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ALLEGHENY ENERGY, INC.
[LOGO]
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1999
AND PROXY STATEMENT
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[LOGO] ALLEGHENY ENERGY, INC.
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10435 Downsville Pike
Hagerstown, Maryland 21740
April 9, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ALLEGHENY
ENERGY, INC. will be held in Conference Room A on the eleventh floor of 270 Park
Avenue, between 47th and 48th Streets, New York, N.Y., on Thursday, May 13,
1999, at 10:30 a.m., New York time, for the following purposes:
(1) To elect directors to hold office until the next Annual Meeting of
Stockholders and until their successors are duly chosen and qualified;
(2) To approve the appointment of independent accountants;
(3) If presented, to consider and vote upon a shareholder proposal regarding
global warming;
(4) If presented, to consider and vote upon a shareholder proposal regarding
golden parachutes;
(5) If presented, to consider and vote upon a shareholder proposal regarding
the nomination of two additional directors;
(6) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Holders of record at the close of business on April 5, 1999 will be entitled
to vote at the meeting.
By Order of the Board of
Directors,
EILEEN M. BECK
SECRETARY
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PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of Directors of
Allegheny Energy, Inc. (the Company), 10435 Downsville Pike, Hagerstown,
Maryland 21740, for the Annual Meeting of Stockholders to be held on May 13,
1999. The proxy card provided each stockholder by the Company covers the total
number of shares registered in his or her name and, in the case of participants
in the Company's Dividend Reinvestment and Stock Purchase Plan, the shares held
for his or her account under the Plan. A proxy may be revoked at any time prior
to its exercise by written notice to the Company, by submission of another proxy
bearing a later date, or by voting in person at the meeting.
At the close of business on April 5, 1999, there were outstanding
121,997,917 shares of Common Stock each entitled to one vote. In elections of
directors, each holder entitled to vote is entitled to as many votes as shall
equal the number of shares held multiplied by the number of directors to be
elected and may cast all of such votes for a single director or may distribute
them among the number of directors to be elected or any two or more of them.
There are no conditions precedent to the exercise of such cumulative voting
rights.
The presence in person or by proxy of the holders of record of a majority of
the outstanding shares of Common Stock entitled to vote constitutes a quorum.
The affirmative vote of a majority of all the votes cast is required for the
election of each director. The affirmative vote of a majority of the votes cast
is required for approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants and for the three proposals. Abstentions are counted
only for purposes of determining whether a quorum is present. Broker non-votes
are not treated as votes.
The approximate date on which the proxy statement and form of proxy are
first being sent or given to stockholders is April 9, 1999. The Annual Report
for 1998 has already been mailed to stockholders.
ELECTION OF DIRECTORS
At the meeting, eight directors are to be elected to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
duly chosen and qualified. The proxies received, unless marked to the contrary,
will be voted for the election of the following persons, all of whom are now
directors of the Company and are the nominees of the Board of Directors at this
election, or, if considered desirable, cumulative voting rights will be
exercised by the proxy holder to elect as many of such nominees as possible. The
Board of Directors does not expect that any of the nominees will become unable
to serve as a director, but if that should occur for any reason prior to the
meeting, the proxy holders reserve the right to name another person of their
choice.
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DIRECTOR, PRINCIPAL OCCUPATION,
OTHER DIRECTORSHIPS, DIRECTOR OF
BUSINESS EXPERIENCE, AND 1998 COMPANY THE COMPANY
BOARD AND COMMITTEE MEETINGS ATTENDANCE AGE SINCE
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ELEANOR BAUM (3) (4) 58 1988
Dean of The Albert Nerken School of Engineering of The Cooper Union for the Advancement of
Science and Art, Director of Avnet, Inc. and United States Trust Company, Chair of the
Engineering Workforce Commission, a fellow of the Institute of Electrical and Electronic
Engineers, and Chairman of the Board of Governors, New York Academy of Sciences. Formerly,
President of Accreditation Board for Engineering and Technology and President, American Society
of Engineering Education.
Attendance: 21 of 24
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DIRECTOR, PRINCIPAL OCCUPATION,
OTHER DIRECTORSHIPS, DIRECTOR OF
BUSINESS EXPERIENCE, AND 1998 COMPANY THE COMPANY
BOARD AND COMMITTEE MEETINGS ATTENDANCE AGE SINCE
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WILLIAM L. BENNETT (1) (5c) (6) 49 1991
Vice Chairman and Director, HealthPlan Services Corporation, a leading managed health care
services company and Director of Sylvan, Inc. Formerly, Chairman, Director, and Chief Executive
Officer of Noel Group, Inc. and Director of Belding Heminway Company, Inc.
Attendance: 18 of 20
WENDELL F. HOLLAND (1) (5) 47 1994
Vice President, American International Water Services Company and Director of Bryn Mawr Trust
Company. Formerly, of Counsel, Law Firm of Reed, Smith, Shaw & McClay, Partner, Law Firm of
LeBoeuf, Lamb, Greene & MacRae, and Commissioner of the Pennsylvania Public Utility Commission.
Attendance: 16 of 18
PHILLIP E. LINT (1c) (3) (5) (6) 69 1989
Retired. Formerly partner, Price Waterhouse.
Attendance: 24 of 24
FRANK A. METZ, JR. (2) (3) (4c) (6c) 64 1984
Retired. Director of Norrell Corporation and Solutia Inc. Formerly, Senior Vice President,
Finance and Planning and Director of International Business Machines Corporation, a
manufacturer and distributor of information systems equipment and services and Director of
Monsanto Company.
Attendance: 28 of 28
ALAN J. NOIA (2c) (3) (5) 52 1994
Chairman of the Board, President, and Chief Executive Officer of the Company and of Allegheny
Power Service Corporation and Chairman and Chief Executive Officer of the Company's other
principal subsidiaries. Formerly, President and Chief Operating Officer of the Company and
President of The Potomac Edison Company.
Attendance: 22 of 22
STEVEN H. RICE (2) (3c) (4) (6) 55 1986
President, LaJolla Bank, FSB, Northeast Region and Director, LaJolla Bank, FSB. Formerly, Chief
Executive Officer and Vice Chairman of the Board of Stamford Federal Savings Bank, bank
consultant, President and Director of The Seamen's Bank for Savings, and Director of Royal
Group, Inc.
