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            No     X    

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

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 has been authorized by the Pennsylvania PUC 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.

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. 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. In December 2002, the Servicer completed its adjustment request filing, and new rates became effective on January 1, 2003, which increased ITC collections by approximately $600,000. West Penn has made its initial f iling in connection with its 2003 adjustment request for rates to become effective January 1, 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.

ITEM 2.     PROPERTIES

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

ITEM 3.     LEGAL PROCEEDINGS

None.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders in the fourth quarter of 2002.

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

(a)  Market Information. The Company has no equity securities. West Penn Funding Corporation, which is a wholly-owned subsidiary of West Penn, owns all of the membership interests in the Company.

(b)  Holders. All of the membership interests in the Company are owned by West Penn Funding Corporation.

(c)  Dividends. The Company may not make any payments, distributions, or dividends to its member with respect to its membership interest in the Company, except in accordance with the Indenture. As outlined in the Indenture, the Company shall not, directly or indirectly, pay any dividends or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities, or a combination thereof, to any owner of a beneficial interest in the Company or otherwise with respect to any ownership or equity interest in, or ownership security of, the Company. The Company may not, directly or indirectly, redeem, purchase, retire, or otherwise acquire for value any such ownership or equity interest or security or set aside or otherwise segregate any amounts for any such purpose.

• regulation and the status of retail electricity service in Pennsylvania;

• regulatory action of the Pennsylvania PUC with respect to ITC;

• sufficiency and recoverability of ITC revenues;

• demand for energy;

• results of operations;

• regulatory matters;

• internal controls and procedures and outstanding financial reporting obligations; and

• accounting issues.

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:

• loss of revenue due to changes in usage, delinquencies, write-offs, or regulatory action of the Pennsylvania PUC;

• changes in laws and regulations in Pennsylvania;

• inaccuracies of projections;

• delays in payment by customers;

• changes in rate schedules or payment terms related to the collection of ITC revenues in Pennsylvania by West Penn;

• changes in billing policies and practices by West Penn;

• general economic and business conditions;

• the continuing effects of global instability, terrorism, and war;

• changes in the weather and other natural phenomena; and

• the effect of accounting policies issued periodically by accounting standard-setting bodies.

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 Energy, Inc. (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

In November 2002, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which requires disclosures by a guarantor concerning its obligations under certain guarantees that it has issued. FIN 45 also requires recognizing, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The recognition and measurement provisions of FIN 45 are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The Company does not anticipate that FIN 45 will have a material effect on its statement of operations and financial position. Various other new accounting pronouncements that were effective in 2002 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 pron ouncements, effective in 2003, will not have a significant impact on its financial statements.

REVIEW OF OPERATIONS

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.

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 $(151,000) in 2002, $31,000 in 2001, and $116,000 in 2000. The loss for 2002 included the correction of certain accounting errors related to financial statements prior to 2002 as discussed in Note 2 to the financial statements. The adjustments to correct these errors increased the net loss in 2002 by $164,000.

ITC billings resulted in operating revenue of $105.6 million, $98.6 million and $96.0 million for 2002, 2001 and 2000, respectively. Revenue increased by $7.0 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. Operating expenses were relatively flat for 2002 and 2001. In 2002, the Company recorded $1.3 million in operating expense, compared to $1.4 million in 2001 and 2000. As outlined in the Indenture, the Company made annual payments of $1.25 million in 2002, 2001 and 2000 to West Penn to administer the Bonds.

Amortization of Intangible Transition Property: The ITP is being amortized over the life of the Bonds, based on ITC revenues, plus interest income less accrued interest, on the Bonds, servicing fees, and other administrative expenses. The amortization of ITP increased by $11.7 million and $5.9 million in 2002 and 2001, respectively, mainly due to higher revenues and lower interest on the Transition Bonds.

Other Income

Other income and expense decreased $.1 million and $.2 million in 2002 and 2001, respectively. Other income and expense consists of interest income earned on the investments in the General and Capital Subaccounts.

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, 2002, the Capital Subaccount's balance is $2.4 million. The Capital Subaccount is classified as "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 $.2 million, $.3 million, and $.5 million, for 2002, 2001, and 2000, 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 2001 and 2002.

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.

Interest Charges

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

The Company recorded a decrease in interest expense on the Transition Bonds of $4.4 million and $3.4 million in 2002 and 2001, respectively. Interest expense has decreased based on the declining Bond balance.

Amortization of the debt issuance expense and discounts remained relatively flat over the three-year period ending December 31, 2002.

