AEP Seeks FERC Approval to Move Forward with Full Competition in Ohio

COLUMBUS, Ohio, – American Electric Power (NYSE: AEP) has submitted filings to the Federal Energy Regulatory Commission (FERC) seeking approval to fully separate its Ohio generating assets from its Ohio distribution and transmission operations following an Oct. 17 decision from the Public Utilities Commission of Ohio in the company’s corporate separation case.

“These FERC filings are an important next step in our transition to full competition in Ohio. We have requested approval to transfer ownership of a portion of our Ohio generation-related assets from AEP Ohio into a separate unregulated generation company, to transfer other generation assets currently owned by AEP Ohio to Appalachian Power and Kentucky Power to help satisfy their long-term capacity requirements in the PJM Interconnection, and to end the current system interconnection agreement for our Midwest utilities,” said Nicholas K. Akins, AEP president and chief executive officer. “If the process moves forward as we expect, we will be in a position to fully separate our Ohio generation from our Ohio utility operations at the beginning of 2014.”

AEP requested approval to transfer approximately 9,200 megawatts (MW) of AEP Ohio-owned generation to a new wholly owned company – AEP Generation Resources Inc. AEP also requested FERC approval to transfer AEP Ohio’s current two-thirds ownership (867 MW) in the John E. Amos Plant Unit 3 (1,300 MW) to Appalachian Power and to transfer 800 MW of the 1,600-MW generating capacity of Mitchell Plant to Appalachian Power and the remaining 800 MW to Kentucky Power. Additionally, AEP asked FERC to terminate the existing interconnection agreement, or pool, that exists among AEP’s utilities in the Midwest and to approve a new Power Coordination Agreement among Appalachian Power, Kentucky Power and Indiana Michigan Power.

AEP also requested approval to merge AEP’s Wheeling Power utility into Appalachian Power.

AEP anticipates a decision on the FERC filings by mid-2013, with implementation of corporate separation and the other items in the related filings Jan. 1, 2014. Appalachian Power and Kentucky Power will submit necessary state regulatory filings in the fourth quarter of 2012.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east and north Texas). AEP’s headquarters are in Columbus, Ohio. News releases and other information about AEP can be found at www.aep.com.

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This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: the economic climate and growth in, or contraction within, AEP’s service territory and changes in market demand and demographic patterns; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to finance new capital projects and refinance existing debt at attractive rates; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load, customer growth and the impact of retail competition, particularly in Ohio; weather conditions, including recent storms in our eastern service territory, and AEP’s ability to recover significant storm restoration costs through applicable rate mechanisms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of necessary generating capacity and the performance of AEP’s generating plants; AEP’s ability to resolve I&M’s Donald C. Cook Nuclear Plant Unit 1 restoration and outage-related issues through warranty, insurance and the regulatory process; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity, and transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances or additional regulation of fly ash and similar combustion products that could impact the continued operation and cost recovery of AEP’s plants and related assets; a reduction in the federal statutory tax rate that could result in an accelerated return of deferred federal income taxes to customers; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP’s ability to constrain operation and maintenance costs; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including the implementation of Electric Security Plans and the transition to market and expected legal separation for generation in Ohio and the allocation of costs within regional transmission organizations, including PJM and SPP; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact on future funding requirements; prices and demand for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; AEP’s ability to recover through rates or market prices any remaining unrecovered investment in generating units that may be retired before the end of their previously projected useful lives; AEP’s ability to successfully manage negotiations with stakeholders and obtain regulatory approval to terminate or amend the Interconnection Agreement; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.