<PAGE>                                                        
                                                               Exhibit 3.2

                             DUQUESNE LIGHT COMPANY

                                    BY-LAWS


                          EFFECTIVE DECEMBER 18, 1996



                                   ARTICLE I


                                  STOCKHOLDERS



          SECTION 1.  Annual Meeting.  The Company shall hold an annual
                      ---------------
stockholders' meeting for election of Directors at a date, location (within or

outside Pennsylvania) and time set by the Board of Directors.  Annual meetings

shall be general meetings, open for the transaction of any business within the

powers of the Company without special notice of such business, except in cases

in which special notice is required by statute, the Articles or these By-Laws.



          SECTION 2.  Special Meetings.  Special meetings of the stockholders
                      -----------------
may be called at any time by the Chairman of the Board or President or by the

Board of Directors, and (to the extent permitted by statute) shall be called at

the written request of stockholders owning at least 20% of the shares of 
<PAGE>
 
capital stock entitled to be voted at the meeting, which request shall state the

purpose of the proposed meeting.


          SECTION 3.  Notice of Meetings.  Written notice of every meeting of
                      -------------------
the stockholders shall be given to each stockholder entitled to vote at such

meeting, at least five days (or such other period as required by statute) before

the meeting, by the Chairman of the Board or Secretary.  Failure to give notice

of any annual meeting or irregularity in the notice shall not affect the

validity of any proceedings at such meeting (other than proceedings of which

special notice is required by law, the Articles or these By-Laws).


          SECTION 4.  Quorum.  At all meetings of stockholders, a majority of
                      -------
the outstanding shares of capital stock entitled to vote, represented by

stockholders in person or by proxy, shall constitute a quorum.


          SECTION 5.  Judges of Election.  Three judges of election shall be
                      -------------------
appointed by the Board of Directors for any meeting of stockholders.  The judges

of election shall act as

                                       2
<PAGE>
 
tellers of any ballot vote taken at the meeting and certify the result.

          SECTION 6.  Voting and Proxies.  Any stockholder having the right to
                      -------------------
vote at any meeting shall be entitled to one vote for each share of stock held.

At meetings for the election of Directors, each stockholder entitled to vote

shall be entitled to votes equal to the number of shares held multiplied by the

number of Directors to be elected, and each stockholder may cast all votes for a

single candidate or distribute them among any two or more candidates.


          Any stockholder entitled to vote at any meeting of stockholders may

vote either in person or by proxy, but no proxy which is dated more than three

years prior to the meeting at which it is offered shall confer the right to

vote.  Every proxy shall be in writing, signed by a stockholder or duly

authorized attorney in fact, and dated.


          SECTION 7.  Order of Business.  At all meetings of stockholders, the
                      -------------------
order of business shall be, as far as applicable and practicable, as follows:

                                       3
<PAGE>
 
  (1)  Organization.

  (2)  Proof of giving of the notice of meeting or of waivers thereof.

  (3)  Submission by the Secretary, or by the judges of election, of a list of
       stockholders entitled to vote, present in person or by proxy.

  (4)  If an annual meeting, presentation of unapproved minutes of preceding
       meetings and action thereon.

  (5)  Matters to be voted upon as specified in the notice of meeting.

  (6)  Reports.

  (7)  Unfinished business.

  (8)  New business.

  (9)  Adjournment.

                                       4
<PAGE>
 
                                   ARTICLE II


                               BOARD OF DIRECTORS



          SECTION 1.  Election and Powers.  The business and affairs of the
                      --------------------
Company shall be managed by its Board of Directors.  The Board may exercise all

the powers of the Company except such as are by statute, the Articles or these

By-Laws conferred upon or reserved to the stockholders.  At each annual meeting

the stockholders shall elect directors of the class whose term then expires, to

hold office until the third succeeding annual meeting.  Except as otherwise

expressly provided in the Articles, each director shall hold office until a

successor is elected and qualified, or until such director's earlier death,

resignation or removal in the manner provided in Section 11 of this Article II.

The number of directors which shall constitute the full Board of Directors shall

be not less than one as fixed by the Board of Directors.


          SECTION 2.  Lead Directors.  Directors who are not employees of the
                      ----------------
Company (the "outside directors") may elect one or two outside directors on an

annual basis to serve as Lead Director(s) of the Board.  In the absence of the 

Chairman

                                       5
<PAGE>
 
and President, or at the request of the Board of Directors, a Lead Director may

chair meetings of the stockholders or Board of Directors. A Lead Director may

also 1) call for and chair meetings of the outside directors and 2) consult with

and advise the Chairman, President and Chief Executive Officer of the Company on

matters of Board and corporate governance.