Federal Income Taxes

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 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 a ccompanying consolidated balance sheet was $346.7 million as of December 31, 2002. To date, none of the debt holders have provided the Company with any notices of default under the agreement. Such notices, if received, would allow the Company 30 days to cure its noncompliance before the debt holders could accelerate the due dates of the Bonds.

During 2002 and 2003, 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.

Cash Flow

Cash flow from operations was $72.6 million, $61.7 million, and $41.5 million in 2002, 2001, and 2000, respectively. Cash flows from operations increased $10.8 million in 2002, compared with an increase of $20.3 million in 2001. 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 on the Bonds. The increase in 2001 was mainly due to increased ITC revenues, lower interest payments, and decreased accounts receivable.

Cash flows used in financing activities increased $9.3 million in 2002, compared with an increase of $19.6 million in 2001. The increase in both years was a direct result of the increased ITC billings and collections which resulted in increased bond principal payments.

West Penn, as Servicer, remitted to the Trustee a total of $105.6 million of ITC collections during 2002. During 2001, West Penn remitted to the Trustee a total of $98.8 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, principal payments were scheduled at $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, principal payments were scheduled and issued at $17.4 million. 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 2003, West Penn, as Servicer, filed a request for an adjustment to the ITC with the Pennsylvania PUC on December 10, 2002. On December 19, 2002, the Pennsylvania PUC approved West Penn's request and allowed West Penn to recover the required ITC amounts in rates effective January 1, 2003. West Penn has made its initial filing in connection with its 2003 adjustment request for rates to become effective January 1, 2004.

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.

These notes are an integral part of the financial statements.

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

West Penn Funding LLC (the Company), a limited liability company established under the laws of the State of Delaware, was formed in May 1999. West Penn Funding Corporation is the sole member of the Company. West Penn Funding Corporation is a wholly-owned subsidiary of West Penn Power Company (West Penn), an operating electric utility. West Penn is a wholly-owned subsidiary of Allegheny Energy, Inc. (Allegheny), a public utility holding company.

The Company was organized for the sole purpose of purchasing and owning Intangible Transition Property (ITP), issuing Transition Bonds (Bonds), pledging its interest in ITP and other collateral to the bond trustee, and performing activities that are necessary, suitable, or convenient to accomplish these purposes. ITP represents the irrevocable right of West Penn, or its successor or assignee, to collect a non-bypassable Intangible Transition Charge (ITC) from customers pursuant to a Qualified Rate Order (Pennsylvania PUC Order) issued on November 19, 1998, and supplemented by order dated August 12, 1999, by the Pennsylvania Public Utility Commission (Pennsylvania PUC) in accordance with the Pennsylvania Electricity Generation Customer Choice Order and Competition Act (Competition Act), enacted in December 1996. In November 1999, West Penn transferred the ITP to West Penn Funding Corporation, which then sold the ITP to the Company.

The Company issued $600 million of Bonds in four different classes on November 16, 1999. See Note 3 for additional information. The proceeds were used to fund the purchase of ITP. The ITP and restricted funds were used to collateralize the Bonds. Under applicable law, the Bonds are recourse to the Company and are collateralized on a pro rata basis by the ITP and the equity and other assets of the Company. The source of repayment of the Bonds is the ITC revenues authorized pursuant to the Pennsylvania PUC Order, under which charges are collected from West Penn customers by West Penn, as Servicer.

ITC collections are deposited by West Penn with the Company and are used to pay the expenses of the Company, to pay debt service on the Bonds, and to fund credit enhancement for the Bonds.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America (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. On a continuous basis, the Company evaluates its estimates, including those related to the provisions for amortization, income taxes, and contingencies related to litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the normal course of business, estimated amounts are subsequently adjusted to actual results.

Revenue

The Company records intangible transition revenues in the period ITC is billed to customers by West Penn.

Amortization of Intangible Transition Property

Cash and Temporary Cash Investments

For purposes of the statement of cash flows, temporary cash investments with original maturities of three months or less, generally in the form of commercial paper, certificates of deposit, and repurchase agreements, are considered to be the equivalent of cash.

Restricted Funds

Under the Indenture, the Company deposited an amount equal to 0.5 percent of the initial principal amount of the Bonds into the "Capital Subaccount" with Deutsche Bank Trust Company (formerly Bankers Trust Company), a New York banking corporation (the Bond Trustee). West Penn Funding Corporation contributed this amount to the Company. This account is the last account drawn in the event that the "General Subaccount" collections are insufficient to make required payments. If the "Capital Subaccount" is used, it will be replenished from the ITC remittances to its original level through a periodic reconciliation process. Accordingly, the "Capital Subaccount" is classified as Restricted Funds on the balance sheet. See Note 3 to the Financial Statements for additional information.

