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FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For Quarterly Period Ended March 31, 2004

Commission File Number: 333-79619

WEST PENN FUNDING LLC

(Exact name of registrant as specified in its charter)

2325-B Renaissance Drive Suite 10, Las Vegas, NV 89119

Telephone Number—(702) 895-6752

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 (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes         ¨  No

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

West Penn Funding LLC (the Registrant) is a Delaware limited liability company, whose sole member is West Penn Funding Corporation.

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WEST PENN FUNDING LLC

Form 10-Q for Quarter Ended March 31, 2004

Contents

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PART I.    FINANCIAL INFORMATION:

ITEM 1.    FINANCIAL STATEMENTS

WEST PENN FUNDING LLC

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

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WEST PENN FUNDING LLC

STATEMENTS OF CASH FLOWS

See accompanying notes to financial statements.

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WEST PENN FUNDING LLC

BALANCE SHEETS

See accompanying notes to financial statements.

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WEST PENN FUNDING LLC

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1:    BASIS OF PRESENTATION

The accompanying unaudited interim financial statements should be read in conjunction with the Annual Report on Form 10-K of West Penn Funding LLC (the Company) for the year ended December 31, 2003. The Company is an indirect wholly-owned subsidiary of Allegheny Energy, Inc. (Allegheny).

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles of the United States of America (GAAP) have been condensed or omitted, and management believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, the unaudited interim financial statements reflect all normal recurring adjustments which are necessary for a fair presentation of the results of operations and cash flows for the three months ended March 31, 2004, and 2003 and financial position at March 31, 2004, and December 31, 2003.

NOTE 2:    LONG-TERM DEBT

Scheduled maturities and interest rates for the long-term debt at March 31, 2004, are:

The current maturities stated above are based on a combination of the expected final payment dates and scheduled repayments for the Class A-3 Transition Bonds rather than the final maturity dates.

According to the indenture, principal payments are applied to the Class A-3 Transition Bonds until the issue is paid in full. Thereafter, principal payments will be applied to the Class A-4 Transition Bonds.

On the scheduled payment date in March 2004, the Trustee made a quarterly payment of Transition Bond principal, interest and related expenses. Payments and Intangible Transition Charge (ITC) collections were sufficient to pay interest of $6.0 million and the scheduled principal payment in the amount of $19.9 million.

The Company is required to file copies of its annual and quarterly reports as filed with the 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 the Indenture a certificate indicating that the Company has complied with all conditions and covenants under the agreement. The Company is in compliance with its reporting obligations under its debt covenants.

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WEST PENN FUNDING LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(UNAUDITED)

NOTE 3:    SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS

Under an agreement between the Company and West Penn Power Company (West Penn) (the Servicing Agreement), West Penn, as Servicer, is required to manage and administer the Intangible Transition Property (ITP) of the Company and to collect the ITC on behalf of the Company. The Company pays a maximum annual service fee of $1.25 million to West Penn. The Company recorded servicing fees of $0.3 million for the three months ended March 31, 2004 and 2003.

At March 31, 2004, the balance sheet includes a receivable from West Penn of $6.0 million for ITC collections.

The Company joins with Allegheny and its subsidiaries in filing a consolidated federal income tax return. The consolidated 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.

The Notes to Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2003 Annual Report on Form 10-K for the Company should be read in conjunction with the following Management’s Discussion and Analysis information.

Forward-Looking Statements

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

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

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

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WEST PENN FUNDING LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(UNAUDITED)

Review of Operations

The Company is a Delaware limited liability company whose sole member is West Penn Funding Corporation, a wholly owned subsidiary of West Penn. In November 1999, the Company issued Transition Bonds and transferred the proceeds in exchange for all rights, title, and interest in the ITP from West Penn Funding Corporation.

Transition Bond principal, interest, fees, and scheduled overcollateralization sub-account funding will be recovered through ITC payable by retail customers within West Penn’s service territory who receive electric delivery service from West Penn.

During the three months ended March 31, 2004, the Company recorded approximately $26.0 million in ITC revenue and recorded $6.1 million interest expense on the Transition Bonds, and recorded $19.5 million in ITP amortization.

In comparison, during the three months ended March 31, 2003, the Company recorded approximately $29.4 million in ITC revenue and $7.4 million in interest expense on the Transition Bonds, and recorded $21.7 million in ITP amortization.

West Penn, as Servicer, remitted to the Trustee $26.7 million of ITC collections for the period covering December 2003 and January and February 2004. A portion of the ITC collections for March 2004 are reflected in revenues for the first quarter of 2004 with a corresponding receivable from West Penn at March 31, 2004.

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

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There are no changes to the quantitative and qualitative disclosures about market risk from those described in Item 7-A of the Company’s 2003 Annual Report on Form 10-K.

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WEST PENN FUNDING LLC

NOTES TO FINANCIAL STATEMENTS—(Continued)

(UNAUDITED)

ITEM 4.    CONTROLS AND PROCEDURES

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, Allegheny 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 generally accepted accounting principles.

Allegheny, for itself and its subsidiaries, has implemented corrective actions to mitigate the risk that its internal control deficiencies would prevent information required to be disclosed by the Company in its periodic reports, including this quarterly report, from being timely reported or impede the compilation and communication of information to Allegheny’s and the Company’s management sufficient to permit timely decisions regarding required disclosures in the financial statements and other information included in the Company’s periodic reports, including this quarterly report.

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 their procedures in connection with the preparation of each subsequently filed periodic report, including this quarterly report. These augmented procedures involved the creation of a formal drafting group to comprehensively review, revise, and update disclosures. This exercise also includes 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.

In 2003, Allegheny and the Company 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 establishes, maintains, monitors and evaluates Allegheny’s and its subsidiaries’ written disclosure controls and procedures and supervises and coordinates the preparation of their periodic reports and certain other public communications pursuant to formal written disclosure controls and procedures.

The Disclosure Committee, with the participation of the Company’s management, including the Company’s Principal Executive and Principal Financial Officer, reviewed, in accordance with Exchange Act Rules 13a-15(e) and 15d-15(e), the augmented procedures implemented by Allegheny and the Company in connection with the preparation of this report as of March 31, 2004 and found them to be effective. However, until Allegheny completes actions to remedy internal control deficiencies, Allegheny and the Company intend to devote additional resources to ensure that its public disclosures are accurate.

For additional information, see Item 9A., Controls and Procedures, in the Company’s 2003 Annual Report on Form 10-K.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None

None

ITEM 3.    DEFAULT UPON SENIOR SECURITIES

None

ITEM 4.    SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None

ITEM 5.    OTHER INFORMATION

None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

(b)  Reports on Form 8-K

No reports on Form 8-K were filed on behalf of the Company for the quarter ended March 31, 2004.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 10, 2004

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