Attendance: 28 of 28
GUNNAR E. SARSTEN (4) (5) (6) 61 1992
Chairman and Chief Executive Officer of MK International. Formerly, President and Chief
Operating Officer of Morrison Knudsen Corporation, President and Chief Executive Officer of
United Engineers & Constructors International, Inc. (now Raytheon Engineers & Constructors),
and Deputy Chairman of the Third District Federal Reserve Bank in Philadelphia.
Attendance: 24 of 24
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(1) Member of Audit Committee.
(2) Member of Executive Committee.
(3) Member of Finance Committee.
(4) Member of Management Review and Director Affairs Committee.
(5) Member of New Business Committee.
(6) Member of Strategic Affairs Committee.
(c) Current committee Chairman.
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COMPENSATION OF DIRECTORS
Each of the directors is also a director of the following subsidiaries of
the Company: Monongahela Power Company, The Potomac Edison Company, West Penn
Power Company, and Allegheny Power Service Corporation (Allegheny companies). In
1998, directors who were not officers or employees (outside directors) received
for all services to the Company and Allegheny companies (a) $16,000 in retainer
fees, (b) $800 for each committee meeting attended, except Executive Committee
meetings for which such fees are $200, and (c) $250 for attendance at each Board
meeting of the Company, Monongahela, Potomac Edison, and West Penn. Under an
unfunded deferred compensation plan, a director may elect to defer receipt of
all or part of his or her director's fees for succeeding calendar years to be
payable with accumulated interest when the director ceases to be such, in equal
annual installments, or, upon authorization by the Board of Directors, in a lump
sum. In addition to the foregoing compensation, (a) the Chairperson of each
committee other than the Executive Committee receives an additional fee of
$4,000 per year and (b) outside directors of the Company annually receive 200
shares of Common Stock pursuant to the Allegheny Energy, Inc. Restricted Stock
Plan for Outside Directors. In addition, a Deferred Stock Unit Plan for Outside
Directors provides for a lump sum payment (payable at the director's election in
one or more installments, including interest thereon equivalent to the dividend
yield) to directors calculated by reference to the price of the Company's Common
Stock. Directors who serve at least five years on the Board and leave at or
after age 65, or upon death or disability, or as otherwise directed by the Board
will receive such payments. Each year the Company credits each outside
director's account with 275 deferred stock units.
BOARD OF DIRECTORS AND CERTAIN COMMITTEE MATTERS
The Board of Directors has Audit, Executive, Finance, Management Review and
Director Affairs, New Business, and Strategic Affairs Committees. The Audit
Committee, which is made up of outside directors only, makes recommendations to
the Board with respect to auditing matters, including the employment of
independent accountants and the handling of the annual audit of the books and
accounts of the Company and its subsidiaries. It met four times in 1998. The
Management Review and Director Affairs Committee, which is made up of outside
directors only, makes recommendations to the Board on certain matters concerning
directors and officers, including compensation and management succession. This
Committee serves also as the nominating committee for directors and considers
recommendations sent by shareholders to the Company that are accompanied by a
comprehensive written resume of the proposed nominee's experience and background
and a written consent of such person to serve as a director if nominated and
elected. It met seven times in 1998. The total number of Company Board meetings
held in 1998 was thirteen.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed PricewaterhouseCoopers LLP as independent accountants for the Company
to audit its consolidated financial statements for 1999 and to perform other
audit related services. Such services include: review of the Company's quarterly
interim financial information; review of periodic reports and registration
statements filed by the Company with the Securities and Exchange Commission;
issuance of special purpose reports covering such matters as employee benefit
plans and submissions to various governmental agencies; and consultation in
connection with various accounting and financial reporting matters.
Pricewaterhouse-
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Coopers also performs non-audit services for the Company. Fees for the 1998
audit and fees for audit services paid during the year aggregated $667,500, and
fees for non-audit services were $701,478. The Board has directed that the
appointment of PricewaterhouseCoopers be submitted to the stockholders for
approval. If the stockholders should not approve, the Audit Committee and the
Board would reconsider the appointment. Representatives of
PricewaterhouseCoopers will be present at the annual meeting to make a statement
if they wish and to answer questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS AND WILL SO
VOTE PROXIES RECEIVED THAT DO NOT OTHERWISE SPECIFY.
SHAREHOLDER PROPOSALS
The following proposals have been submitted by shareholders for inclusion in
this proxy statement.
The names and addresses of the shareholders submitting the proposals, as
well as the number of shares held, will be furnished by Allegheny Energy either
orally or in writing as requested, promptly upon the receipt of any oral or
written request therefor.
A shareholder submitting a proposal must appear personally or by proxy at
the meeting to move the proposal for consideration. A proposal will be approved
if it is introduced and voted on at the meeting and it is supported by a
majority of the shares that are voted.
SHAREHOLDER PROPOSAL CO-SPONSORED BY TWO ORGANIZATIONS
REGARDING GLOBAL WARMING
WHEREAS:
The overwhelming majority of independent, peer-reviewed atmospheric
scientists agree that global warming is not hypothetical but a real, existing
problem posing serious challenges for modern civilization;
The Intergovernmental Panel on Climate Change (IPCC), composed of more than
2000 scientists nominated and reviewed by governments, warns that global warming
caused by burning fossil fuels and emitting greenhouse gases is already
underway;
The impacts of global warming on our public health and welfare include
increased occurrence of extreme weather events, sea-level rise, increased spread
of infectious diseases, and more frequent and deadly heat waves like the summer
of 1998 which was linked to more than 150 deaths in Texas alone.
WE BELIEVE:
It will cost U.S. taxpayers billions of dollars to combat the impacts of
global warming. So far, our company has not lived up to its responsibility as a
producer of the pollution which causes global warming. In order to leave the
children of the world a safe and healthy environment, and protect threatened
plants and animals, it is time for Allegheny Energy to lead by example. A
variety of companies including Enron, British Petroleum, 3M, Toyota and others
have stated that they "accept the views of most scientists that enough is known
about the science and environmental impacts of climate change for us to take
actions to address its consequences." These companies are preparing for the
future now by taking the concrete steps necessary to assess their opportunities
for reducing the amount of carbon pollution they produce. Failing to rise to the
challenge set by these industry leaders will hurt our company's competitiveness
and cost our shareholders increasing amounts of money.