After the Bonds are paid in full, any remaining amounts that collateralize the Bonds will be released to the Company. The restricted fund balance in the Capital Subaccount was $2.4 million and $1.6 million at December 31, 2002, and 2001, respectively.

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 No. 71 (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. These regulatory assets or liabilities reflect the economic effects of decisions by regulators. 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.

Income Taxes

The Company joins with Allegheny and affiliates in filing a consolidated federal income tax return. The consolidated income tax liability is allocated among the participants generally in proportion to the taxable income of each participant, except that no subsidiary pays tax in excess of its separate return tax liability. For the Company, the difference between the effective tax rate and the statutory tax rate of 35 percent is not significant. See Note 5 for additional information regarding income taxes.

Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income," established standards for reporting comprehensive income and its components (revenues, expenses, gains, and losses) in the financial statements. The

Company does not have any elements of other comprehensive income to report in accordance with SFAS No. 130.

New Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which requires disclosures by a guarantor concerning its obligations under certain guarantees that it has issued. FIN 45 also requires recognizing, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The recognition and measurement provisions of FIN 45 are effective on a prospective basis for guarantees issued or modified after December 31. 2002. The Company does not anticipate that FIN 45 will have a material effect on its statement of operations and financial position.

Various other new accounting pronouncements that were effective in 2002 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.

NOTE 2: COMPREHENSIVE FINANCIAL REVIEW

After Allegheny filed its quarterly report on Form 10-Q for the period ended June 30, 2002, Allegheny identified a miscalculation in its business segment information. Following the discovery of this miscalculation, and in light of Allegheny's prior restatements of reports filed with the SEC, Allegheny and the Company initiated a comprehensive review of its financial processes, records, and internal controls to ensure that its current and prior financial statements, including the financial statements of the Company, are fairly presented in accordance with GAAP.

As a result of Allegheny's and the Company's comprehensive accounting review, the Company identified, prior to closing its books for 2002, various errors relating to the financial statements for 2001, 2000, and years prior to 2000, including certain accounting errors related to the Company's financial statements. Allegheny's management concluded that these errors for the Company were not material, either individually or in the aggregate, to the current year or any prior years' financial statements. Accordingly, prior year financial statements have not been restated. Rather, the first quarter of 2002 reflects adjustments, which decreased net income by approximately $245,000 before income taxes ($164,000 net of income taxes), predominantly related to errors in the calculation of the amortization of ITP in fiscal years 2001, 2000, and years prior to 2000. These errors have had no effect on the Company's ability to service its Transition Bonds or meet its other financial obligations.

In November 1999, the Company issued $600 million of Series 1999-A Bonds. The Bonds consisted of four classes with various interest rates based on the scheduled maturity date for each class, ranging from Class A-1 at 6.32 percent to Class A-4 at 6.98 percent (refer to schedule below). The Company used the proceeds from the Bonds to purchase ITP from West Penn Funding Corporation. The ITP and other assets of the Company collateralize the Bonds. In 2001, the Class A-1 bonds were retired.

Total
Unamortized debt discount

 422,688

On payment in full of the Bonds, any remaining amounts that collateralize the Bonds will be released to the Company.

The expected final payment date for the Series 1999-A Bond is the date upon which the Company expects to make the final payment on such Bond. This expectation is based upon its estimate of collections of ITC. The actual dates on which principal is paid on each class of Transition Bonds are affected by the amount and timing of receipt of collections of ITC. If collections of ITC are received at a slower rate than expected, payments on the Transition Bonds may be made later than expected. Although the final payment may be made later than the expected final payment date, it must be made before the termination date. The Series 1999-A Bonds will not be in default unless they are not paid in full by their respective termination dates, as defined under the Indenture. In general, the termination dates are two years following the expected final payment date.

NOTE 5:  INCOME TAXES

The carrying value of the Bonds, as stated above, does not reflect the netting of the unamortized discount of $38,000 and $60,000 for December 31, 2002 and December 31, 2001, respectively, as shown on the balance sheet. The fair value of the Bonds was estimated based on actual market prices or market prices of similar issues. The Company has no financial instruments held or issued for trading purposes.

The balance sheet includes a receivable from West Penn of $14.8 million at December 31, 2002, and 2001, for ITC collections.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company is not in compliance with reporting obligations contained in its Series 1999-A Bonds' covenants and, as a result, these Bonds were classified as current which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Mr. Morrell was awarded the above number of performance shares for Cycle IX under the LTIP. Such number of shares is only a target. Mr. Morrell's 2002-2004 target long-term incentive opportunity was converted into performance shares equal to an equivalent number of shares of Allegheny common stock, based on the price of such stock on December 31, 2001. The plan provides that 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 Allegheny common stock on December 31, 2004, 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 AE Companies prior to the end of the three-year period, the executive may nevertheless 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 executiv e in early 2005.

