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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

WEST PENN FUNDING LLC

Delaware

2325B Renaissance Drive

Las Vegas, NV 89119

Telephone (702) 895-6752

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has 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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes   ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant: None.

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

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

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WEST PENN FUNDING LLC

FORM 10-K ANNUAL REPORT TO

THE SECURITIES AND EXCHANGE COMMISSION

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

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Glossary of Terms and Abbreviations

BOND TRUSTEE - Deutsche Bank Trust Company Americas (formerly Bankers Trust Company, a New York banking corporation) as Trustee under the Indenture.

CAPITAL SUBACCOUNT - An account held by the Trustee under the Indenture which is funded by a contribution to West Penn Funding LLC by West Penn Funding Corporation at the date of issuance of each series of Transition Bonds.

COMPETITION ACT - The Pennsylvania Electricity Generation Customer Choice and Competition Act enacted in Pennsylvania in December 1996.

GENERAL SUBACCOUNT - An account held by the Trustee under the Indenture into which Intangible Transition Charge remittances by the Servicer are deposited. The Trustee allocates the funds from the General Subaccount to other subaccounts on the quarterly payment dates.

INDENTURE - The agreement entered into by West Penn Funding LLC and the Trustee, dated November 16, 1999, providing for the issuance of Transition Bonds.

INTANGIBLE TRANSITION CHARGES (ITC) - The charge West Penn Power Company (West Penn) has been authorized by the Pennsylvania Public Utility Commission to impose on customer bills and to collect through a non-bypassable billing mechanism to recover Qualified Transition Expenses.

INTANGIBLE TRANSITION PROPERTY (ITP) -The property right created under the Competition Act representing the irrevocable right of West Penn Funding LLC to receive, through ITC, amounts sufficient to recover all Qualified Transition Expenses.

OVERCOLLATERALIZATION SUBACCOUNT - An account held by the Trustee under the Indenture which is funded ratably from collections of ITC over the term of each series of Transition Bonds.

PENNSYLVANIA PUC - The Pennsylvania Public Utility Commission.

QUALIFIED RATE ORDER - The final order issued by the Pennsylvania PUC to West Penn in November 1998, in connection with West Penn’s restructuring filing under the Competition Act, as supplemented by an August 1999 Pennsylvania PUC order.

QUALIFIED TRANSITION EXPENSES - The transition or stranded costs of an electric utility approved by the Pennsylvania PUC for recovery through the issuance of Transition Bonds; the costs of retiring existing debt or equity capital of the electric utility or its holding company parent, including accrued interest and acquisition or redemption premium, costs of defeasance, and other related fees, costs and charges, through the issuance of Transition Bonds or the assignment, sale, or other transfer of ITP; and the costs incurred to issue, service, or refinance the Transition Bonds, including accrued interest and acquisition or redemption premium, and other related fees, costs, and charges associated with the Transition Bonds, or to assign, sell, or otherwise transfer ITP.

RESERVE SUBACCOUNT - An account held by the Trustee under the Indenture which consists of the remaining funds available after required allocations on the quarterly payment dates.

SERVICING AGREEMENT - The ITP Servicing Agreement between West Penn, as Servicer, and West Penn Funding LLC, as Issuer.

WEST PENN - West Penn Power Company, a Pennsylvania corporation.

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General

West Penn Funding LLC (the Company) is a Delaware limited liability company, whose sole member is West Penn Funding Corporation. West Penn Funding Corporation is a wholly-owned subsidiary of West Penn Power Company (West Penn), which operates an electric transmission and distribution system in southwestern, north and south central Pennsylvania under the trade name Allegheny Power. West Penn is a wholly-owned subsidiary of Allegheny Energy, Inc. (Allegheny or AE). For further information concerning West Penn, see reports filed by West Penn with the Securities and Exchange Commission (SEC), including its most recent Annual Report on Form 10-K. The Company was organized in May 1999 for the sole purpose of purchasing and owning Intangible Transition Property (ITP), issuing Transition Bonds (the Bonds or Transition Bonds), pledging its interest in ITP and other collateral to the Trustee under an Indenture between the Company and the Trustee to collateralize the Transition Bonds, and performing activities that are necessary to accomplish these purposes. The Company’s organizational documents require it to operate in a manner so that its assets will not be consolidated with the bankruptcy estate of West Penn or West Penn Funding Corporation in the event that they become subject to a bankruptcy proceeding.