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RESOLVED: that the shareholders of Allegheny Energy request that the Board of
Directors report (at reasonable costs and omitting proprietary information), to
shareholders by August 1999, on the greenhouse gas emissions from our company's
own operations and products, including (with dollar amounts where relevant) (i)
what our company is doing in research and/or action to reduce those emissions
and ameliorate the problem, (ii) the financial exposure of our company and its
shareholders due to the likely costs of reducing those emissions and potential
liability for damages associated with climate change, and (iii) actions by our
company, or by the industry associations to which it pays dues, promoting the
view that the issue of climate change is exaggerated, not real, or that global
warming may be beneficial.
SUPPORTING STATEMENT
We believe that Allegheny Energy is exposing its shareholders to financial
risk by continuing to produce unnecessary amounts of the pollution which causes
global warming, even as the problem of climate change becomes more severe, more
widely understood, and more likely to lead to legislation that will penalize
excessive carbon polluters. Futhermore, we believe that our company is incurring
costs for advertising and lobbying to suggest that the problem of global warming
is exaggerated, not real, or too costly to deal with; and thus using our
prestige and influence to delay any lessening of climate change.
END OF SHAREHOLDER PROPOSAL
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL AND WILL SO
VOTE PROXIES RECEIVED THAT DO NOT OTHERWISE SPECIFY.
As detailed below, the Company has taken numerous voluntary, precautionary
steps to address the issue of global climate change. Many uncertainties remain
in the global climate change debate, including the relative contributions of
human activities and natural processes, the extremely high potential costs of
extensive mitigation efforts, and the significant economic and social
disruptions which may result from a large-scale reduction in the use of fossil
fuels. The Company is responding appropriately and will continue to explore
cost-effective opportunities to improve efficiency and performance.
The Company participates in active climate-related research programs and is
responsive to the voluntary guidelines suggested in the National Energy Policy
Act of 1992, under Section 1605(b) directed toward reducing, controlling,
avoiding, and sequestering greenhouse gases. The Company has taken many concrete
steps to reduce greenhouse gases and help stimulate a business climate that
encourages improved efficiency, performance, electrical loss reductions, and
cost effectiveness:
- Allegheny has reduced its total emissions of greenhouse gases each year by
approximately 1.1 million short tons of CO2 equivalent.
- Allegheny signed a Memorandum of Understanding with the U.S. Department of
Energy to participate in the Climate Challenge and supports the Electric
Power Research Institute, which funds $7 to $10 million per year of direct
climate research.
- Allegheny supports the Climate Challenge Initiatives in cooperation with
other utilities through Edison Electric Institute (EEI).
These initiatives include:
Envirotech Investment Fund, a venture capital fund for promising
electrotechnologies and renewable energy technologies to which Allegheny
has committed $3.11 million, of which $1.6 million has already been
spent; and $100,000 to the Geothermal Heat Pump Consortium; International
Utility Efficiency Partnership; and Utility Forest Carbon Management
Initiatives.
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- The Company spends about $2 million annually on in-house research projects
intended to improve efficiency, reliability and cost effectiveness.
Research results to date in these areas have contributed positively to
applications of new technology, operating efficiencies, reduced electrical
losses, and emission reductions.
- In Pennsylvania, under West Penn Power Company's restructuring plan, the
Company has invested $11 million in a fund to promote the development and
use of renewable energy; $8 million per year in a program for
weatherization and other community action programs; $4 million to provide
low income and rural households with the opportunity for clean and
renewable energy sources; a net metering rider to install and operate
renewable energy generation; and a solar water heater and photovoltaic
program as part of a low income energy pilot program.
The Company will also maintain its environmental awareness and compliance
with all applicable federal law and state implementation plans, as it has
throughout its history. Under the 1970 Clean Air Act and its 1990 Amendments and
the Clean Water Act and its Amendments, the Company has made capital investments
of over $1.6 billion for environmental control equipment. Allegheny is committed
to environmental stewardship and the research needed to provide answers to
difficult compliance problems. Even with these requirements, Allegheny remains
one of the most efficient providers of low cost electricity in America.
Allegheny Energy is participating in a variety of voluntary programs to
reduce emissions of greenhouse gases. However, no requirements or regulations
for involuntary reductions of greenhouse gas emissions exist at this time. Any
costs or liabilities for future required reductions or damages are highly
speculative in the absence of reduction requirements. It is not possible to
quantify these potential effects with any accuracy.
Allegheny Energy does not promote, nor does it belong to organizations that
promote, the view that the issue of climate change is not real or that global
warming may be beneficial.
The Company believes that it has taken prudent, adequate, and balanced steps
to protect the environment, consumers, shareholders, and the national interest
in energy security and will continue to do so.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE
PROPOSAL.
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SHAREHOLDER PROPOSAL REGARDING GOLDEN PARACHUTES
RESOLVED:
Golden Parachutes or executive severance pay/benefits, totaling more than
one-year of base salary must be approved by a majority of stockholders. This
includes a vote as a separate issue at the annual shareholder meeting or special
shareholder meeting. Base salary is listed in the annual proxy statement on page
14.
Such a severance package must be linked to the performance of Allegheny
Energy stock (and/or the merged company) over the next 3 years compared to the
Dow Jones Utilities Index.
The "one-year of base salary" parachute limit extends to all forms of pay
and benefits, but is not limited to cash, stock, options and benefits. The "100%
of base salary" parachute limit includes current pay and deferred pay.
This resolution also means that there is no severance pay for a merger with
less than 50% change in control. There is no severance pay for a merger that is
not completed or is aborted before completion.
SUPPORTING STATEMENT:
Golden Parachutes are generous severance agreements given to executives after a
merger. Golden parachutes need reasonable limits because executives already
receive substantial pay. Golden parachutes may reduce incentives to maximize
shareholder value during merger negotiations because management is guaranteed
specific benefits.
The recent failed DQE merger would have given Allegheny management
substantial Golden Parachutes of 3-times their maximum annual pay.
While management focused on the merger for 1-1/2 years, the day to day
operations suffered:
Allegheny reported for the first nine months of 1998:
- An extraordinary charge of $265 million
- A net loss of $50.6 million
BUSINESS WIRE Oct. 16, 1998
- HSBC Securities said its long-term Allegheny outlook "still contains
considerable uncertainty."
- HSBC said Allegheny has yet to announce its forward strategy and has
exposure to regulatory risk in both Maryland and West Virginia.
REUTERS Nov. 5, 1998
- Allegheny requested recoupment of $1.5 billion in stranded costs, but
regulators granted only $0.5 billion.
