ALLEGHENY ENERGY SERVICE CORPORATION EXECUTIVE SEVERANCE PLAN

Exhibit 10.1

ALLEGHENY ENERGY SERVICE CORPORATION
EXECUTIVE SEVERANCE PLAN

(Effective as of July 10, 2008)

TABLE OF CONTENTS

		Page
ARTICLE I PURPOSE AND TERM OF PLAN			1
Section 1.1 Purpose of the Plan			1
Section 1.2 Term and Effect of the Plan			1
ARTICLE II DEFINITIONS			2
Section 2.1 “AE Companies”			2
Section 2.2 “Allegheny”			2
Section 2.3 “Average Annual Incentive Payment”			2
Section 2.4 “Base Salary”			2
Section 2.5 “Board”			2
Section 2.6 “Cause”			2
Section 2.7 “Change in Control Termination”			2
Section 2.8 “Code”			3
Section 2.9 “Committee”			3
Section 2.10 “Common Stock”			3
Section 2.11 “Company”			3
Section 2.12 “Effective Date”			3
Section 2.13 “Eligible Employee”			3
Section 2.14 “Employee”			3
Section 2.15 “Employer”			3
Section 2.16 “ERISA”			3
Section 2.17 “Exchange Act”			3
Section 2.18 “Good Reason Resignation”			3
Section 2.19 “Involuntary Termination”			4
Section 2.20 “Participant”			4
Section 2.21 “Permanent Disability”			4
Section 2.22 “Plan”			4
Section 2.23 “Plan Administrator”			4
Section 2.24 “Release”			4
Section 2.25 “Severance Benefits”			4
Section 2.26 “Successor”			4
Section 2.27 “Target Bonus”			4
Section 2.28 “Termination Date”			5
Section 2.29 “Tier 1 Employee”			5
Section 2.30 “Tier 2 Employee”			5
ARTICLE III PARTICIPATION AND ELIGIBILITY FOR BENEFITS			6
Section 3.1 Participation			6
Section 3.2 Conditions			6
ARTICLE IV DETERMINATION OF SEVERANCE BENEFITS			8
Section 4.1 Amount of Severance Benefits Upon Involuntary Termination or Good Reason Resignation			8
Section 4.2 Other Terminations			9

TABLE OF CONTENTS
(continued)

		Page
Section 4.3 Termination for Cause			9
Section 4.4 Reduction of Severance Benefits			10
Section 4.5 Reimbursement of Legal Fees and Costs			10
ARTICLE V METHOD AND DURATION OF PAYMENT OF SEVERANCE BENEFITS			11
Section 5.1 Method of Payment			11
Section 5.2 Termination of Eligibility for Benefits			11
ARTICLE VI COVENANTS			12
Section 6.1 General			12
Section 6.2 Confidential Information			12
Section 6.3 Employment with Conflicting Organizations			12
Section 6.4 Non-Competition			12
Section 6.5 Non-Solicitation			13
Section 6.6 Return of Confidential Information			13
Section 6.7 Cooperation			13
Section 6.8 Non-Disparagement			14
Section 6.9 Equitable Relief			14
Section 6.10 Survival of Provisions			15
ARTICLE VII PLAN ADMINISTRATION; DUTIES OF THE COMPANY, THE COMMITTEE AND THE PLAN ADMINISTRATOR; AND CLAIMS			16
Section 7.1 Authority and Duties			16
Section 7.2 Payment			16
Section 7.3 Discretion			16
Section 7.4 Claims Administration			16
ARTICLE VIII AMENDMENT, TERMINATION AND DURATION			18
Section 8.1 Amendment, Suspension and Termination			18
Section 8.2 Duration			18
ARTICLE IX MISCELLANEOUS			19
Section 9.1 Nonalienation of Benefits			19
Section 9.2 Notices			19
Section 9.3 Successors			19
Section 9.4 Other Payments			19
Section 9.5 No Mitigation			19
Section 9.6 No Contract of Employment			19
Section 9.7 Severability of Provisions			19
Section 9.8 Heirs, Assigns, and Personal Representatives			19
Section 9.9 Headings and Captions			20
Section 9.10 Gender and Number			20
Section 9.11 Unfunded Plan			20