The only material business conducted by the Company has been the acquisition of ITP from West Penn Funding Corporation and the issuance of $600 million of Bonds, Series 1999-A, Class A-1 through Class A-4, in November 1999. Class A-1 Bonds were retired in 2001 and Class A-2 Bonds were retired in 2003. The specific interest rate and maturity of each class of bonds is specified in Note 3 to the Financial Statements. Each series of Bonds has been registered in the name of Cede & Co., as nominee of The Depository Trust Company. All of the Bonds were sold to a syndicate of underwriters.

In November 1999, the Company used the proceeds of the issuance of the Bonds to pay expenses of issuance and to purchase the transferred ITP from West Penn Funding Corporation. West Penn arranged for the formation of the Company as a bankruptcy remote special purpose entity for the purpose of holding ITP before the issuance of the first series of the Bonds.

West Penn, as Servicer under the Servicing Agreement, is required to manage, service, administer, and make collections of the ITP. The Servicing Agreement also requires West Penn, as Servicer, to file adjustment requests on each calculation date. The Pennsylvania Electricity Generation Customer Choice and Competition Act (Competition Act) and the Qualified Rate Order require the Pennsylvania Public Utility Commission (Pennsylvania PUC) to act upon these requests within specified time periods. These adjustment requests are based on actual Intangible Transition Charge (ITC) collections and updated assumptions by the Servicer as to projected future usage of electricity by customers, expected delinquencies and write-offs, and future payments and expenses relating to the ITP and the Bonds. West Penn filed a request for an adjustment to the ITC with the Pennsylvania PUC on October 1, 2003. On December 18, 2003, the Pennsylvania PUC approved West Penn’s request for rates to become effective in 2004.

Intangible Transition Property

The ITP represents the irrevocable right of West Penn, or its successor or assignee, to collect a non-bypassable ITC from its customers pursuant to the Qualified Rate Order in accordance with the Competition Act. The Qualified Rate Order authorized West Penn to securitize up to $670 million of its stranded costs. West Penn, or any assignee of West Penn to whom the ITP is sold, may issue and sell, in reliance on the Qualified Rate Order, one or more series of the Bonds, each series in one or more classes, secured by the ITP. The Company acquired the ITP and issued the Bonds in November 1999. The principal amount of the Bonds, interest, fees, and funding of the Overcollateralization Subaccount will be recovered through ITC, payable by retail consumers of electricity within West Penn’s service territory who receive electric delivery service from West Penn. Retail consumers in West Penn’s service area cannot avoid paying ITC even if they purchase electricity from a supplier other than West Penn.

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The Company has no physical property. Its primary asset is the ITP described above in ITEM 1. BUSINESS - Intangible Transition Property.

None

There were no matters submitted to a vote of security holders in the fourth quarter of 2003.

PART II

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WEST PENN FUNDING LLC

In addition to historical information, this report contains a number of forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These include statements with respect to:

Forward-looking statements involve estimates, expectations, and projections and, as a result, are subject to risks and uncertainties. There can be no assurance that actual results will not materially differ from expectations.

Factors that could cause actual results to differ materially include, among others, the following:

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OVERVIEW

As discussed under ITEM 1. BUSINESS - General, the Company is a Delaware limited liability company. Its sole member is West Penn Funding Corporation, which is a wholly-owned subsidiary of West Penn. As discussed above and in Note 3 to the Financial Statements, in November 1999, the Company issued the Bonds and transferred the proceeds in exchange for all rights, title, and interest in the ITP from West Penn Funding Corporation. As the Company was formed for limited purposes, the factors affecting the statement of operations are limited primarily to revenue from collections of ITC by the Servicer, interest income earned on the Capital Subaccount maintained by the Trustee and on temporary investments, interest expense on the Bonds, amortization of the ITP, servicing fees, and other administrative expenses.