VALUE LINE Oct. 9, 1998
Management needs to give shareholder value higher priority. The Investor
Responsibility Research Center, Washington, DC, said management's 1998 stock
option plan had a potential shareholder dilution of 8% -- significantly higher
than the 2% average in the electric companies industry peer group. Institutional
Shareholder Services recommended a no vote. Institutional Shareholder Services
(www.cda.com/iss) is a proxy advisory firm for institutional shareholders.
Management's 1998 stock option plan was thus rejected by 30% of the
shareholder votes that counted -- against management's recommendation.
This 30%-rejection encourages shareholders to review management
recommendations more carefully.
Recent news reports highlight the need for reasonable limits on Golden
Parachutes, including:
- Please fire me:
- Many Hollywood executives find the fastest way to wealth is getting fired.
LOS ANGELES TIMES Nov. 19, 1998
Reasonable golden parachutes limits are needed to prevent management from
supporting a merger or acquisition proposal with the best golden parachute in
contrast to the best price for shareholders.
To maximize shareholder value give shareholders:
Opportunity to Vote on Golden Parachutes
Yes on 4
END OF SHAREHOLDER PROPOSAL
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SHAREHOLDER PROPOSAL REGARDING NOMINATION OF ADDITIONAL DIRECTORS
RESOLVED:
Shareholders recommend the board nominate, as a matter of routine, two
additional directors, one chosen from one of the company's recognized labor
unions, at labor's discretion, and one chosen from the unrepresented employees
at management's discretion.
SUPPORTING STATEMENT:
The electrical utility industry is in the midst of the most comprehensive and
far-reaching change ever experienced.
The shift is from:
- Regulated, vertically integrated companies with assigned franchised areas.
To:
- A system of regulated core transmission and distribution companies subject
to performance based rate-making.
This will introduce widespread competition between unregulated generation
and marketing companies.
In order to excel in this new environment, Allegheny must seek new ways to
create business opportunities by:
- Expanding our traditional work
- Broadly expanding the scope of the business in which we engage
- Providing better service
It is critical to respond positively and swiftly to these expanded
possibilities.
As employees, stockholders and customers of Allegheny, the workers'
perspective on the competitive operation of the company is a resource that the
Board should welcome. Since the redesign of Allegheny and the subsequent
electric deregulation in Pennsylvania, the need has never been greater for
direct communication from the field and shop floor to the boardroom.
Companies such as Chrysler, United Airlines, and Northwest Airlines have
benefited from boards that include employee/union members. This action will
serve as a source of significant value to ensure our company's future success.
Since boards typically include members cognizant of various constituents, such
as suppliers, customers, economics, academia and politics, it behooves the board
to include directors finely tuned to the challenges facing the workforce in
making our business more competitive.
Adding these two key directors is facilitated by current Allegheny by-laws
authorizing a 15-member board with 8 seats currently filled.
Human assets from the company's own workforce on the company's board will
pay dividends. Employees are acutely aware of the competitive business issues
the workforce encounters daily in the operation of this electric utility.
The best boards continue to raise the bar, said BUSINESS WEEK.
Vote for Employee Directors
YES ON 5
END OF SHAREHOLDER PROPOSAL
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YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL AND WILL SO
VOTE PROXIES RECEIVED THAT DO NOT OTHERWISE SPECIFY.
The Management Review and Director Affairs Committee serves as the
nominating committee for members of the Board of Directors of the Company. In
that capacity, the Committee will consider shareholder recommendations for
directors that are accompanied by a comprehensive written resume of the proposed
nominee's experience and background and a written consent of the proposed
nominee to serve as a director if nominated and elected. The Committee may also
use such other sources as it deems appropriate. The Committee considers the
following factors in proposing nominees to serve as directors: integrity,
compatibility, judgment, independence, experience and background in a useful
field, willingness to commit time and energy, and a genuine interest in the
investor-owned electric industry.
The Board believes that any potential candidate for the Board should be
appraised based on individual achievements, skills, and experience. The Board is
against considering a person for inclusion on (or exclusion from) the Board
based primarily on a position or membership in a particular constituency or
group. The Board believes that qualifications and not status should be the
criteria for Board membership. The Board further believes it would be contrary
to proper corporate governance to turn over selection of individual Board
nominees to any particular constituency or group.
Moreover, the Board believes that each director should represent all
shareholders. It is opposed to electing a director to represent a particular
point of view or particular constituency other than shareholders as a whole. In
this regard, it is important to the Board that its members possess a breadth of
experience, insight and knowledge to exercise independent judgment in carrying
out responsibilities for broad corporate policy and the overall performance of
Allegheny.
In the Board's view, the interests of shareholders are best served when the
Committee and the Board can exercise discretion to consider potential qualified
nominees. Qualified nominees will bring broad experience, skills and
perspectives to bear on Allegheny's efforts to achieve continued business
success and increase shareholder value.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE
PROPOSAL.
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MANAGEMENT REVIEW AND DIRECTOR AFFAIRS COMMITTEE REPORT
GENERAL
The compensation program for executive officers of the Company and its
subsidiaries is directed by the Management Review and Director Affairs Committee
(the Committee) of the Company's Board of Directors. The Committee recommends
the annual compensation program for each year to the Board of Directors of the
Company and of each subsidiary for its approval.
The Committee continues to believe that with the advent of competition to
this industry a larger portion of compensation should be included in incentive
plans. For 1999, a substantial portion of total compensation will continue to be
linked to corporate and business performance.
The executive compensation program is intended to meet three objectives:
- Create a strong link between executive compensation and total return to
stockholders.
- Offer compensation opportunities that are competitive with the median
level of opportunity in the marketplace, at expected levels of
performance, but exceed median levels for performance exceeding
expectations.
- Ensure internal compensation equity--maintaining a reasonable relationship
between compensation and the duties and responsibilities of each executive
position.
In a further effort to tie the executive compensation program to the overall
success of Allegheny, stock ownership guidelines were adopted for the executive
officers. The guidelines require the Chief Executive Officer (CEO) to own stock
valued at 3.5 times his base salary; the Senior Vice Presidents at 1.75 times
base salary; and the Vice Presidents at one times base salary. They have until
December 31, 2003 to meet the guidelines.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program has three components: base
salary and short-term and long-term incentive awards.
The Company's executive compensation is both market- and performance-based.
