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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          ---------------------------
                                   FORM 10-K
                          ---------------------------

(Mark One)



  x[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     [FEE REQUIRED]

      For the fiscal year ended December 31, 1995

   2002

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     [NO FEE REQUIRED]

      For the transition period from _____________-------------- to ______________





COMMISSION               REGISTRANT; STATE OF INCORPORATION;    I.R.S. EMPLOYER
FILE NUMBER              ADDRESS; AND TELEPHONE NUMBER       IDENTIFICATION NO.--------------

COMMISSION REGISTRANTS; STATES OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NOS. ----------- ------------------------------------- ------------------- 1-3525 AMERICAN ELECTRIC POWER COMPANY, INC. 13-4922640 (A New York 13-4922640 Corporation) 0-18135 AEP GENERATING COMPANY (An Ohio Corporation) 31-1033833 0-346 AEP TEXAS CENTRAL COMPANY (A Texas Corporation) 74-0550600 0-340 AEP TEXAS NORTH COMPANY (A Texas Corporation) 75-0646790 1-3457 APPALACHIAN POWER COMPANY (A Virginia Corporation) 54-0124790 1-2680 COLUMBUS SOUTHERN POWER COMPANY (An Ohio Corporation) 31-4154203 1-3570 INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation) 35-0410455 1-6858 KENTUCKY POWER COMPANY (A Kentucky Corporation) 61-0247775 1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000 0-343 PUBLIC SERVICE COMPANY OF OKLAHOMA (An Oklahoma Corporation) 73-0410895 1-3146 SOUTHWESTERN ELECTRIC POWER COMPANY (A Delaware Corporation) 72-0323455 1 Riverside Plaza, Columbus, Ohio 43215 Telephone (614) 223-1000 0-18135 AEP GENERATING COMPANY 31-1033833 (An Ohio Corporation) 1 Riverside Plaza Columbus, Ohio 43215 Telephone (614) 223-1000 1-3457 APPALACHIAN POWER COMPANY 54-0124790 (A Virginia Corporation) 40 Franklin Road, S.W. Roanoke, Virginia 24011 Telephone (540) 985-2300 1-2680 COLUMBUS SOUTHERN POWER COMPANY 31-4154203 (An Ohio Corporation) 215 North Front Street Columbus, Ohio 43215 Telephone (614) 464-7700 1-3570 INDIANA MICHIGAN POWER COMPANY 35-0410455 (An Indiana Corporation) One Summit Square P. O. Box 60 Fort Wayne, Indiana 46801 Telephone (219) 425-2111 1-6858 KENTUCKY POWER COMPANY 61-0247775 (A Kentucky Corporation) 1701 Central Avenue Ashland, Kentucky 41101 Telephone (800) 572-1113 1-6543 OHIO POWER COMPANY 31-4271000 (An Ohio Corporation) 301 Cleveland Avenue, S.W. Canton, Ohio 44702 Telephone (330) 456-8173 AEP Generating Company, Columbus Southern Power Company and Kentucky Power Company meet the conditions set forth in General Instruction J(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instruction J(2) to such Form 10-K.
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X . No. . SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE REGISTRANT TITLE OF EACH CLASS ON WHICH REGISTERED AEP Generating Company None American Electric Common Stock, Power Company, Inc. $6.50 par value New York Stock Exchange Appalachian Power Cumulative Preferred Company Stock Voting, no par value: 4-1/2% Philadelphia Stock Exchange 4.50% Philadelphia Stock Exchange 7.40% New York Stock Exchange Columbus Southern 8-3/8% Junior Subordinated Power Company Deferrable Interest Debentures, Series A, Due 2025 New York Stock Exchange Indiana Michigan Cumulative Preferred Power Company Stock, Non-Voting, $100 par value: 4-1/8% Chicago Stock Exchange 7.08% New York Stock Exchange Kentucky Power Company 8.72% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2025 New York Stock Exchange Ohio Power Company 8.16% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2025 New York Stock Exchange Indicate by check mark if disclosure of delinquent filers with respect to American Electric Power Company, Inc. and Appalachian Power Company pursuant to Item 405 of Regulation S-K (
229.405(229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy statement of American Electric Power Company, Inc. or definitive information statement of Appalachian Power Companystatements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark if disclosure of delinquent filers with respect to Appalachian Power Company, Indiana Michigan Power Company or Ohio Power Company pursuant to Item 405 of Regulation S-K (