The actual payout of an executive's award may range from zero to 200 percent of the target amount before dividend reinvestment. 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 percent results in a zero-percent payout. The minimum payout begins at the 30-percent ranking, which results in a payout of 60 percent of target, ranging up to a payout of 200 percent of target if there is a 90-percent or higher ranking.

Prior to his retirement, Mr. Morrell was party to an employment contract providing for specified levels of severance protection based on the reason for termination, and a change in control contract setting forth the severance benefits to be provided to him in the event of his termination subsequent to a Change in Control of Allegheny (as defined in the contract) and his obligation to continue his employment after the occurrence of certain circumstances that could lead to a Change in Control. As described below, Mr. Morrell's election to retire pursuant to the ERO in September 2003 has effected the termination of his employment agreement and change in control contract with Allegheny.

The Company has a contract with its two independent directors (Beth L. Peoples and Michael G. Morgan), whereby the Company retains the directors to perform the duties of independent director in consideration of $1,250 per year. The base fee will be increased in the event of an increase in the cost of living. None of the other directors receive compensation for their services as a director for the Company.

West Penn Funding Corporation is a 100 percent holder of the membership interests in the Company. There are no equity compensation plans.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

West Penn, as Servicer, currently provides various services to the Company, including financial, collection, servicing, and other administrative support.

ITEM 14.     CONTROLS AND PROCEDURES

These accounting errors resulted principally from internal control deficiencies, which were identified by Allegheny and the Company during the course of the comprehensive financial review. See ITEM 14 -- Controls and Procedures in the Annual Report on Form 10-K for Allegheny for additional information.

Due to the ongoing comprehensive financial review and accounting errors identified by Allegheny, the Company delayed the filing of its annual report, and has not filed its quarterly reports on Form 10-Q for the periods ended September 30, 2002, March 31, 2003, and June 30, 2003.

Based on the results of its comprehensive financial review, management was able to determine that the Company's financial statements for periods prior to 2002 do not require restatement as discussed in Note 2 to the financial statements. Allegheny, for itself and its subsidiaries, has implemented corrective actions to mitigate the risk that its internal control deficiencies could lead to material misstatements in the financial statements filed as part of this Form 10-K. Allegheny developed and implemented a plan to perform significant additional procedures designed to mitigate the effects of the deficiencies in internal controls and hired outside professional services firms to assist in the performance of the additional procedures.

To address the weaknesses identified in Allegheny's and the Company's internal controls and disclosure practices, Allegheny and the Company substantially augmented and revised its procedures in connection with the preparation of this report. These augmented procedures involved the creation of a formal drafting group to comprehensively review, revise, and update disclosure over an iterative process. This exercise also involved a heightened degree of direct involvement by senior officers, including the Principal Executive Officer of the Company. The principal elements of these augmented procedures have formed the basis for the Company's written disclosure controls and procedures applicable to future periodic reports and certain public communications.

Allegheny and the Company have created a Disclosure Committee, which is chaired by Allegheny's General Counsel and is currently comprised of executives, including Allegheny's Chief Risk Officer, Vice President and Controller, Director of Audit Services, and Vice President, Corporate Communications, as well as the senior officers responsible for Allegheny's segments. The Disclosure Committee's principal functions are to establish, maintain, monitor and evaluate Allegheny's and its subsidiaries' written disclosure controls and procedures and to supervise and coordinate the preparation of their periodic reports and certain other public communications.

Following its formation, the Disclosure Committee adopted formal written disclosure controls and procedures. These newly adopted disclosure controls and procedures will be applicable to Allegheny's and the Company's future periodic reports and certain public communications.

The Disclosure Committee, with the participation of our management, including the Company's Principal Executive and Chief Financial Officer, reviewed the augmented procedures implemented by Allegheny and the Company in connection with the preparation of this report and found them to be satisfactory. However, until Allegheny completes the actions described above to achieve improvements in its internal controls, Allegheny and the Company intend to devote additional resources to ensure that its public disclosures are accurate.

SIGNATURES

Form 10-K of the Company (333-79619),

Form 10-K of the Company (333-79619),

Form 10-K of the Company (333-79619),

Form 10-K of the Company (333-79619),

Form 10-K of the Company (333-79619),

Form 10-K of the Company (333-79619),