The Committee believes that it is necessary to use both market- and
performance-based compensation to meet the challenges of intensifying
competitive, economic, and regulatory pressures.
To ensure that the Company's salary structure and total compensation
continue to be competitive, they are compared each year through an annual
compensation survey, prepared by a leading consulting firm, with those of
comparable electric utilities--16 or more in recent years. The survey companies
are either similar in type and size to the Company, contiguous to our geographic
territory, or have a similar fuel mix.
In 1998, over 80% of these survey companies are included in the Dow Jones
Electric Index to which the Company's performance is compared on page 18 of this
proxy statement. This comparison, conducted by a national compensation
consulting firm, involves matching Company positions, including the CEO, with
those in the survey companies that have comparable duties and responsibilities.
For 1998, the survey indicated that the Company's executive salary structure was
below the median. This survey data became the basis for the consulting firm's
recommendations as to market prices for each position and total compensation in
line with the survey average for comparable positions.
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BASE SALARY:
The base salaries of all executive officers, including the CEO, are
reviewed annually by the Committee, which makes recommendations to the Board
of Directors. In recommending base salary levels, the Committee gives most
weight to the performance of each executive. The Committee receives a report
from the CEO including (a) a performance assessment of each executive (other
than himself) based on that executive's position-specific responsibilities
and a performance evaluation by his or her supervisor and (b) a specific
salary recommendation for each. In determining its recommendations to the
Board, the Committee also takes into consideration operating performance,
including such factors as safety, efficiency, competitive position, customer
satisfaction, and financial results, including such things as total return,
earnings per share, dividends paid, and dividend payout ratio.
SHORT-TERM INCENTIVE AWARDS:
The Allegheny Energy Annual Incentive Plan (the Annual Incentive Plan)
is designed to supplement base salaries and provide cash incentive
compensation opportunities to attract, retain, and motivate a senior group
of managers, including executive officers selected by the Committee. The
Annual Incentive Plan provides for establishment of individual incentive
awards based on meeting specific predetermined corporate performance
targets. The performance targets are based on net income available to common
shareholders, achieved shareholder return, overall corporate financial
results (changes in earnings per share, dividends paid per share, and
dividend payout ratios), cost of service to customers, and Company
performance, including competitive position. In addition, individual
performance goals are set on a position specific basis for participants.
Specific operating, management, or financial areas to be emphasized, as
well as performance targets, are determined each year by the Committee with
the recommendations of the CEO. The target awards under the 1998 Incentive
Plan were determined by the Committee, and participants could earn from zero
to 1 1/2 times the target award. For the 1998 Incentive Plan the targets
were $262,500 for Mr. Noia and from $80,000 to $140,000 for the other named
officers. Targets for other participants ranged from $70,000 and lower,
which is approximately 35% or less of 1998 base salary. Annual Incentive
Plan awards earned are paid in the year after the year for which they are
earned. Awards earned for performance in 1996, 1997, and 1998 are included
in the Annual Compensation Table for those years under the column "Incentive
Awards" for the individuals named therein.
LONG-TERM INCENTIVE AWARDS:
The Allegheny Energy, Inc. Long-term Incentive Plan (the Incentive Plan)
replaced the Allegheny Power System Performance Share Plan (the Performance
Share Plan) in 1998. Both plans were designed as an aid in attracting and
retaining individuals of outstanding ability. Awards earned under both plans
are based on performance over three-year "cycles." Eleven executive officers
of the Company and its subsidiaries were selected by the Committee to
participate in Cycle III (1996-1998); eleven in Cycle IV (1997-1999); and
eleven in Cycle V (1998-2000). Cycles III and IV provide for the
establishment of corporate incentive awards based on meeting specific
stockholder and customer performance rankings (total stockholder return
ranking in the Dow Jones Electric Utility Index and cost of customer service
versus nine other utilities). Cycle V is based solely on total stockholder
return ranking in the Dow Jones Electric Utility Index.
The Cycle III target awards under the Performance Share Plan range from
$70,000 for the named officers to $175,000 for Mr. Noia. These amounts
equate to 2,445 to 6,114 targeted shares of stock as of January 1, 1996, the
start of the performance cycle. The actual award calculated under the Plan
equaled 115% of the target amount. The dollar value of such shares
calculated as of December 31, 1998, including reinvested dividends, is
included in the compensation table on page 14.
12
<PAGE>
The Cycle IV target awards under the Performance Share Plan range from
$70,000 for the named officers to $230,000 for Mr. Noia, which equate to
2,300 to 7,570 shares of stock as of January 1, 1997, the start of the
performance cycle.
The Cycle V target awards under the Incentive Plan range from $80,000
for the named officers to $262,500 for Mr. Noia, which equate to 2,462 to
8,077 shares of stock as of January 1, 1998, the start of the performance
cycle. The target opportunity and the corresponding number of equivalent
performance shares allocated to each named executive officer for Cycle V are
listed in the Long-term Incentive Plan Table on page 16.
The actual payouts will be determined in 2000 for Cycle IV and in 2001
for Cycle V, after completion of each cycle and determination of the actual
stockholder and customer rankings. The actual awards may be paid in Company
stock or cash (Cycle IV) or Company stock, stock options, or cash (for Cycle
V) and can range from 0 to 200% of the targeted shares noted above.
For Mr. Noia, the Committee developed base salary and short-term and
long-term incentive award recommendations for the Board's consideration. The
base salary recommendation was based upon the Committee's evaluation of his
performance as CEO and of his responsibilities in the context of the Company's
overall financial and operating performance, including the factors described in
the next sentence. The Annual Incentive Plan award recommendation was based
primarily on 1998 corporate financial results, including total shareholder
return, changes in earnings per share, dividends paid per share, and dividend
payout ratios; the overall quality and cost of service rendered to customers;
and overall Allegheny Energy performance, including competitive position. The
Performance Share Plan Cycle III award recommendation was based on the
performance rankings described earlier. Mr. Noia's 1998 total compensation
reflected the Committee's evaluation of his performance as CEO and the described
overall results.
Section 162(m) of the Internal Revenue Code generally limits to $1 million
the corporate deduction for compensation paid to executive officers named in the
Proxy Statement, unless certain requirements are met. This Committee has
carefully considered the effect of this tax code provision on the current
executive compensation program. At this time, Allegheny's deduction for officer
compensation is not limited by the provisions of Section 162(m). The Committee
intends to take such actions with respect to the executive compensation program,
if necessary, to preserve the corporate tax deduction for executive compensation
paid.