TABLE OF CONTENTS
(continued)

		Page
Section 9.12 Payments to Incompetent Persons			20
Section 9.13 Lost Payees			20
Section 9.14 Controlling Law			20
Section 9.15 Code Section 409A Compliance			20
SCHEDULE A ELIGIBLE EMPLOYEES			A-1
SCHEDULE B RELEASE AGREEMENT			B-1
SCHEDULE C ADDITIONAL BENEFITS			C-1

ARTICLE I

PURPOSE AND TERM OF PLAN

      Section 1.1 Purpose of the Plan . The purpose of the Plan is to provide Eligible Employees with certain severance benefits as set forth in the Plan in the event the Eligible Employee’s employment with the AE Companies is terminated due to an Involuntary Termination or a Good Reason Resignation. The Plan is not intended to be an “employee pension benefit plan” or “pension plan” within the meaning of section 3(2) of ERISA. Rather, this Plan is intended to be a “welfare benefit plan” within the meaning of section 3(1) of ERISA and to meet the descriptive requirements of a plan constituting a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations , section 2510.3-2(b). Accordingly, the benefits paid by the Plan are not deferred compensation for purposes of ERISA and no Employee shall have a vested right to such benefits.

      Section 1.2 Term and Effect of the Plan . The Plan generally shall be effective as of the Effective Date and shall supersede any prior plan, program, policy, or agreement under which the AE Companies provided severance benefits prior to the Effective Date of the Plan. Notwithstanding the foregoing, the Plan shall not: (i) apply to any Employee who is subject to an existing employment or severance agreement pursuant to which the Company or any of the other AE Companies has arranged to provide severance benefits to the Employee until the term of such agreement expires (or, if earlier, such date as the Employee executes an acknowledgement that the Plan supersedes such agreement); or (ii) supersede any plan, program, policy or agreement pursuant to which the Company or any of the other AE Companies has arranged to provide severance benefits to an Employee in connection with the occurrence of a change in control. Further, the Plan shall not be construed so as to supersede any prior or existing plan, program, policy or agreement (or any portion of such prior arrangement) pursuant to which an Eligible Employee accrued benefits other than severance benefits. The Plan shall continue until terminated pursuant to Article VIII of the Plan.

ARTICLE II

DEFINITIONS

      Section 2.1 “ AE Companies ” shall mean the Company, Allegheny, the affiliates and subsidiaries of Allegheny and the Company, and any successor or assigns of any of the foregoing.

      Section 2.2 “ Allegheny ” shall mean Allegheny Energy, Inc., the Company’s parent, and any successor to all or a major portion of the assets or business of Allegheny Energy, Inc.

      Section 2.3 “ Average Annual Incentive Payment ” shall mean the average of the actual annual incentive payments paid to the Participant pursuant to the annual bonus or incentive program of the AE Companies as in effect from time to time for each of the full and completed fiscal years (up to a maximum of three full and completed fiscal years) immediately preceding the Participant’s Termination Date. For a Participant who has not been employed long enough to receive any annual bonus or incentive payment from the AE Companies for a full and completed fiscal year, Average Annual Incentive Payment shall be deemed to be: (i) 50% of the Participant’s Base Salary for a Tier 1 Employee; and (ii) 30% of the Participant’s Base Salary for a Tier 2 Employee.

      Section 2.4 “ Base Salary ” shall mean the annual base salary in effect as of the Participant’s Termination Date.

      Section 2.5 “ Board ” shall mean the Board of Directors of Allegheny, or any successor thereto.