          SECTION 3.  Eligibility for Election.  No person who is an employee of
                      --------------------------
the Company, except the Chairman of the Board or President, shall be eligible to

serve as a Director of the Company after retiring as an employee.  The mandatory

retirement age for directors is 70 except for directors completing a current

term of office or directors currently serving as Lead Directors.


          SECTION 4.  Regular Meetings.  After each meeting of stockholders at
                      ------------------
which Directors shall have been elected, the Board of Directors shall meet as

soon as practicable for the purpose of organization and the transaction of other

business.  Additional regular meetings shall be held as fixed by the Board of

Directors.

                                       6
<PAGE>
 
          SECTION 5.  Special Meetings.  Special meetings of the Board of
                      -----------------
Directors shall be held whenever called by the Chairman of the Board, the

President or a majority of the Board of Directors.


          SECTION 6.  Place of Meetings.  The Board of Directors may hold its
                      ------------------
regular and special meetings at such places as it designates.


          SECTION 7.  Notice of Meetings.  No notice of regular meetings of the
                      --------------------
Board of Directors need be given. Notice of the place, day and hour of every

special meeting shall be given to each director at least one day before the

meeting, by personal, telex or telephonic notification, at the director's

residence or usual place of business, or in the alternative, upon three days'

notice to the director's last known mailing address. The failure to give notice

shall not affect the validity of any meeting as to any director who attends the

meeting or waives notice in writing. No notice of adjourned meetings of the

Board of Directors need be given. All regular and special meetings of the Board

of Directors shall be general

                                       7
<PAGE>
 
meetings open for the transaction of any business without special notice of such

business.

          SECTION 8.  Quorum.  At all meetings of the Board of Directors, a
                      --------
majority of the directors shall constitute a quorum for the transaction of

business.  Except in cases in which it is by law, the Articles or these By-Laws

otherwise provided, a majority of the quorum shall decide any questions.


          SECTION 9.  Vacancies.  Vacancies on the Board of Directors shall be
                      ----------
filled as provided in the Articles.

          SECTION 10.  Compensation.  The directors may be compensated for their
                       --------------
services on a periodic basis and/or receive a fixed sum for attendance at each

regular, special or Committee meeting and every adjournment thereof.  The amount

shall be fixed by resolution of the Board of Directors.  The directors shall be

reimbursed for all reasonable traveling expenses incurred in attending meetings.

Directors who are employees of the Company shall not be paid for their services

as directors.

                                       8
<PAGE>
 
          SECTION 11.  Removal.  Any Director, any class of Directors or the
                       --------
entire Board of Directors may be removed as provided in the Articles.


          SECTION 12.  Indemnification of Directors and Officers.
                       ------------------------------------------

       (a) Right of Indemnification.  Except as prohibited by law, every
           --------------------------
Director and officer of the Company shall be entitled as of right to be

indemnified by the Company against reasonable expense and any liability paid or

incurred by such person in connection with any actual or threatened claim,

action, suit or proceeding, civil, criminal, administrative, investigative or

other, whether brought by or in the right of the Company or otherwise, by reason

of such person being or having been a Director or officer of the Company or by

reason of the fact that such person is or was serving at the request of the

Company as a director, officer, employee, fiduciary or other representative of

another corporation, partnership, joint venture, trust, employee benefit plan or

other entity (such claim, action, suit or proceeding hereinafter being referred

to as "action"); provided, however, that no such right of indemnification shall
 
exist with respect to an action brought

                                       9
<PAGE>
 
by a Director or officer against the Company (other than a suit for

indemnification as provided in paragraph (b)).  Such indemnification shall

include the right to have expenses incurred by such person in connection with an

action paid in advance by the Company prior to final disposition of such action,

subject to such conditions as may be prescribed by law.  Persons who are not

Directors or officers of the Company may be similarly indemnified in respect of

service to the Company or to another such entity at the request of the Company

to the extent the Board of Directors at any time denominates such person as

entitled to the benefits of this Section.  As used herein, "expense" shall

include fees and expenses of counsel selected by such person; and "liability"

shall include amounts of judgments, excise taxes, fines and penalties, and

amounts paid in settlement.