No current member of the Management Review and Director Affairs Committee is
or ever was an employee of the Company or any of its subsidiaries.
Frank A. Metz, Jr., CHAIRMAN
Eleanor Baum
Steven H. Rice
Gunnar E. Sarsten
13
<PAGE>
EXECUTIVE COMPENSATION
During 1998, and for 1997 and 1996, the annual compensation paid by the
Company and its subsidiaries directly or indirectly to the Chief Executive
Officer and each of the four most highly paid executive officers of the Company
whose cash compensation exceeded $100,000 for services in all capacities to the
Company and its subsidiaries was as follows:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------------------------
PERFORMANCE
INCENTIVE SHARE PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY AWARDS (A) PAYOUT (B) COMPENSATION (C)
- - ------------------------------------------------- --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
ALAN J. NOIA 1998 $ 525,000 $ 180,500 $ 286,655 184,788
Chairman, President, Chief Executive Officer, 1997 460,000 253,000 250,657 124,495
and Director of the Company and Allegheny Power 1996 360,000 253,750 131,071 92,769
Service Corporation. Chairman of the Board of
the Company's other principal subsidiaries.
PETER J. SKRGIC 1998 $ 280,000 $ 123,000 $ 204,753 $ 50,757
Senior Vice President of the Company and 1997 265,000 155,400 150,394 91,409
Allegheny Power Service Corporation. Vice 1996 245,000 176,300 96,119 24,830
President and Director of the Company's other
principal subsidiaries.
MICHAEL P. MORRELL 1998 $ 255,000 $ 117,000 $ 114,870 $ 28,599 (d)
Senior Vice President of the Company and 1997 240,000 95,200 -- (d) 26,068
Allegheny Power Service Corporation. Vice 1996 183,336 72,500 -- (d) --
President and Director of the Company's other
principal subsidiaries.
JAY S. PIFER 1998 $ 250,000 $ 66,500 $ 131,042 $ 41,542
Senior Vice President of the Company and 1997 240,000 95,200 150,394 67,810
Allegheny Power Service Corporation. President 1996 230,000 112,000 87,381 30,949
and Director of the Company's other principal
subsidiaries.
RICHARD J. GAGLIARDI 1998 $ 200,000 $ 60,400 $ 114,662 $ 25,345
Vice President of the Company and Allegheny 1997 190,000 75,600 100,263 25,340
Power Service Corporation and of certain of the 1996 175,000 100,800 52,429 17,898
Company's other subsidiaries.
</TABLE>
- - ------------------------
(a) Incentive awards (primarily Annual Incentive Plan awards) are based upon
performance in the year in which the figure appears but are paid in the
following year. The Annual Incentive Plan will be continued for 1999.
(b) In 1994, the Board of Directors of the Company implemented a Performance
Share Plan (the "Plan") for senior officers of the Company and its
subsidiaries which was approved by the shareholders of the Company at the
annual meeting in May 1994. The first Plan cycle began on January 1, 1994
and ended
14
<PAGE>
on December 31, 1996. A second cycle began on January 1, 1995 and ended on
December 31, 1997. The figure shown for 1996 represents the dollar value
paid in 1997 to each of the named executive officers who participated in
Cycle I. The figure shown for 1997 represents the dollar value paid in 1998
to each of the named executive officers who participated in Cycle II. A
third cycle began on January 1, 1996 and ended on December 31, 1998. The
figure shown for 1998 represents the dollar value paid in 1999 to each of
the named executives who participated in Cycle III. A fourth cycle began on
January 1, 1997 and will end on December 31, 1999. In 1998, the Board of
Directors of the Company (AE) implemented a new Long-term Incentive Plan,
which was approved by the shareholders of AE at the annual meeting in 1998.
A fifth cycle (the first three-year performance period of this plan) began
on January 1, 1998 and will end on December 31, 2000. After completion of
each cycle, AE stock, stock options (for Cycle V), cash, or a combination
may be paid if performance criteria have been met.
(c) The figures in this column include the present value of the executives' cash
value at retirement attributable to the current year's premium payment for
both the Executive Life Insurance and Secured Benefit Plans (based upon the
premium, future valued to retirement, using the policy internal rate of
return minus the corporation's premium payment), as well as the premium paid
for the basic group life insurance program plan and the contribution for the
Employee Stock Ownership and Savings Plan (ESOSP) established as a
non-contributory stock ownership plan for all eligible employees effective
January 1, 1976, and amended in 1984 to include a savings program.
Effective January 1, 1992, the basic group life insurance provided employees
was reduced from two times salary during employment, which reduced to one
times salary after five years in retirement, to a new plan which provides
one times salary until retirement and $25,000 thereafter. Some executive
officers and other senior managers remain under the prior plan. In order to
pay for this insurance for these executives, during 1992 insurance was
purchased on the lives of each of them, except Mr. Morrell, who is not
covered by this plan. Effective January 1, 1993, Allegheny started to
provide funds to pay for the future benefits due under the supplemental
retirement plan (Secured Benefit Plan). To do this, Allegheny purchased,
during 1993, life insurance on the lives of the covered executives. The
premium costs of both policies plus a factor for the use of the money are
returned to Allegheny at the earlier of (a) death of the insured or (b) the
later of age 65 or 10 years from the date of the policy's inception. Under
the ESOSP for 1998, all eligible employees may elect to have from 2% to 10%
of their compensation contributed to the Plan as pre-tax contributions and
an additional 1% to 6% as post-tax contributions. Employees direct the
investment of these contributions into one or more of nine available funds.
Fifty percent of the pre-tax contributions up to 6% of compensation are
matched with common stock of the Company. Effective January 1, 1997 the
maximum amount of any employee's compensation that may be used in these
computations is $160,000. Employees' interests in the ESOSP vest
immediately. Their pre-tax contributions may be withdrawn only upon meeting
certain financial hardship requirements or upon termination of employment.
For 1998, the figure shown includes amounts representing (a) the aggregate
of life insurance premiums and dollar value of the benefit to the executive
officer of the remainder of the premium paid on the Group Life Insurance
program and the Executive Life Insurance and Secured Benefit Plans, and (b)
ESOSP contributions respectively, as follows: Mr. Noia $179,988 and $4,800;
Mr. Skrgic $45,957 and $4,800; Mr. Pifer $36,742 and $4,800; Mr. Morrell
$25,399 and $3,200; and Mr. Gagliardi $20,545 and $4,800; respectively.