      Section 2.6 “ Cause ” shall mean an Eligible Employee’s: (i) conviction of, or plea of guilty or nolo contendere to, (A) a felony, or (B) a lesser crime or offense which, in the reasonable opinion of the Company, could adversely affect the business or reputation of the AE Companies; (ii) repeated failure to follow specific lawful directions of the Board or any officer to whom he reports; (iii) willful misconduct, fraud, embezzlement, or dishonesty either in connection with his duties to the AE Companies or which otherwise causes damage or, in the reasonable opinion of the Company, is likely to cause damage, to the AE Companies; (iv) failure to perform a substantial part of his duties following notice and a reasonable opportunity to cure (if such failure is capable of cure); (v) material violation of any policy, procedure, or guideline of the AE Companies following notice and a reasonable opportunity to cure (if such violation is capable of cure); (vi) abuse of alcohol or legal drugs which has a significant effect on his ability to perform his duties or the Eligible Employee’s use of illegal drugs; or (vii) violation of any applicable confidentiality, non-competition, non-solicitation, or non-disparagement covenants relating to the AE Companies (including, without limitation, the covenants set forth in Article VI). The Committee, in its sole and absolute discretion, shall determine Cause.

      Section 2.7 “ Change in Control Termination ” shall mean an Eligible Employee’s termination of employment that occurs in connection with a change in control and that results in the Employee receiving severance payments or other benefits under the Allegheny Energy Service Corporation Executive Change in Control Severance Plan or any other plan, program,

agreement or arrangement on account of such change in control. For purposes of this Section, the term “change in control” shall have the meaning as defined in the Allegheny Energy Service Corporation Executive Change in Control Severance Plan or such other plan, program, agreement or arrangement, as applicable.

      Section 2.8 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

      Section 2.9 “ Committee ” shall mean the Management Compensation and Development Committee of the Board or such other committee appointed by the Board to assist the Company in making determinations required under the Plan in accordance with its terms. The Committee may delegate all or a portion of its authority under the Plan to an individual or another committee.

      Section 2.10 “ Common Stock ” shall mean the Common Stock of Allegheny.

      Section 2.11 “ Company ” shall mean Allegheny Energy Service Corporation and any successor to all or a major portion of the assets or business of Allegheny Energy Service Corporation.

      Section 2.12 “ Effective Date ” shall mean July 10, 2008.

      Section 2.13 “ Eligible Employee ” shall mean any Employee who is employed by the AE Companies as a Vice President or in a more senior position and who is designated for participation in the Plan by the Committee or, pursuant to authority delegated to him by the Committee, the Company’s Chief Executive Officer. The Employees who have been designated as Eligible Employees are set forth in Schedule A as amended and updated by the Company from time to time.

      Section 2.14 “ Employee ” shall mean a person who receives salary, wages or commissions from the AE Companies that are subject to withholding for the purposes of federal income and employment taxes. The term Employee shall not include an independent contractor or any other person who the Committee or its designee determines is not subject to withholding for purposes of federal income and employment taxes, regardless of any contrary governmental or judicial determination relating to such employment or withholding tax status.

      Section 2.15 “ Employer ” shall mean the Company or any of the AE Companies with respect to which this Plan has been adopted.

      Section 2.16 “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder.

      Section 2.17 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

      Section 2.18 “ Good Reason Resignation ” shall mean an Eligible Employee’s written resignation within 60 days of the occurrence of any reduction in the Eligible Employee’s then-current annual Base Salary or Target Bonus without the Eligible Employee’s consent, unless such events are fully corrected by the Company within ten days following receipt of written notice

from the Eligible Employee; provided , however , that a uniform percentage reduction in the annual Base Salary or Target Bonus of all Employees employed as a Vice President or in a more senior position of less than 5% shall not constitute a basis for a Good Reason Resignation.

      Section 2.19 “ Involuntary Termination ” shall mean an Eligible Employee’s termination of employment initiated by the AE Companies for any reason other than Cause as provided under and subject to the conditions of Article III. Involuntary Termination does not include a termination of employment due to a Permanent Disability or death.

      Section 2.20 “ Participant ” shall mean any Eligible Employee who meets the requirements of Article III and thereby becomes eligible for benefits under the Plan.

      Section 2.21 “ Permanent Disability ” shall mean that an Employee has a permanent and total incapacity from engaging in any employment for the Employer for physical or mental reasons. A “Permanent Disability” shall be deemed to exist: (i) if the Employee meets the requirements for disability benefits under the Employer’s long-term disability plan; (ii) if the Employee is not covered by a long-term disability plan of the Employer, the Employee satisfies the requirements to receive disability benefits under the Social Security law then in effect; or (iii) if the Employee is designated with an inactive employment status at the end of a disability or medical leave.