In 2002, Allegheny and its subsidiaries, including the Company, identified various errors relating to their financial statements for years prior to 2002 as a result of a comprehensive financial review discussed in Note 2 to the Financial Statements. Allegheny’s management concluded that these errors were not material, either individually or in the aggregate, to the Company’s current year or any prior years’ financial statements. Accordingly, corrections to these errors are reflected in the financial statements for the year ended December 31, 2002.

New Accounting Standards

Various new accounting pronouncements that were effective in 2003 do not have a material effect on the Company’s results of operations, cash flows, and financial position. Also, the Company expects that various other new accounting pronouncements, effective in 2003, will not have a significant impact on its financial statements.

REVIEW OF OPERATIONS

Critical Accounting Estimates

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles of the United States (GAAP) requires the Company to make estimates that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingencies during the reporting period. Significant changes in the estimates could have a material effect on the Company’s results of operations, cash flows, and financial position. On a continuous basis, the Company evaluates its estimates, including those related to the provisions for amortization, income taxes, and contingencies related to litigation.

Regulatory Assets and Liabilities: The Company, through West Penn, is regulated by various federal and state regulatory agencies. As a result, the Company qualifies for the application of Statement of Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation.” SFAS No. 71 recognizes that the actions of a regulator can provide reasonable assurance of the existence of an asset or liability. Regulatory assets or liabilities arise as a result of a difference between GAAP and the economic effect of decisions by the regulatory agencies. Regulatory assets generally represent incurred costs that have been deferred, as they are probable of recovery in customer rates. Regulatory liabilities generally represent obligations to make refunds to customers for various reasons.

Earnings Summary

Net income (loss) was $0 in 2003, $(151,000) in 2002 and $31,000 in 2001. The Company modified its accounting treatment for the amortization of ITP as a result of the comprehensive accounting review discussed in Note 2 to these financial statements resulting in no net income or loss for each period effective in 2003 and thereafter.

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Operating Revenues

ITC billings resulted in operating revenue of $107.4 million, $105.6 million, and $98.6 million for 2003, 2002 and 2001, respectively. Revenue increases were $1.8 million in 2003, $7.1 million in 2002 and $2.6 million in 2001, partially due to the ITC rate increases that went into effect on January 1 of each year. West Penn, as Servicer, is required by the Servicing Agreement to file adjustment requests based on actual ITC collections and assumptions by the Servicer as to projected future usage of electricity by customers, expected delinquencies and write-offs, and future payments and expenses related to the ITP and the Bonds. The increases were a direct result of the approval of West Penn’s requests for a rate increase. There are no known trends or uncertainties that have had or might have a material favorable or unfavorable effect on revenues.

Operating Expenses

Operation Expense: Operation expense includes servicing fees and other administration expenses paid to the Bond Trustee as outlined in the Indenture. Operation expense was relatively flat for 2003, 2002 and 2001. In 2003, the Company recorded $1.4 million in operation expense compared to $1.3 million in 2002 and $1.4 million in 2001. As outlined in the Indenture, the Company made annual payments of $1.25 million in 2003, 2002 and 2001 to West Penn to administer the Bonds.

Amortization of Intangible Transition Property: In 2003, the ITP was amortized over the life of the bonds based on ITC revenues adjusted by interest on Transition Bonds, operation expense, and interest income. These adjustments result in no reportable net income. In 2002 and 2001, the ITP was amortized over the life of the Bonds, based on ITC revenues, interest accruals and other fees. The schedule of amortization calculated the monthly amortization based on actual ITC revenues to date and the projection of ITC revenues on a going forward basis, adjusting future months estimated amortization over the remaining life of the Bonds. The amortization of ITP increased by $6.6 million, $11.7 million, and $5.9 million in 2003, 2002, and 2001, respectively, mainly due to higher revenues and lower interest expense on the Transition Bonds.