       (b) Right of Claimant to Bring Suit.  If a claim under paragraph (a) of
           ---------------------------------
this Section is not paid in full by the Company within thirty days after a

written claim has been received by the Company, the claimant may at any time

thereafter bring suit against the Company to recover the unpaid amount of the

claim, and, if successful in whole or in part, the claimant

                                       10
<PAGE>
 
shall also be entitled to be paid the expense of prosecuting such claim.  It

shall be a defense to any such action that the conduct of the claimant was such

that under Pennsylvania law the Company would be prohibited from indemnifying

the claimant for the amount claimed, but the burden of proving such defense

shall be on the Company.  Neither the failure of the Company (including its

Board of Directors, independent legal counsel and its stockholders) to have made

a determination prior to the commencement of such action that indemnification of

the claimant is proper in the circumstances because the conduct of the claimant

was not such that indemnification would be prohibited by law, nor an actual

determination by the Company (including its Board of Directors, independent

legal counsel or its stockholders) that the conduct of the claimant was such

that indemnification would be prohibited by law, shall be a defense to the

action or create a presumption that the conduct of the claimant was such that

indemnification would be prohibited by law.

       (c) Insurance and Funding.  The Company may purchase and maintain
           ----------------------
insurance to protect itself and any person eligible to be indemnified hereunder

against any liability or expense

                                       11
<PAGE>
 
asserted or incurred by such person in connection with any action, whether or

not the Company would have the power to indemnify such person against such

liability or expense by law or under the provisions of this Section 12.  The

Company may create a trust fund, grant a security interest, cause a letter of

credit to be issued or use other means (whether or not similar to the foregoing)

to ensure the payment of such sums as may become necessary to effect

indemnification as provided herein.

       (d)  Non-Exclusivity; Nature and Extent of Rights.  The right of
            ---------------------------------------------
indemnification provided for herein (1) shall not be exclusive of any other

rights, whether existing now or later, to which those seeking indemnification

may be entitled under any agreement, by-law or charter provision, vote of

stockholders or Directors or otherwise, (2) shall be deemed to create

contractual rights in favor of persons entitled to indemnification, (3) shall

continue as to persons who have ceased to have the status pursuant to which they

were entitled or were denominated as entitled to indemnification and shall inure

to the benefit of the heirs and legal representatives of persons entitled to

indemnification hereunder and (4) shall be applicable to actions, suits or

proceedings commenced after adoption, whether arising from acts or omissions

occurring

                                       12
<PAGE>
 
before or after the adoption hereof. The right of indemnification may not be

amended, modified or repealed so as to limit the indemnification provided herein

with respect to any acts or omissions occurring prior to the adoption of any

such amendment or repeal.


          SECTION 13.  Personal Liability of Directors.
                       --------------------------------

       (a) To the fullest extent that the laws of the Commonwealth of

Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit

elimination or limitation of the liability of directors, no Director of the

Company shall be personally liable for monetary damages as such for any action

taken, or any failure to take any action, as a Director.

       (b) This Section 13 shall not apply to any action filed prior to January

27, 1987, nor to any breach of performance or failure of performance of duty by

a Director occurring prior to January 27, 1987.  Any amendment or repeal of this

Section 13 which has the effect of increasing Director liability shall operate

prospectively only, and shall not affect action taken, or any failure to act,

prior to its adoption.

                                       13
<PAGE>
 
                                  ARTICLE III


                                   COMMITTEES



          Committees.  The Board of Directors may by resolution designate and
          ------------
discontinue such standing or special committees as it deems desirable.  Each

committee shall have such powers and perform such duties, not inconsistent with

law, as may be assigned by the Board of Directors.


                                   ARTICLE IV


                                    OFFICERS




          SECTION 1.  Executive Officers.  The executive officers of the Company
                      --------------------
shall be a Chairman of the Board, a President, one or more Vice Presidents, a

Secretary, a Treasurer and a Controller.  The Chairman of the Board and the

President shall be chosen from among the Directors.  The executive officers

shall be elected annually by the Board of Directors at its first meeting

following the annual meeting, and each such officer shall hold office until the

corresponding meeting in the next year and until a successor has been duly

chosen and

                                       14
<PAGE>
 
qualified, or until such officer's earlier death, resignation or removal. Any

vacancy in the above offices may be filled for the unexpired portion of the term

by the Board of Directors, at any regular or special meeting.


          SECTION 2.  Chairman of the Board.  The Chairman of the Board shall
                      ----------------------
preside at any meeting of the stockholders or of the Board of Directors and

shall have all the powers and authority vested in a presiding officer by law or

practice to conduct an orderly meeting.  In addition to any specific powers

conferred by these By-Laws, the Chairman of the Board shall have the powers and

duties assigned by the Board of Directors.