      Section 2.22 “ Plan ” shall mean the Allegheny Energy Service Corporation Executive Severance Plan as set forth herein, and as the same may from time to time be amended.

      Section 2.23 “ Plan Administrator ” shall mean the individual(s) appointed by the Committee to administer the terms of the Plan as set forth herein and if no individual is appointed by the Committee to serve as the Plan Administrator for the Plan, the Plan Administrator shall be the Company’s Vice President who is responsible for human resources. Notwithstanding the preceding sentence, in the event the Plan Administrator is entitled to Severance Benefits under the Plan, the Committee or its delegate shall act as the Plan Administrator for purposes of administering the terms of the Plan with respect to the Plan Administrator. The Plan Administrator may delegate all or any portion of its authority under the Plan to any other person(s).

      Section 2.24 “ Release ” shall mean a release and discharge of the AE Companies and all affiliated persons and entities from any and all claims, demands and causes of action, other than as to amounts or benefits due to the Participant under any qualified employee retirement plan of the AE Companies, which shall be substantially in the form attached hereto as Schedule B .

      Section 2.25 “ Severance Benefits ” shall mean the severance benefits that a Participant is eligible to receive pursuant to Article IV.

      Section 2.26 “ Successor ” shall mean any other corporation or unincorporated entity or group of corporations or unincorporated entities which acquires ownership, directly or indirectly, through merger, consolidation, purchase or otherwise, of all or substantially all of the assets of the Company or Allegheny.

      Section 2.27 “ Target Bonus ” shall mean the Participant’s annual target bonus opportunity under Allegheny’s Annual Incentive Plan (or any other such successor plan or arrangement).

      Section 2.28 “ Termination Date ” shall mean the date on which the active employment of the Eligible Employee by the AE Companies is severed for any reason.

      Section 2.29 “ Tier 1 Employee ” shall mean an Eligible Employee who is designated as such by the Company, in its sole discretion.

      Section 2.30 “ Tier 2 Employee ” shall mean an Eligible Employee who is designated as such by the Company, in its sole discretion.

ARTICLE III

PARTICIPATION AND ELIGIBILITY FOR BENEFITS

      Section 3.1 Participation . Each Eligible Employee in the Plan who incurs an Involuntary Termination or a Good Reason Resignation (other than an Involuntary Termination or Good Reason Resignation that constitutes a Change in Control Termination) and who satisfies the conditions of Section 3.02 shall be eligible to receive the Severance Benefits described in the Plan. An Eligible Employee shall not be eligible to receive any other severance benefits from the AE Companies on account of an Involuntary Termination or a Good Reason Resignation, unless otherwise provided in the Plan.

      Section 3.2 Conditions .

          (a) Eligibility for any Severance Benefits is expressly conditioned on: (i) an Eligible Employee’s written acknowledgment and agreement to comply with the confidentiality, non-competition, non-solicitation, and non-disparagement provisions in Article VI during and after the Eligible Employee’s employment with the AE Companies; (ii) to the extent requested by the Company, execution of a written acknowledgement and agreement that this Plan supersedes an existing arrangement that provides severance benefits to the Eligible Employee and/or that the Eligible Employee is no longer entitled to receive severance benefits pursuant to a prior arrangement that has expired; (iii) execution by the Participant of a Release in the form provided by the Company within 60 days following the Participant’s Termination Date (or such shorter period of time specified in the Release); and (iv) execution by the Participant of a written agreement that authorizes the deduction of amounts owed to the Company prior to the payment of any Severance Benefits (or in accordance with any other schedule as the Committee may, in its sole discretion, determine to be appropriate); provided , that such deduction is not in violation of Code section 409A.

          (b) If the Committee determines, in its sole discretion, that the Participant has not fully complied with any of the terms of the Release, the Committee may deny Severance Benefits not yet in pay status or discontinue the payment of the Participant’s Severance Benefits and may require the Participant, by providing written notice of such repayment obligation to the Participant, to repay any portion of the Severance Benefits already received under the Plan. If the Committee notifies a Participant that repayment of all or any portion of the Severance Benefits received under the Plan is required, such amounts shall be repaid within 30 calendar days of the date the written notice is sent. Any remedy under this paragraph (b) shall be in addition to, and not in place of, any other remedy, including injunctive relief, that the AE Companies may have.