(d) Michael P. Morrell joined the Company on May 1, 1996 and did not receive a
payment from the Performance Share Plan for the first or second Plan cycles.
The Cycle III payout is prorated for the period May 1, 1996--December 31,
1998.
------------------------
15
<PAGE>
ALLEGHENY ENERGY, INC. LONG-TERM INCENTIVE PLAN
SHARES AWARDED IN LAST FISCAL YEAR
(CYCLE V)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE -------------------------------------
PERIOD THRESHOLD TARGET MAXIMUM
UNTIL NUMBER OF NUMBER OF NUMBER OF
NAME PAYOUT SHARES SHARES SHARES
- - --------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Alan J. Noia................................................... 1998-00 4,846 8,077 16,154
Chief Executive Officer
Peter Skrgic................................................... 1998-00 2,585 4,308 8,615
Senior Vice President
Michael P. Morrell............................................. 1998-00 1,846 3,077 6,154
Senior Vice President
Jay S. Pifer................................................... 1998-00 1,754 2,923 5,846
Senior Vice President
Richard J. Gagliardi........................................... 1998-00 1,477 2,462 4,923
Vice President
</TABLE>
The named executives were awarded the above number of performance shares for
Cycle V. Such number of shares are only targets. As described below, no payouts
will be made unless certain criteria are met. Each executive's 1998-2000 target
long-term incentive opportunity was converted into performance shares equal to
an equivalent number of shares of the Company's common stock based on the price
of such stock on December 31, 1997. At the end of this three-year performance
period, the performance shares attributed to the calculated award will be valued
based on the price of the Company's common stock on December 31, 2000 and will
reflect dividends that would have been paid on such stock during the performance
period as if they were reinvested on the date paid. If an executive retires,
dies or otherwise leaves the employment of the Company prior to the end of the
three-year period, the executive may still receive an award based on the number
of months worked during the period. The final value of an executive's account,
if any, will be paid to the executive in early 2001.
The actual payout of an executive's award may range from 0 to 200% of the
target amount, before dividend reinvestment. The Management Review and Director
Affairs Committee may decide to convert the value of such performance shares to
stock options at that time or deliver cash or shares of common stock. The payout
is based upon stockholder performance versus the peer group. The stockholder
rating is then compared to a pre-established percentile ranking chart to
determine the payout percentage of target. A ranking below 30% results in a 0%
payout. The minimum payout begins at the 30% ranking, which results in a payout
of 60% of target, ranging up to a payout of 200% of target if there is a 90% or
higher ranking.
RETIREMENT PLAN
The Company maintains a Retirement Plan covering substantially all
employees. The Retirement Plan is a noncontributory, trusteed pension plan
designed to meet the requirements of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the Code). Each covered employee is eligible for retirement
at normal retirement date (age 65), with early retirement permitted. In
addition, executive officers and other senior managers participate in a
supplemental executive retirement plan (Secured Benefit Plan).
Pursuant to the Secured Benefit Plan senior executives of Allegheny
companies who retire at age 60 or over with 40 or more years of service are
entitled to a supplemental retirement benefit in an amount that, together with
the benefits under the basic plan and from other employment, will equal 60% of
the executive's highest average monthly earnings for any 36 consecutive months.
Beginning February 1, 1996 the earnings include 50% of the actual annual
incentive award paid and 100% beginning February 1, 1999. The supplemental
benefit is reduced for less than 40 years service and for retirement age from 60
to 55. It
16
<PAGE>
is included in the amounts shown where applicable. To provide funds to pay such
benefits, beginning January 1, 1993 the Company purchased insurance on the lives
of the participants in the Secured Benefit Plan. If the assumptions made as to
mortality experience, policy dividends, and other factors are realized, the
Company will recover all premium payments, plus a factor for the use of the
Company's money. The portion of the premiums for this insurance required to be
deemed "compensation" by the Securities and Exchange Commission is included in
the "All Other Compensation" column on page 14 of this proxy statement. All
executive officers are participants in the Secured Benefit Plan. It also
provides for use of Average Compensation in excess of Code maximums.
The following table shows estimated maximum annual benefits payable
following retirement (assuming payments on a normal life annuity basis and not
including any survivor benefit) to an employee in specified remuneration and
years of credited service classifications. These amounts are based on an
estimated Average Compensation (defined as average total earnings during the
highest-paid 36 consecutive calendar months or, if smaller, the member's highest
rate of pay as of any July 1st), retirement at age 65 and without consideration
of any effect of various options which may be elected prior to retirement. The
benefits listed in the Pension Plan Table are not subject to any deduction for
Social Security or any other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------------------------
AVERAGE COMPENSATION(A) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- - ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$200,000................................ $ 60,000 $ 80,000 $ 100,000 $ 110,000 $ 115,000 $ 120,000
250,000................................ 75,000 100,000 125,000 137,500 143,750 150,000
300,000................................ 90,000 120,000 150,000 165,000 172,500 180,000
350,000................................ 105,000 140,000 175,000 192,500 201,250 210,000
400,000................................ 120,000 160,000 200,000 220,000 230,000 240,000
450,000................................ 135,000 180,000 225,000 247,500 258,750 270,000
500,000................................ 150,000 200,000 250,000 275,000 287,500 300,000
550,000................................ 165,000 220,000 275,000 302,500 316,250 330,000
600,000................................ 180,000 240,000 300,000 330,000 345,000 360,000
650,000................................ 195,000 260,000 325,000 357,500 373,750 390,000
700,000................................ 210,000 280,000 350,000 385,000 402,500 420,000
750,000................................ 225,000 300,000 375,000 412,500 431,250 450,000
800,000................................ 240,000 320,000 400,000 440,000 460,000 480,000
</TABLE>
- - ------------------------
(a) The earnings of Messrs. Noia, Skrgic, Pifer, Gagliardi and Morrell covered
by the plan correspond substantially to such amounts shown for them in the
annual compensation table. As of December 31, 1998, they had accrued 29, 34,
34, 20, and 2 1/2 years of credited service, respectively, under the
Retirement Plan. Pursuant to an agreement with Mr. Morrell, at the end of
ten years of employment with the Company, Mr. Morrell will be credited with
an additional eight years of service.
