Preview | Administration Agreement |

THIS ADMINISTRATION AGREEMENT dated as of April 11, 2007 (as amended, restated, supplemented or otherwise modified from time to time, this Administration Agreement), between PE Environmental Funding LLC, a limited liability company formed under the laws of the State of Delaware (the Company), and Allegheny Energy Service Corporation, a corporation formed under the laws of the State of West Virginia (the Administrator). Capitalized terms used but not otherwise defined herein have the meanings assigned to such terms in Appendix A to this Administration Agreement.

WHEREAS, the Administrator was created to perform certain management duties on behalf of Allegheny Energy, Inc. (the System), its utility subsidiary companies and its non-utility subsidiary companies (the Subsidiaries); and

WHEREAS, the Administrator offers to provide a central organization to furnish to the System, the Subsidiaries and the Company certain advisory, supervisory and other services in accordance with current practices and procedures; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be reasonably bound, hereby agree as follows:

Section 1. Duties of Administrator; Management Services. The Administrator hereby offers to furnish to the Company the services detailed on Exhibit I attached hereto and made a part hereof.

Section 2. Compensation. (a) For all services rendered for the Company by the Administrator pursuant to this Administration Agreement, as compensation for the performance of the Administrators obligations under this Administration Agreement (including the compensation of Persons serving as Managers), the Administrator shall be entitled to an annual fee (the Administration Fee), payable by the Company in arrears proportionately on each Payment Date. The Administration Fee shall not exceed $50,000 in the aggregate annually. The Administrators compensation and other expenses, including any indemnities, payable hereunder shall be paid from the Collection Account

pursuant to Section 8.02(e) of the Indenture, and the Administrator shall have no recourse against the Company for payment of such amounts other than in accordance with Section 8.02 of the Indenture. For services rendered to one or more of the companies in the System, the applicable approved allocation factor will be used.

(b) The payment for services rendered by the Administrator to the System, the Subsidiaries and the Company shall cover all the costs and expenses of the Administrator doing business, excluding only a return for the use of equity capital, and each Subsidiary, the System and the Company shall pay its direct or fair proportionate share for such services.

(d) Nothing herein shall be construed to release the officers and directors of the Company from the performance of their respective duties or limit the exercise of their powers as prescribed by applicable Requirements of Law or otherwise.

Section 3. Terms of the Agreement; Resignation and Removal of Administrator. (a) This Administration Agreement shall continue in full force and effect until the payment in full of the Environmental Control Bonds and any Additional Securities, although the Company may terminate this Administration Agreement at any time with or without notice for any cause deemed by it to be sufficient, provided, however, that removal of the Administrator pursuant to this Section 3 shall be effective until (i) a Successor Administrator shall have been appointed by the Company and (ii) such Successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder, and the PSCWV Condition set forth in Section 7(b) of this Administration Agreement has been satisfied.

(b) The Administrator shall not resign from the obligations and duties imposed on it as Administrator under this Administration Agreement except upon a determination that the performance of its duties under this Administration Agreement shall no longer be permissible under applicable Requirements of Law. Notice of any such determination permitting the resignation of the Administrator shall be communicated to the Company, the PSCWV, the Indenture Trustee and each Rating Agency at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time), and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Company, the PSCWV and the Indenture Trustee concurrently with or promptly after such notice.