          (c) An Eligible Employee who experiences a termination of employment that is not an Involuntary Termination or a Good Reason Resignation shall not be eligible to receive Severance Benefits under the Plan. Specifically, and without limiting the foregoing, an Eligible Employee shall not be eligible to receive Severance Benefits upon the Eligible Employee’s: (i) voluntary resignation or retirement (other than a voluntary resignation or retirement that constitutes a Good Reason Resignation); (ii) Change in Control Termination; (iii) resignation of employment (other than a Good Reason Resignation) before the job-end date specified by the

Employer or while the Employer still desires the Eligible Employee’s services; (iv) termination for Cause; (v) termination due to death or Permanent Disability; or (vi) failure to return to work within six months of the onset of an approved leave of absence, other than a military leave and/or as otherwise required by applicable statute. Further, an Eligible Employee shall not be eligible to receive Severance Benefits upon his termination of employment if the Eligible Employee receives severance benefits pursuant to another plan, policy, program or arrangement providing benefits upon a termination of employment.

          (d) Except as otherwise set forth herein, the Committee has the sole discretion to determine an Eligible Employee’s eligibility to receive Severance Benefits.

          (e) An Eligible Employee returning from approved military leave shall be eligible for Severance Benefits if: (i) he or she is eligible for reemployment under the provisions of the Uniformed Services Employment and Reemployment Rights Act; (ii) his or her pre-military leave job is eliminated; and (iii) the Employer’s circumstances are changed so as to make reemployment in another position impossible or unreasonable, or re-employment would create an undue hardship for the Employer. If the Eligible Employee returning from military leave qualifies for Severance Benefits, his or her Severance Benefits will be calculated as if he or she had remained continuously employed from the date he or she began his or her military leave. The Eligible Employee must also satisfy any other relevant conditions for payment, including execution of a Release.

ARTICLE IV

DETERMINATION OF SEVERANCE BENEFITS

      Section 4.1 Amount of Severance Benefits Upon Involuntary Termination or Good Reason Resignation . The Severance Benefits to be provided to a Participant who incurs an Involuntary Termination or a Good Reason Resignation and who satisfies the conditions of Section 3.02 shall be as follows:

          (a) Salary and Bonus Severance . Participants shall receive salary and bonus severance as follows:

               (i) Tier 1 Employees shall receive salary and bonus severance equal to 200% of the sum of (A) the Tier 1 Employee’s Base Salary, plus (B) the Tier 1 Employee’s Average Annual Incentive Payment (with both Base Salary and Average Annual Incentive Payment being determined without regard to any decrease in such Base Salary or Average Annual Incentive Payment that would constitute a basis for a Good Reason Resignation).

               (ii) Tier 2 Employees shall receive salary and bonus severance equal to 100% of the sum of (A) the Tier 2 Employee’s Base Salary, plus (B) the Tier 2 Employee’s Average Annual Incentive Payment (with both Base Salary and Average Annual Incentive Payment being determined without regard to any decrease in such Base Salary or Average Annual Incentive Payment that would constitute a basis for a Good Reason Resignation).

               (iii) Both Tier 1 and Tier 2 Employees shall receive a pro-rata bonus amount for the year of termination equal to the product of the Participant’s Average Annual Incentive Payment and a fraction, the numerator of which is the number of days during which the Participant was employed in the current fiscal year through the Participant’s Termination Date, and the denominator of which is 365.

          (b) Benefit Coverage Premiums . Participants shall receive a lump sum amount equal to $30,000 for a Tier 1 Employee and $20,000 for a Tier 2 Employee to reimburse Participants for premiums to continue medical and dental coverage under the benefit plans of the AE Companies or, if coverage is unavailable under the benefit plans of the AE Companies, to purchase it from an independent third-party.

          (c) Stock Options . The shares of Common Stock covered by any option granted to a Participant under the term