ARTICLE I PURPOSE AND ADOPTION OF THE PLAN

Exhibit 10.5

ALLEGHENY ENERGY, INC.
1998 LONG-TERM INCENTIVE PLAN
Effective May 14, 1998
Amended and Restated January 1, 2008

ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN

     Sec. 1.01 Purpose. The purpose of the Allegheny Energy, Inc. 1998 Long-Term Incentive Plan (as the same may be amended from time to time, the “Plan”) is to assist Allegheny Energy, Inc., a Maryland corporation (the “Company”), and its Subsidiaries (as defined below) in attracting and retaining highly competent key employees and directors and to act as an incentive in motivating selected key employees and directors of the Company and its Subsidiaries (as defined below) to achieve long-term corporate objectives.

     Sec. 1.02 Adoption and Term. The Plan has been approved by the Board of Directors of the Company (the “Board”) to be effective as of the date of approval of the Plan by the shareholders of the Company (the “Effective Date”). The Plan shall remain in effect until the tenth anniversary of the Effective Date; provided, however, that the provisions of Articles VII and VIII with respect to performance-based awards to “covered employees” under Section 162(m) of the Code (as defined below) shall expire as of the fifth anniversary of the Effective Date. This Plan is hereby amended and restated effective as of January 1, 2008 to update it for changes in applicable law and to make certain other clarifying changes.

ARTICLE II
DEFINITIONS

     For the purposes of this Plan, capitalized terms shall have the following meanings:

     Sec. 2.01 “Acquiring Corporation” shall have the meaning given to such term in Section 9.08(b).

     Sec. 2.02 “Award” means any grant to a Participant of one or a combination of Non-Qualified Stock Options or Incentive Stock Options described in Article VI, Restricted Shares described in Article VII and Performance Awards described in Article VIII.

     Sec. 2.03 “Award Agreement” means a written agreement between the Company and a Participant or a written notice from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan.

     Sec. 2.04 “Award Period” means, with respect to an Award, the period of time set forth in the Award Agreement during which specified target performance goals must be achieved or other conditions set forth in the Award Agreement must be satisfied.

     Sec. 2.05 “Beneficiary” means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company or by operation of law, succeeds to the rights and obligations of the Participant under the Plan and an Award Agreement upon the Participant’s death.

     Sec. 2.06 “Board” shall have the meaning given to such term in Section 1.02.

     Sec. 2.07 “Change in Control” shall be deemed to have occurred at such time as (a) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 25% or more of the combined voting power of the Company Voting Securities; or (b) during any period of not more than two years, individuals who constitute the Board as of the beginning of the period and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a) or (c) of this sentence) whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at such time or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Company Voting Securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the Company Voting Securities or the voting securities of such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or any agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

     Sec. 2.08 “Code” means the Internal Revenue Code of 1986, as amended. References to a section of the Code include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

     Sec. 2.09 “Committee” means the committee established in accordance with Section 3.01.

     Sec. 2.10 “Company” shall have the meaning given to such term in Section 1.01.

     Sec. 2.11 “Common Stock” means Common Stock of the Company.

     Sec. 2.12 “Company Voting Securities” means the combined voting power of all outstanding securities of the Company entitled to vote generally in the election of directors of the Company.

     Sec. 2.13 “Date of Grant” means the date as of which the Committee grants an Award. If the Committee contemplates an immediate grant to a Participant, the Date of Grant shall be the date of the Committee’s action. If the Committee contemplates a date on which the grant is to be made other than the date of the Committee’s action, the Date of Grant shall be the date so contemplated and set forth in or determinable from the records of action of the Committee; provided, however, that the Date of Grant shall not precede the date of the Committee’s action.

     Sec. 2.14 “Dividend Equivalent Account” shall have the meaning given to such term in Section 6.03(a).

     Sec. 2.15 “Effective Date” shall have the meaning given to such term in Section 1.02.

     Sec. 2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     Sec. 2.17 “Exercise Price” shall have the meaning given to such term in Section 6.01(b).

     Sec. 2.18 “Fair Market Value” means, as of any applicable date, the closing price per share of the Common Stock as quoted in the NYSE-Composite Transactions listing in The Wall Street Journal (or such other reliable publication as the Committee, in its discretion, may determine to rely upon) for the date as of which Fair Market Value is to be determined. If there are no sales on such date, then Fair Market Value shall be the closing price per share of the Common Stock as so quoted on the nearest date before the date as of which Fair Market Value is to be determined on which there are sales. If the Common Stock is not listed on the New York Stock Exchange on the date as of which Fair Market Value is to be determined, the Committee shall in good faith determine the Fair Market Value of the Common Stock on such date. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. Notwithstanding the foregoing, in the case of Options granted in connection with the assumption by the Company of stock options of acquired companies, as described in Section 9.08(c) the Committee may determine that the term “Fair Market Value” shall have the same meaning as is given to such term under the provisions of such assumed stock option. All determinations regarding the Fair Market Value of the Company’s Common Stock shall be consistent with the requirements of Section 409A of the Code and its corresponding regulations and related guidance.

