Statement of Corporate Governance Principles

Date of Adoption: April 22, 2004
As amended: November 19, 2004

Company Objectives

Our Company's objectives are to conduct business with a view to earning sustainable profits over the long term and protecting and enhancing the value of our shareholders' investment in the Company.

In pursuing those objectives, our Company is committed to maintaining the highest standards of business and common sense ethics. Behaving in accordance with these standards and in a manner that avoids any appearance of impropriety is crucial to support our mission. In that spirit, our employees, officers and directors are all subject to our Guidelines for Ethical Conduct.

By virtually any measure, success in the conduct of our core business - as a public utility in the electric power industry - is dependent upon maintaining a highly positive stature, and in some instances harmonious relationships, with certain constituencies. The most important of these are:

*       Our residential, commercial and industrial customers (and potential customers) in our service territory, all of which have choices in the selection of their electric power suppliers;

*       State and federal governmental regulators, whose rules and decisions have a profound impact upon our revenues and costs; and

*       Our employees, whose commitment to customers and the community in which we operate has a direct and indirect impact upon the attitudes of both our customers and our regulators toward the Company.

These realities demand constant attention in the governance of our Company, as well as in the daily management of our operations. While our corporate governance structure is shaped largely by legal mandates, our corporate governance practices are designed to deal with these realities.

Functions of our Management and Board of Directors

The management of our business is conducted by and under the supervision of our Chief Executive Officer and a team of senior executive officers. In performing the management function, the executives are obliged to act in accordance with policies and standards established by our Board of Directors, and to carry out specific plans and transactions approved by the Board.

Our executives operate with a wide scope of discretion in the pursuit of our Company's economic and related business objectives. Managerial flexibility and judgment are necessities in dealing with changes and uncertainties in the electric power industry today, and with the volatile conditions in the economic environment and financial markets that affect our Company.

But our Company also recognizes a companion and compelling need for management accountability. The interests of our investors and other constituencies require that we conduct our business and affairs under a system ensuring that our executive officers perform their management functions capably and lawfully.

Our Company is a large publicly held corporation, with a diverse and shifting population of shareholders. Accordingly, the responsibility for requiring management accountability and overseeing management performance is lodged, legally and practically, in our Board of Directors. The oversight function is not the same as the management function, in that our Board (as is the case with the board of any publicly held corporation) is not expected to actually manage the Company's business or to supervise executives on a day-to-day basis.

Our Board is cognizant of its responsibilities in this regard and endeavors to discharge them in several ways, including:

*       Frequent meetings of the Board with senior executive officers during which the Board reviews financial and other operating results, major corporate plans and other significant corporate programs and actions.

*       Frequent executive sessions among the non-management members of the Board during which the performance of senior executive officers is discussed and assessed. In addition, the independent, non-management members of the Board meet in executive session at least annually.

*       Receipt and review of written information and reports furnished by senior executive officers to all Board members, in advance of formal meetings of the Board.

A central and critical aspect of our Board's oversight function is the selection (and, if necessary, replacement) of the Company's Chief Executive Officer. Accordingly, our Board has created an interactive relationship with the Chief Executive Officer and the other senior executives -- a relationship that is best described as arms-length, vigilant and challenging, while at the same time collegial, supportive and non-adversarial. Within the framework of this relationship, the Board regularly monitors the performance of our Chief Executive Officer and the senior executive team, and provides advice and guidance to them.

Our Board's oversight function encompasses other matters as well. Among the most important are: establishment and implementation of executive compensation policies that are appropriate to the nature, condition and performance of our Company; adoption and observance of sound financial accounting and (internal and external) auditing policies and practices; review of the Company's financing and tax strategies, material capital expenditures and other major transactions; and review of policies and programs to strengthen the Company's standing with relevant units of government and with the general public in our service territory.

Board Committees

In order to efficiently and effectively carry out these (and other) aspects of its oversight function, our Board of Directors has six standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, the Employment and Community Relations Committee, the Finance Committee and the Executive Committee.

The particular powers and responsibilities delegated to these Committees are specified in written Charters. These were prepared under the direction of the Corporate Governance Committee and have been approved by the Board as a whole, and are subject to revision as circumstances may require. Descriptions of these Committees, and copies of their written Charters, are accessible via the following link: Board Committees

Membership on the Board Committees is comprised solely of Directors of the Company. However, senior executive officers and other management personnel are normally in attendance at Committee meetings to assist and support the work of the Committees.

Assignment of Board members to serve on the Committees, and appointment of Chairs of the Committees, are made by the Board, upon the recommendation of the Corporate Governance Committee. Assignments are made on the basis of the interests and competencies of individual Board members and in compliance with applicable regulatory requirements as to "independence" and expertise.

Meetings of the respective Committees are held as often as necessary to carry out their delegated responsibilities. The respective Committees regularly report on their proceedings, actions and recommendations at meetings of the Board of Directors. The Committees have authority to engage outside professional advisors when necessary or advisable in their discretion.

Role of Chairman of the Board

Although not mandated by law or the Company's bylaws, our Chairman is not associated with the Company as an executive officer or employee.