          SECTION 3.  President.  In addition to any specific powers conferred
                      -----------
by these By-Laws, the President shall have the powers and duties assigned by the

Board of Directors.  At the request or in the absence or disability of the

Chairman of the Board, the President shall preside at any meeting of the

stockholders or of the Board of Directors.


          SECTION 4.  Chief Executive Officer.  The Board of Directors shall
                      ------------------------
designate the Chairman of the Board or President

                                       15
<PAGE>
 
or the person holding both of such offices to perform the functions of the Chief

Executive Officer.  The Chief Executive Officer shall carry out the policies

approved by the Board of Directors.  In addition to any specific powers

conferred by these By-Laws, the Chief Executive Officer shall have supervision

over, and shall exercise general executive powers concerning, all the operations

and business of the Company.  The Chief Executive Officer shall also have and

exercise such powers and duties as assigned by the Board of Directors and may

delegate executive and other powers and duties to any other officer.

          SECTION 5.  Vice Presidents.  At the request of the President, or in
                      -----------------
the absence or disability of the President, any Vice President shall perform the

duties of the President, and when so acting shall have the powers of the

President, unless otherwise determined by the Board of Directors.  Each Vice

President shall also have and exercise such powers and duties as assigned by the

Board of Directors or the Chief Executive Officer.


          SECTION 6.  Secretary.  The Secretary shall perform all duties
                      -----------
incident to the office of a secretary of a

                                       16
<PAGE>
 
corporation, and such other duties as assigned by the Board of Directors or the

Chief Executive Officer.

          SECTION 7.  Treasurer.  The Treasurer shall perform all the duties
                      -----------
incident to the office of a treasurer of a corporation, and such other duties as

assigned by the Board of Directors or the Chief Executive Officer.


          SECTION 8.  Controller.  The Controller shall perform all duties
                      ------------
incident to the office of a controller of a corporation, and such other duties

as assigned by the Board of Directors or the Chief Executive Officer.


          SECTION 9.  Assistant Officers.  The Board of Directors may elect one
                      -------------------
or more Assistant Vice Presidents, Assistant Secretaries and Assistant

Treasurers.  Each assistant officer shall hold office for such period and shall

have such authority and perform such duties as the Board of Directors or the

Chief Executive Officer may prescribe.



          SECTION 10.  Certain Powers of Officers.  Except in cases in which the
                       ----------------------------
signing and execution shall have been expressly delegated by the Board of

Directors to some other 

                                       17
<PAGE>
 
officer,employee or agent of the Company, the Chairman of the Board or President

or a Vice President may sign and execute in the name of the Company all

authorized deeds, mortgages, bonds, contracts or other instruments; provided,

however, that a Vice President may delegate to any General Manager or Manager

reporting to such officer authority to sign and execute in the name of the

Company all authorized contracts and similar instruments pursuant to a policy

approved by the Board of Directors.

          SECTION 11.  Compensation.  The Board of Directors shall have the
                       -------------
power to fix the compensation of the Chairman of the Board, President and any

Vice President of the Company.  The Chief Executive Officer shall have the power

to fix the compensation of the Secretary, the Treasurer, the Controller and

assistant officers.


                                   ARTICLE V


                                     STOCK




          SECTION 1.  Certificates.  Every stockholder shall be entitled to a
                      -------------
certificate or certificates of stock of the 

                                       18
<PAGE>
 
Company in a form prescribed by the Board of Directors, duly numbered and sealed

with the corporate seal of the Company, and setting forth the number and kind of

shares represented thereby; provided however, that the Board of Directors shall

have the power to provide for uncertificated shares of any class or series of

stock or any part thereof. The certificates shall be signed by Chairman of the

Board, the President or a Vice President and by the Treasurer or the Secretary.

The Board of Directors may also appoint one or more Transfer Agents and/or

Registrars for its stock of any class and may require stock certificates to be

countersigned and/or registered by one or more of such Transfer Agents and/or

Registrars.

          SECTION 2.  Transfer of Shares.  The Board of Directors shall have
                      --------------------
power and authority to make all rules and regulations concerning the issue,

transfer, and registration of certificates of stock.



          SECTION 3.  Record Dates.  The Board of Directors shall have the
                      --------------
authority to fix in advance a date, not exceeding ninety (90) days preceding any

meeting of stockholders, or the date for payment of any dividend, or the date

for the allotment of rights, or the date when any change, conversion, or 

exchange

                                       19
<PAGE>
 
of capital stock shall go into effect (each a "stockholder event"), as a record

date, in connection with such stockholder event, and in such case only such

stockholders as shall be stockholders of record on the date so fixed shall be

entitled to participate in such stockholder event, notwithstanding any transfer

of any stock on the books of the Company after any such record date.