     Sec. 2.19 “Incentive Stock Option” means a stock option within the meaning of Section 422 of the Code.

     Sec. 2.20 “Merger” means any merger, reorganization, consolidation, share exchange, transfer of assets or other transaction having similar effect involving the Company.

     Sec. 2.21 “Non-Qualified Stock Option” means a stock option which is not an Incentive Stock Option.

     Sec. 2.22 “Options” means all Non-Qualified Stock Options and Incentive Stock Options granted at any time under the Plan.

     Sec. 2.23 “Original Option” shall have the meaning given to such term in Section 6.04.

     Sec. 2.24 “Participant” means a person designated to receive an Award under the Plan in accordance with Section 5.01.

     Sec. 2.25 “Performance Awards” means Awards granted in accordance with Article VIII.

     Sec. 2.26 “Plan” shall have the meaning given to such term in Section 1.01.

     Sec. 2.27 “Reload Option” shall have the meaning given to such term in Section 6.04.

     Sec. 2.28 “Restricted Shares” means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII.

     Sec. 2.29 “Retirement” means early or normal retirement under a pension plan or arrangement of the Company or one of its Subsidiaries in which the Participant participates.

     Sec. 2.30 “Subsidiary” means a subsidiary of the Company within the meaning of Section 424(f) of the Code.

     Sec. 2.31 “Termination of Employment” means the voluntary or involuntary termination of a Participant’s employment with the Company or a Subsidiary for any reason, including death, disability, retirement or as the result of the divestiture of the Participant’s employer or any similar transaction in which the Participant’s employer ceases to be the Company or one of its Subsidiaries. A leave of absence approved in accordance with Company policy shall not be deemed a Termination of Employment. Whether entering military or other government service shall constitute Termination of Employment, or whether a Termination of Employment shall occur as a result of disability, shall be determined in each case by the Committee in its sole discretion. In the case of a director who is not an employee of the Company or a Subsidiary, Termination of Employment shall mean voluntary or involuntary cessation of Board service for any reason. Notwithstanding the foregoing, Termination of Employment for purposes of determining whether an Award that is “deferred compensation” and subject to Section 409A of the Code is payable from the Plan means a “separation from service” as determined under Section 409A of the Code and its corresponding regulations and related guidance.

ARTICLE III
ADMINISTRATION

     Sec. 3.01 Committee. The Plan shall be administered by a committee of the Board (the “Committee”) comprised of at least two directors of the Company. The Committee shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, and to take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. The Committee may, subject to compliance with applicable legal requirements, delegate to any designated executive officer of the Company the power to determine the employees (other than himself or herself or any employee to whom such designated executive officer reports) to receive Awards under the Plan and the types and amounts of such Awards, subject in each case to the terms and conditions of the Plan. In addition, the Board may exercise any of the authority conferred upon the Committee hereunder. In the event of any such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer to the delegate of the Committee or the Board, as the case may be.

ARTICLE IV
SHARES

     Sec. 4.01 Number of Shares Issuable. The total number of shares initially authorized to be issued under the Plan shall be 10,000,000 shares of Common Stock. The number of shares available for issuance under the Plan shall be subject to adjustment in accordance with Section 9.08. The shares to be offered under the Plan shall be authorized and unissued shares of Common Stock, or issued shares of Common Stock which will have been reacquired by the Company.

     Sec. 4.02 Shares Subject to Terminated Awards. Shares of Common Stock covered by any unexercised portions of terminated Options (including canceled Options) granted under Article VI, shares of Common Stock forfeited as provided in Section 7.02(a) and shares of Common Stock subject to any Award that are otherwise surrendered by a Participant or terminated may be subject to new Awards under the Plan. If any shares of Common Stock are withheld from those otherwise issuable or are tendered to the Company, by attestation or otherwise, in connection with the exercise of an Option, only the net number of shares of Common Stock issued as a result of such exercise shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan.

ARTICLE V
PARTICIPATION

     Sec. 5.01 Eligible Participants. Participants in the Plan shall be such key employees and directors of the Company and its Subsidiaries as the Committee, in its sole discretion, may designate from time to time. The Committee’s designation of a Participant in any year shall not require the Committee to designate such person to receive Awards in any other year. The designation of a Participant to receive an Award under one portion of the Plan does not require the Committee to include such Participant under other portions of the Plan. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the types and amounts of their respective Awards. Subject to adjustment in accordance with Section 9.08, during any calendar year no Participant shall be granted Awards in respect of more than 600,000 shares of Common Stock (whether through grants of Options or other Awards of Common Stock or rights with respect thereto); provided, however, that if it is the Committee’s intention as of the Date of Grant of an Award, as evidenced by the applicable Award Agreement, that such Award shall be earned by the Participant over a period of more than one calendar year, then for purposes of applying the foregoing per calendar year share limitation, the shares of Common Stock subject to such Award shall be allocated to the first calendar year in which such shares may be earned (determined without regard to possible vesting as a result of a Change in Control or pursuant to any provision of this Plan authorizing the Committee to accelerate the vesting of an Award).

ARTICLE VI
STOCK OPTIONS

     Sec. 6.01 Option Awards.