Specific leadership powers have been conferred upon the Chairman of the Board with the goal of ensuring optimal performance in Board operations. These include:

*       Agenda management, i.e. determining the subject matter to be presented by management at Board meetings and the issues to be taken up in proceedings of the Board;

*       Meeting management, i.e. determining the frequency and length of Board meetings and the frequency and length of executive sessions of the Board;

*       Presiding at Board meetings and guiding formal and informal proceedings in a manner that encourages questions from all Board members and facilitates frank and open discussion of the several Directors' insights and opinions;

*       Participating, as an ex officio voting member of the Corporate Governance Committee, in recommendations for the appointment of members and Chairs of the Board Committees and evaluation of the performance of the Committees; and

*       Monitoring individual Director performance by observing the attendance, preparedness and participation of each Director and, when necessary in his judgment, encouraging self-assessment and pursuing other measures for improvement of individual Director performance.

Evaluation of Committees, Board and CEO Performance

The Corporate Governance Committee is responsible for performing an annual performance evaluation of the Audit, Compensation, Employment and Community Relations, and Finance Committees of the Board. The objective of this evaluation is to determine that, in their proceedings over the course of each year, the Committees have given attention to all functions delegated to them under their respective Charters. The independent members of the Executive Committee are responsible for performing an annual performance evaluation of the Corporate Governance Committee.

The Corporate Governance Committee is responsible for overseeing the evaluation of the Board as a whole on at least an annual basis. The objective of this evaluation is to assess the effectiveness of the Board, with the aim of achieving optimal performance of the Board as a whole.

The Compensation Committee is responsible for overseeing the formal evaluation of the Chief Executive Officer and other senior executives on at least an annual basis. The objectives of this evaluation -- along with the informal and more frequent assessments of management that occur in executive sessions of the Board -- are to strengthen the performance of the Chief Executive Officer and senior executive team (and overall corporate performance), and to make studied recommendations to the Board on executive compensation matters.

Director Qualifications and Responsibilities

Our Company has, for many years, followed a policy of constituting its Board with a substantial majority of so-called "outside" Directors, i.e. with persons who are not associated with the Company as executive officers or employees and who have no material economic relationships with the Company or personal relationships with any senior executive officer. This policy is intended to ensure that the Board will operate with maximum objectivity in carrying out its oversight and decision-making functions. This policy is augmented by our compliance with regulatory requirements prescribing "independence" and other competencies relative to our Directors. We comply with the New York Stock Exchange corporate governance requirement our Board is majority independent. Although we have not adopted categorical standards defining independence (as permitted by the Exchange), we established certain guidelines for the Board to use when determining each Director's independence. These guidelines are accessible via the following link: Independence Guidelines The Exchange's minimum requirements for determining independence are accessible via the following link: NYSE Independence Requirements

There are several other individual qualities considered as fundamental prerequisites by the Corporate Governance Committee and the Board in selecting candidates for election and re-election as Directors. These include: integrity and trustworthiness; diligence and sound judgment; financial literacy; collaborative competency; and a high sense of stewardship.

In addition, all candidates recommended for election and re-election as Directors must make a commitment to devote the time and effort necessary to be productive members of the Board. This means, among other things, that each Director is expected to learn the salient characteristics of the business of the Company, to do all preparatory work necessary to participate in Board meetings, and to attend all meetings of the Board and each Committee to which he or she is appointed.

Under our bylaws, the shareholders normally elect our Directors for three-year (staggered) terms. We do not have pre-determined term limits. However, no individual who has attained age 72 at the time of our Annual Meetings is eligible to stand for election or re-election. Also, any individual whose principal occupation has changed subsequent to his or her initial election as a Director must offer to resign from the Board if requested by the Board to do so.

Our Company requires Directors to obtain Corporate Governance Committee approval before joining any other public company board of directors. Otherwise there are no pre-determined restrictions on Directors relative to their other occupations and activities as a condition or qualification for service on our Board of Directors or any Committee. If and to the extent such restrictions may be externally imposed from time to time by regulatory requirements, we will take steps necessary to comply with them.

We believe that the character, past experience, ability and objectivity of our individual Directors are critical ingredients in successful operation of the Board. We believe further that the effectiveness of the Board is also dependent upon the composite skills and experience of the Board as a whole. Therefore, in recommending candidates for election and re-election as Directors, consideration is also given by the Corporate Governance Committee and the Board to assembling a variety of relevant skills and experience that will enable optimal performance of the Board as a whole.

New Directors receive an orientation to meet the requirements the Board determines are necessary on an individual basis to orient the Director to the industry, the Company and the Board. The Board may, as it deems appropriate, recommend additional training and continuing education for Directors from time to time.

To reinforce the independence and objectivity of the Board in its oversight and decision-making functions, we have installed procedures for eliciting information from individual Directors as to possible conflicts of interest and direct or indirect economic and personal relationships that could impair their independence or objectivity. Such matters are addressed on a case-by-case basis and resolved in a way that protects the interests of the Company. In no instance is a Director permitted to participate in deliberations or decision-making on behalf of the Company if he or she is unable to act with unfettered loyalty to our corporate interests because of self-interest or a competing duty to others.

Director Compensation

The Compensation Committee is responsible for recommending compensation and benefits for directors. The compensation is designed (a) to fairly pay Directors for work required in a company of Duquesne Light's size and scope, and (b) to align Directors' interests with the long-term interests of shareholders. Details on Director compensation are accessible via the following link: Director Compensation

Succession Planning

Our Board of Directors is cognizant of the importance of preparedness for succession, particularly at the Chief Executive Officer level of management. This contingency is addressed by the Board as an integral part of the assessment and monitoring of the performance of the Chief Executive and other senior executive officers. Further in that regard, it is Board policy and practice to regularly interact with all members of the senior executive team, by which our Board maintains familiarity with their capabilities and achievements.