operating expenses:

  Operation expense

     130,955 

     123,900 

     290,624 

     223,460 

  Depreciation and amortization

      31,316 

      29,504 

      61,603 

      61,744 

  Taxes other than income taxes

      15,617 

      18,435 

      29,738 

      35,273 

    Total other operating expenses

     177,888 

     171,839 

     381,965 

     320,477 

Operating (loss) income

    (336,325)

     (48,689)

    (486,788)

      57,847 

Other income and (expenses), net (Note 11)

        (100)

       1,166 

        (416)

      (1,193)

Interest charges:

  Interest on debt and other

      79,840 

      42,080 

     140,450 

      75,310 

  Interest capitalized

      (7,527)

        (848)

     (12,625)

      (4,023)

    Total interest charges

      72,313 

      41,232 

     127,825 

      71,287 

Consolidated loss before income
  taxes, minority interest, and cumulative
  effect of accounting change

    (408,738)

     (88,755)

    (615,029)

     (14,633)

Federal and state income tax (benefit) expense

    (171,951)

     (34,421)

    (251,950)

      (7,461)

Minority interest

       1,075 

       1,043 

       2,188 

       2,055 

Consolidated loss before cumulative
  effect of accounting change

    (237,862)

     (55,377)

    (365,267)

      (9,227)

Cumulative effect of accounting change,
  net of tax of $12,131

         ---  

         ---  

     (19,533)

         ---  

Consolidated net loss

   $(237,862)

    $(55,377)

   $(384,800)

    $ (9,227)

See accompanying Combined Notes to Consolidated Financial Statements.

11

ALLEGHENY ENERGY SUPPLY COMPANY, LLC, AND SUBSIDIARIES
Consolidated Statements of Cash Flows

Unaudited
Six Months Ended
               June 30                

(In thousands)

2003

2002
Restated

Cash flows (used in) operations:

  Consolidated net loss

$ (384,800)

$  (9,227)

  Cumulative effect of accounting change, net

    19,533 

      ---  

  Consolidated loss before cumulative
    effect of accounting change

  (365,267)

  (9,227)

  Depreciation and amortization

    61,603 

   61,744 

  Minority interest in AGC

     2,188 

    2,055 

  Deferred investment credit and income taxes, net

  (124,701)

   66,458 

  Unrealized losses (gains) on
    commodity contracts, net

   368,341 

 (128,106)

  Loss on disposal of assets

    32,802 

      ---  

  Impairment of generation assets

       ---  

   31,190 

  Changes in certain assets and liabilities:

    Accounts receivable, net

   (14,600)

  (14,444)

    Affiliated accounts receivable/payable, net

   (54,747)

   44,636 

    Materials and supplies

   (15,524)

  (24,139)

    Prepaid taxes

     5,693 

    3,375 

    Taxes receivable/payable, net

    (1,618)

    9,098 

    Accounts payable

   (48,760)

   (3,832)

    Accrued payroll

        (4)