Other Income

Other income consists of interest income earned on the investments in various Subaccounts required by the Indenture amounting to $13.4 million at December 31, 2003. The Servicer deposits collections of the ITC into a General Subaccount maintained by the Trustee under the Indenture. In 1999, the Company also deposited an amount equal to 0.5 percent of the initial principal amount of the Bonds, or $3.0 million, into the Capital Subaccount with the Bond Trustee. As of December 31, 2003, the Capital Subaccount’s balance is $3.0 million. The various Subaccounts are classified in “restricted funds” on the balance sheet. See Note 3 to the Financial Statements for additional information regarding the various subaccounts.

Interest earned on the General and Capital Subaccounts was $0.1 million, $0.2 million, and $0.3 million for 2003, 2002, and 2001, respectively. During 2000, the Trustee withdrew amounts from the Capital Subaccount to cover the shortage in the General and Reserve Subaccounts, in order to make the scheduled payments in the first and second quarters of 2000. Replenishments to the Capital Subaccount were initiated late in 2001, resulting in reduced interest income earnings for the Capital Subaccount in 2002 and 2001.

The General Subaccount, while recognizing an increase in the ITC collections deposited into the account in 2002 in comparison to prior years, recognized less investment earnings over the prior years due to a decline in interest rates.

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Interest Charges

Interest charges on the Transition Bonds include interest accrued on the outstanding Transition Bonds balance for the period and amortization of the debt issuance expenses and discount.

The Company recorded a decrease in interest expense on Transition Bonds of $5.0 million, $4.5 million, and $3.4 million in 2003, 2002, and 2001, respectively. Interest expense decreased due to the amortization of the principal amount of the Transition Bonds.

Federal Income Taxes

The Company did not have any federal income tax expense in 2003 as a result of the Company having no taxable income. Federal income taxes decreased for 2002 and 2001 due to the decrease in taxable income. See Note 5 to the financial statements for further analysis of income taxes.

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

FINANCIAL CONDITION, REQUIREMENTS, AND RESOURCES

Liquidity and Capital Requirements

To meet cash needs for operating expenses, the payment of interest, and retirement of debt, the Company has used net cash flows from operations, restricted funds, and contributions from its member.

The Company’s debt agreement requires it to file copies of its annual and quarterly reports as filed with the U.S. Securities and Exchange Commission (SEC) pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 with or for the debt holders. The Company is also required to deliver to the trustee under its indentures a certificate indicating that the Company has complied with all conditions and covenants under the agreements. On April 30, 2003, the Company provided certificates to the trustee under the indenture indicating that it was not in compliance with the covenants related to the Transition Bonds for filing its annual and quarterly reports. The covenant breaches with respect to the Transition Bonds are deemed defaults of the related debt agreements for the Company’s financial reporting purposes in accordance with SFAS No. 78, “Classification of Obligations That Are Callable by the Creditor.” Accordingly, the total debt related to the Transition Bonds reclassified as current in the accompanying consolidated balance sheet was $346.7 million as of December 31, 2002. During the period of noncompliance with the reporting obligations, none of the debt holders provided the Company with any notices of default under the agreement.

On December 19, 2003, the Company filed its first quarter 2003 and second quarter 2003 quarterly reports on Form 10-Q with the SEC. On January 23, 2004, the Company filed its third quarter 2002 and third quarter 2003 quarterly reports on Form 10-Q with the SEC. The Company is now current on all required SEC filings. Since the Company is in compliance with its reporting obligations under its debt covenants, long-term debt related to the Transition Bonds is no longer classified as current as of December 31, 2003.