          (a) Grant of Options. The Committee may grant, to such Participants as the Committee may select, Options entitling the Participants to purchase shares of Common Stock from the Company in such numbers, at such prices, and on such terms and subject to such conditions, not inconsistent with the terms of the Plan, as may be established by the Committee. The terms of any Option granted under the Plan shall be set forth in an Award Agreement.

          (b) Exercise Price of Options. The exercise price of each share of Common Stock which may be purchased upon exercise of any Option granted under the Plan (the “Exercise Price”) shall be determined by the Committee; provided, however, that, except in the case of any substituted Options described in Section 9.08(c), the Exercise Price shall in all cases be equal to or greater than the Fair Market Value on the Date of Grant.

          (c) Designation of Options. Except as otherwise expressly provided in the Plan, the Committee may designate, at the time of the grant of an Option, such Option as an Incentive Stock Option or a Non-Qualified Stock Option; provided, however, that an Option may be designated as an Incentive Stock Option only if the applicable Participant is an employee of the Company or a Subsidiary on the Date of Grant.

          (d) Special Incentive Stock Option Rules. No Participant may be granted Incentive Stock Options under the Plan (or any other plans of the Company and its Subsidiaries) that would result in Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable by such Participant in any one calendar year. Notwithstanding any other provision of the Plan to the contrary, no Incentive Stock Option shall be granted to any person who, at the time the Option is granted, owns stock (including stock owned by application of the constructive ownership rules in Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary, unless at the time the Incentive Stock Option is granted the Exercise Price is at least 110% of the Fair Market Value on the Date of Grant of the Common Stock subject to the Incentive Stock Option and the Incentive Stock Option by its terms is not exercisable for more than five (5) years from the Date of Grant.

          (e) Rights as a Shareholder. A Participant or a transferee of an Option pursuant to Section 9.04 shall have no rights as a shareholder with respect to the shares of Common Stock covered by an Option until that Participant or transferee shall have become the holder of record of any such shares, and, except to the extent that Dividend Equivalent Accounts are granted in accordance with Section 6.03, no adjustment shall be made with respect to any such shares of Common Stock for dividends in cash or other property or distributions of other rights on the Common Stock for which the record date is prior to the date on which that Participant or transferee shall have become the holder of record of any shares covered by such Option; provided, however, that Participants are entitled to the adjustments set forth in section 9.08.

     Sec. 6.02 Terms of Stock Options.

          (a) Conditions on Exercise. An Award Agreement with respect to Options may contain such waiting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic installments) as may be determined by the Committee at the time of grant.

          (b) Duration of Options. Options shall terminate after the first to occur of the following events:

	(i)		Expiration of the Option as provided in the related Award Agreement; or
	(ii)		Termination of the Award as provided in Section 6.02(e) following the Participant’s Termination of Employment; or

(iii)

Ten years from the Date of Grant.

          (c) Acceleration of Exercise Time. The Committee, in its sole discretion, shall have the right (but shall not in any case be obligated), exercisable at any time after the Date of Grant, to permit the exercise of any Option prior to the time such Option would otherwise become exercisable under the terms of the related Award Agreement.

          (d) Extension of Exercise Time. In addition to the extensions permitted under Section 6.02(e) in the event of Termination of Employment, the Committee, in its sole discretion, shall have the right (but shall not in any case be obligated), exercisable on or at any time after the Date of Grant, to permit the exercise of any Option after its expiration date described in Section 6.02(e), subject, however, to the limitations described in Sections 6.02(b)(i) and (iii).

          (e) Exercise of Options Upon Termination of Employment.

	(i)		Termination. In the event of Termination of Employment of a Participant other than by reason of death, disability or Retirement, all Options which were not exercisable as of the date of the Termination of Employment shall expire as of such date and the right of the Participant to exercise any Options which were exercisable as of the date of Termination of Employment shall expire ninety (90) days after the date of such Termination of Employment, unless the exercise period is extended by the Committee in accordance with Section 6.02(d). In no event, however, may the Option be exercised later than the date of expiration of the Option determined pursuant to Section 6.02(b)(i) or (iii).
	(ii)		Disability or Retirement. In the event of a Participant’s Termination of Employment on or after January 1, 2004 by reason of disability or Retirement, the right of the Participant to exercise all Options which were not exercisable as of the date of the Termination of Employment shall expire as of such date and all Options which he or she was entitled to exercise upon Termination of Employment shall expire three years after the date of such Termination of Employment, unless the exercise period is extended by the Committee in accordance with Section 6.02(d). In the event of a Participant’s Termination of Employment prior to January 1, 2004 by reason of disability or Retirement, the right of the Participant to exercise all Options which were not exercisable as of the date of the Termination of Employment shall expire as of such date and all Options which he or she was entitled to exercise upon Termination of Employment shall expire one year after the date of such Termination of Employment, unless the exercise period is extended by the Committee in accordance with Section 6.02(d). In no event, however, may any Option be exercised later than the date of expiration of the Option determined pursuant to Section 6.02(b)(i) or (iii).
	(iii)		Death. In the event of the death of a Participant while employed by the Company or a Subsidia