          SECTION 4.  Mutilated, Lost or Destroyed Certificates.
                      --------------------------------------------

The holder of any certificate representing shares of stock of the Company shall

immediately notify the Company of any mutilation, loss or destruction thereof,

and the Board of Directors may, in its discretion, cause one or more new

certificates, for the same number of shares in the aggregate, to be issued to

such holder upon the surrender of the mutilated certificate, or in case of loss

or destruction of the certificate, upon satisfactory proof of such loss or

destruction and the deposit of indemnity by way of bond or otherwise, in such

form and amount and with such sureties or security as the Board of Directors may

require to indemnify the Company against loss or liability by reason of the

issuance of such new certificate or certificates, and the failure of such holder

to comply with such requirements shall constitute a waiver by such 

                                       20
<PAGE>

holder of any right to receive such new certificate or certificates.
 
                                   ARTICLE VI


                             DIVIDENDS AND FINANCE




          SECTION 1.  Dividends.  Subject to the provisions of the Articles, the
                      -----------
Board of Directors may, in its discretion, declare what, if any, dividends shall

be paid upon the stock of the Company.  Except as otherwise provided by the

Articles, dividends shall be payable upon such dates as the Board of Directors

may designate.  Before payment of any dividend there may be set aside out of any

funds of the Company available for dividends such sum or sums as the Directors,

in their absolute discretion, think proper as a reserve fund to meet

contingencies, for equalizing dividends, or for repairing or maintaining any

property of the Company, or for such other purposes as the Directors shall think

conducive to the interests of the Company, and the Directors may abolish any

such reserve in the manner in which it is created. 

                                       21
<PAGE>
 
         SECTION 2. Checks, Drafts, Etc. Unless otherwise provided by resolution
                    ---------------------
of the Board of Directors, all checks, drafts, or orders for the payment of

money, notes, and other evidences of indebtedness, issued in the name of the

Company, shall be signed by the Treasurer or an Assistant Treasurer and

countersigned by the Chairman of the Board, the President or a Vice President.


          SECTION 3.  Fiscal Year.  The fiscal year of the Company shall be the
                      -------------
calendar year, unless otherwise provided by the Board of Directors.

                                  ARTICLE VII


                               SUNDRY PROVISIONS



          SECTION 1.  Seal.  The Corporate Seal of the Company shall contain
                      ------
within a circle the words "Duquesne Light Company", and in an inner circle the

word "SEAL".



          SECTION 2.  Inspection of Books and Records.  The Board of Directors
                      ---------------------------------
may determine whether and, if allowed, when and under what conditions and

regulations, the books and records of the Company shall be open to the

inspection of stockholders, 

                                       22
<PAGE>
 
and the rights of stockholders in this respect are and shall be limited

accordingly, except as otherwise provided by statute. No stockholder has the

right to inspect any book or record or receive any statement for an improper

purpose.


          SECTION 3.  Bonds.  The Board of Directors may require any officers,
                      -------
agents, or employees of the Company to give a bond to the Company, conditioned

upon the faithful discharge of their duties, with one or more sureties and in

such amount as may be satisfactory to the Board of Directors.


          SECTION 4.  Voting Upon Stock in Other Corporations.  Any stock in
                      -----------------------------------------
other corporations, which may be held by the Company, may be represented and

voted at any meeting of stockholders of such other corporations by the Chairman

of the Board, the President or a Vice President of the Company or by proxy

executed in the name of the Company by the Chairman of the Board, the President

or a Vice President with the corporate seal affixed and attested by the

Secretary or an Assistant Secretary.


          SECTION 5.  Amendments.  Except as provided by the Articles or by
                      ------------
statute, the authority to adopt, amend and repeal the By-Laws is exclusively

vested in the Board of Directors.

                                       23
<PAGE>
 
          SECTION 6.  Participation in Meeting by Telephone.  One or more
                      ---------------------------------------
Directors may participate in a meeting of the Board of Directors or a committee

of the Board of Directors by means of a conference telephone or similar

communications equipment by means of which all persons participating in the

meeting can communicate with each other.


          SECTION 7.  Informal Action by Directors or Committees.
                      -------------------------------------------

Any action which may be taken at a meeting of the Board of Directors or a

committee of the Board of Directors may be taken without a meeting if a consent

or consents in writing setting forth the action so taken shall be signed by all

of the Directors or the members of the committee and shall be filed with the

Secretary of the Company.

                                       24