During 2002, credit rating agencies lowered the credit ratings of Allegheny and certain of its subsidiaries, including West Penn. As a result, West Penn currently does not have a credit rating for short-term debt. Since West Penn does not have a credit rating for short-term debt of A-1 or better by Standard & Poor’s, P-1 or better by Moody’s, and F-1 or better by Fitch, West Penn is required to remit ITC collections to the Bond Trustee not later than the second business day after ITC collections are received. Accordingly, daily remittances to the Bond Trustee began on October 16, 2002.

On a short-term basis, the Company’s ability to cover operating expenses and issue debt payments within the stated due date is solely reliant on the collection of ITC. Revenues from ITC collections on a long-term basis are dependent on the approval of annual rate adjustments by the Pennsylvania PUC, through the annual reconciliation process.

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Cash Flows

Cash flows from operations were $87.0 million, $72.6 million, and $61.7 million in 2003, 2002, and 2001, respectively. Cash flows from operations increased $14.4 million in 2003, compared with an increase of $10.8 million in 2002. The increase in 2003 is primarily the result of a decrease in accounts receivable from West Penn resulting from an acceleration of remittances to the Company from West Penn’s collections and an increase in ITC revenues collected by West Penn. The increase in 2002 was mainly due to an increase in ITC revenues collected by West Penn, as Servicer, and a decrease in cash paid for interest expense on the Bonds.

Cash flows used in investing increased $10.3 million in 2003. The largest component was the change in restricted funds resulting from accelerated remittances from West Penn as discussed above. Cash flows used in investing were fairly consistent in 2002 compared to 2001.

Cash flows used in financing activities increased $5.7 million in 2003, compared with an increase of $10.1 million in 2002. The increases in 2003 and 2002 were the result of scheduled bond principal payments as defined in the Indenture.

West Penn, as Servicer, remitted to the Trustee a total of $115.4 million for ITC collections during 2003. All quarterly payments were made on the scheduled due dates.

During 2002, West Penn remitted to the Trustee a total of $105.6 million of ITC collections. On the scheduled payment dates in March, June, September, and December 2002, the Trustee made quarterly payments of Bond principal, interest, and related administrative expenses. Payments and ITC collections were sufficient to pay interest of $31.8 million and principal payments in the amount of $70.3 million for the twelve-month period ended December 31, 2002. For the first quarter ended March 31, 2002, principal payments were scheduled at $17.5 million and payments were issued in full. During the second quarter ended June 30, 2002, scheduled principal payments were $18.4 million, with principal payments issued at $18.3 million, creating a year-to-date shortfall of $.1 million. During the third quarter ended September 30, 2002, principal payments were scheduled at $17.0 million, with principal payments issued at $17.1 million, which offset the shortfall created in the prior quarter. During the fourth quarter ended December 31, 2002, scheduled principal payments of $17.4 million were made. The shortfall at June 30, 2002 did not constitute an event of default under the Indenture.

In accordance with the Qualified Rate Order for prior years, in order to reconcile undercollections and to recover expected interest and principal payments, fees, or expenses expected in 2004, West Penn, as Servicer, filed a request for an adjustment to the ITC with the Pennsylvania PUC on October 1, 2003. On December 18, 2003, the Pennsylvania PUC approved West Penn’s request for rates to become effective in 2004.

Financing

Transition Bonds: The Company’s obligations for future cash payments are limited to the principal, interest, and administrative fees related to the outstanding Transition Bonds. The balance at December 31, 2003 of Transition Bond obligations was $346.7 million (with $73.7 million representing the amount of principal contractually due within one year). The following table provides a summary of payments due by period for these obligations:

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The bondholders’ exposure to market risk is de minimus.

The bondholders’ exposure to regulatory risks could be affected by inaccurate estimates of future revenue requirements necessary to meet debt obligations as filed in the annual adjustment requests or unforeseen changes in the Pennsylvania Competition Act or West Penn’s Qualified Rate Order.

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WEST PENN FUNDING LLC

Statements of Operations

See accompanying Notes to Financial Statements

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WEST PENN FUNDING LLC

Statements of Cash Flows