CHANGE IN CONTROL CONTRACTS
The Company has entered into Change in Control contracts with the named and
certain other executive officers (Agreements). Each Agreement sets forth (i) the
severance benefits that will be provided to the employee in the event the
employee is terminated subsequent to a Change in Control of the Company (as
defined in the Agreements) and (ii) the employee's obligation to continue his
employment after the occurrence of certain circumstances that could lead to a
Change in Control. The Agreements provide generally that if there is a Change in
Control, unless employment is terminated by the Company
17
<PAGE>
for Cause, Disability or Retirement or by the employee for Good Reason (each as
defined in the Agreements), severance benefits payable to the employee will
consist of a cash payment equal to 2.99 times the employee's base annual salary
and target short-term incentive together with the Company maintaining existing
benefits for the employee and the employee's dependents for a period of three
years. Each Agreement expires on December 31, 2001 but is automatically extended
for one year periods thereafter unless either the Company or the employee gives
notice otherwise. Notwithstanding the delivery of such notice, the Agreements
will continue in effect for thirty-six months after a Change in Control.
PERFORMANCE GRAPH
The graph set forth below compares the Company's cumulative total
stockholder return on its Common Stock with the Dow Jones Electric Utility Index
and the Standard & Poor's Midcap 400 Index at each December 31 during the period
beginning December 31, 1994 and ending December 31, 1998, and assumes the
investment of $100 in each on December 31, 1994 and the reinvestment of all
dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Allegheny Energy 100 88 124 140 159 178
Dow Jones Electrics 100 88 115 116 147 169
S&P Midcap 400 100 96 126 150 199 237
</TABLE>
<TABLE>
<CAPTION>
December 31 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Allegheny Energy 100 88 124 140 159 178
Dow Jones
Electrics 100 88 115 116 147 169
S&P Midcap 400 100 96 126 150 199 237
</TABLE>
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows the number of shares of Common Stock that are
beneficially owned, directly or indirectly, by each director and each named
executive officer of the Company, and by all directors and executive officers of
the Company as a group as of March 15, 1999. To the best of the knowledge of the
Company, there is no person who is a beneficial owner of more than 5% of the
outstanding shares of Common Stock except for Sanford C. Bernstein & Co., Inc.,
One State Street Plaza, New York, NY 10004, which at December 31, 1998 was the
beneficial owner of 7,948,382 shares, or 6.49%
<TABLE>
<CAPTION>
SHARES OF
AE, INC. PERCENT
NAME COMMON STOCK OF CLASS
- - ---------------------------------------------------------- -------------- -----------------
<S> <C> <C>
Eleanor Baum.............................................. 3,000 .03% or less
William L. Bennett........................................ 3,770 "
Richard J. Gagliardi...................................... 13,816 "
Wendell F. Holland........................................ 1,257 "
Phillip E. Lint........................................... 1,717 "
Frank A. Metz, Jr......................................... 3,555 "
Michael P. Morrell........................................ 3,533 "
Alan J. Noia.............................................. 36,135 "
Jay S. Pifer.............................................. 18,290 "
Steven H. Rice............................................ 3,840 "
Gunnar E. Sarsten......................................... 7,000 "
Peter J. Skrgic........................................... 21,949 "
All directors and executive officers of the Company as a
group (18 persons)...................................... 152,683 .12%
</TABLE>
- - ------------------------
* Excludes the outside directors' accounts in the Deferred Stock Unit Plan
which, on March 1, 1999, were valued at the number of shares shown: Baum,
3,463; Bennett, 1,720; Holland, 1,578; Lint, 5,084; Metz, 3,732; Rice, 2,270
and Sarsten, 3,159.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. No director or officer failed to file such reports on a
timely basis in 1998.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the meeting. If any other matters properly come before the meeting, it is
the intention of the persons named in the proxy to vote the proxy thereon in
accordance with their judgment.
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by officers, directors, and
regular employees of the Company and its subsidiaries personally, by telephone
or other means, and the Company may reimburse persons holding stock in their
names or in the names of their nominees for their expenses in sending soliciting
material to their principals.
It is important that proxies be returned promptly. Stockholders are,
therefore, urged to mark, date, sign and return the proxy immediately. No
postage need be affixed if mailed in the enclosed envelope in the United States.
19
<PAGE>
DEADLINE FOR SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by the Company for
inclusion in the proxy materials relating to the next annual meeting is December
16, 1999.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IMMEDIATELY. NO POSTAGE IS
NECESSARY IF MAILED IN THE ENCLOSED ENVELOPE IN THE UNITED STATES.
20
<PAGE>
PROXY
[LOGO TO COME]
ALLEGHENY ENERGY, INC.
10435 DOWNSVILLE PIKE
HAGERSTOWN, MARYLAND 21740
PROXY FOR USE AT ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Alan J. Noia, Thomas K.
Henderson and Eileen M. Beck, and each of them, Proxies, with full power of
substitution, to vote all shares the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Allegheny Energy, Inc. to be held on the 11th
Floor of 270 Park Avenue, between 47th and 48th Street, New York, New York, on
May 13, 1999, at 10:30 a.m., New York time, and at any adjournments thereof,
with all the powers the undersigned would possess if personally present, as
hereinafter specified by the undersigned on the proposals listed on the reverse
side hereof and in their discretion on such matters as may properly come before
the meeting.
WHEN PROPERLY EXECUTED AND RETURNED, THIS PROXY WILL BE VOTED AS SPECIFIED
BY THE UNDERSIGNED STOCKHOLDER. IF NO VOTING SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2 AND "AGAINST" ITEMS
3 AND 4.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, Maryland 21740
Please mark
your votes as /X/
indicated by
this example
<TABLE>
<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1.
Item 1-- Election of the following nominees as Directors:
Eleanor Baum,
William I. Bennett, WITHHOLD
Wendall F. Holland, FOR all for all
Phillip E. Lini, nominees nominees
Frank A. MBtz, Jr., / / / /
Alan J. Nois,
Steven H. AlGB, and
Gunnar E. Sarsten
</TABLE>
To Withhold authority to vote for any nominees, write the name on the line below
- - ------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2.
<TABLE>
<S> <C> <C> <C>
Item 2--Approval of appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP / / / / / /
as independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM 3.
Item 3--Shareholder proposal regarding "global warming". FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM 4.
Item 4--Shareholder proposal regarding "golden paruchutes". FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
Signature(s) ____________________________________ Date __________________, 1999.
(Please sign your name(s) exactly as shown above).