229.405(229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statementstatements of Appalachian Power Company or Ohio Power Company incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: REGISTRANT TITLE OF EACH CLASS AEP Generating Company NoneX Indicate by check mark whether American Electric Power Company, Inc. None Appalachian Power Company None Columbus Southern Power Company None Indiana Michigan Power Company None Kentucky Power Company None Ohio Power Company 4-1/2% Cumulative Preferred Stock, Voting, $100 par value AGGREGATE MARKET VALUE NUMBER OF SHARES OF VOTING STOCK HELD OF COMMON STOCK BY NON-AFFILIATES OF OUTSTANDING OF THE REGISTRANTS AT THE REGISTRANTS AT FEBRUARY 2, 1996 FEBRUARY 2, 1996is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No __ Indicate by check mark whether AEP Generating Company, None 1,000 ($1,000 par value) American Electric PowerAEP Texas Central Company, Inc. $8,164,000,000 186,635,000 ($6.50 par value) Appalachian PowerAEP Texas North Company, $43,000,000 13,499,500 (no par value) Columbus Southern Power Company None 16,410,426 (no par value) Indiana Michigan Power Company None 1,400,000 (no par value) Kentucky Power Company None 1,009,000 ($50 par value) Ohio Power Company $68,000,000 27,952,473 (no par value) NOTE ON MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES All of the common stock of AEP Generating Company, Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company and Ohio Power Company is owned by American Electric Power Company, Inc. (see Item 12 herein). The voting stock owned by non- affiliates of (i) Appalachian Power Company consists of 552,348 shares of Cumulative Preferred Stock, no par value; and (ii) Ohio Power Company consists of 862,403 shares of Cumulative Preferred Stock, $100 par value. Some of the series of Cumulative Preferred Stock are not regularly traded. The aggregate market value of the Cumulative Preferred Stock is based on the average of the high and low prices on the closest trading date to February 2, 1996 for series traded on the New York or Philadelphia Stock Exchange, or the most recent reported bid prices for those series not recently traded. Where recent market price information was not available with respect to a series, the market price for such series is based on the price of a recently traded series with an adjustment related to any difference in the current yields of the two series. DOCUMENTS INCORPORATED BY REFERENCE PART OF FORM 10-K INTO WHICH DOCUMENT DESCRIPTION IS INCORPORATED Portions of Annual Reports of the following companies for the fiscal year ended December 31, 1995: Part II AEP Generating Company American Electric Power Company, Inc. Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company, Ohio Power Company, PortionsPublic Service Company of Proxy StatementOklahoma and Southwestern Electric Power Company are accelerated filers (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes __ No X AEP Generating Company, AEP Texas North Company, Columbus Southern Power Company, Kentucky Power Company and Public Service Company of Oklahoma meet the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instruction I(2) to such Form 10-K. SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE REGISTRANT TITLE OF EACH CLASS ON WHICH REGISTERED ---------- ------------------- --------------------- AEP Generating Company None AEP Texas Central Company None AEP Texas North Company None American Electric Common Stock, Power Company, Inc. $6.50 par value.................................. New York Stock Exchange 9.25% Equity Units................................. New York Stock Exchange Appalachian Power Company 7.20% Senior Notes, Series A, Due 2038............. New York Stock Exchange 7.30% Senior Notes, Series B, Due 2038............. New York Stock Exchange Columbus Southern Power Company None CPL Capital I 8.00% Cumulative Quarterly Income Preferred Securities, Series A, Liquidation Preference $25 per Preferred Security............ New York Stock Exchange Indiana Michigan 8% Junior Subordinated Debentures, Series A, Due Power Company 2026............................................. New York Stock Exchange 7.60% Junior Subordinated Deferrable Interest Debentures, Series B, Due 2038.......... New York Stock Exchange 6% Senior Notes, Series D, Due 2032................ New York Stock Exchange Kentucky Power Company 8.72% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2025.......... New York Stock Exchange Ohio Power Company 7 3/8% Senior Notes, Series A, Due 2038............ New York Stock Exchange Public Service Company 6% Senior Notes, Series B, Due 2032................ New York Stock Exchange of Oklahoma PSO Capital I 8.00% Trust Originated Preferred Securities, Series A, Liquidation Preference $25 per Preferred Security............ New York Stock Exchange SWEPCo Capital I 7.875% Trust Preferred Securities, Series A, Liquidation amount $25 per Preferred Security........................... New York Stock Exchange Southwestern Electric None Power Company
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
REGISTRANT TITLE OF EACH CLASS ---------- ------------------- AEP Generating Company None AEP Texas Central Company 4.00% Cumulative Preferred Stock, Non-Voting, $100 par value 4.20% Cumulative Preferred Stock, Non-Voting, $100 par value AEP Texas North Company None American Electric Power Company, Inc. None Appalachian Power Company 4.50% Cumulative Preferred Stock, Voting, no par value Columbus Southern Power Company None Indiana Michigan Power Company 4.125% Cumulative Preferred Stock, Non-Voting, $100 par value Kentucky Power Company None Ohio Power Company 4.50% Cumulative Preferred Stock, Voting, $100 par value Public Service Company of Oklahoma None Southwestern Electric Power Company 4.28% Cumulative Preferred Stock, Non-Voting, $100 par value 4.65% Cumulative Preferred Stock, Non-Voting, $100 par value 5.00% Cumulative Preferred Stock, Non-Voting, $100 par value
AGGREGATE MARKET VALUE OF VOTING AND NON-VOTING NUMBER OF SHARES COMMON EQUITY HELD OF COMMON STOCK BY NON-AFFILIATES OF OUTSTANDING OF THE REGISTRANTS AT THE REGISTRANTS AT JUNE 28, 2002 JUNE 28, 2002 ------------------------ ------------------ AEP Generating Company None 1,000 ($1,000 par value) AEP Texas Central Company None 2,211,678 ($25 par value) AEP Texas North Company None 5,488,560 ($25 par value) American Electric Power Company, Inc. $13,560,125,474 338,833,720 ($6.50 par value) Appalachian Power Company None 13,499,500 (no par value) Columbus Southern Power Company None 16,410,426 (no par value) Indiana Michigan Power Company None 1,400,000 (no par value) Kentucky Power Company None 1,009,000 ($50 par value) Ohio Power Company None 27,952,473 (no par value) Public Service Company of Oklahoma None 9,013,000 ($15 par value) Southwestern Electric Power Company None 7,536,640 ($18 par value)
NOTE ON MARKET VALUE OF COMMON EQUITY HELD BY NON-AFFILIATES American Electric Power Company, Inc., dated March 9, 1996, for Annual Meeting of Shareholders Part III Portions of Information Statements owns, directly or indirectly, all of the following companies for 1996 Annual Meetingcommon stock of Shareholders, to be filed within 120 days after December 31, 1995:AEP Generating Company, AEP Texas Central Company, AEP Texas North Company, Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company, Ohio Power Company, Public Service Company of Oklahoma and Southwestern Electric Power Company (see Item 12 herein). DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K INTO WHICH DOCUMENT DESCRIPTION IS INCORPORATED - ----------- ------------------- Portions of Annual Reports of the following companies for Part II the fiscal year ended December 31, 2002: AEP Generating Company AEP Texas Central Company AEP Texas North Company American Electric Power Company, Inc. Appalachian Power Company Columbus Southern Power Company Indiana Michigan Power Company Kentucky Power Company Ohio Power Company Public Service Company of Oklahoma Southwestern Electric Power Company Portions of Proxy Statement of American Electric Power Part III Company, Inc. for 2003 Annual Meeting of Shareholders, to be filed within 120 days after December 31, 2002 Portions of Information Statements of the following Part III companies for 2003 Annual Meeting of Shareholders, to be filed within 120 days after December 31, 2002: Appalachian Power Company Ohio Power Company
------------------ THIS COMBINED FORM 10-K IS SEPARATELY FILED BY AEP GENERATING COMPANY, AEP TEXAS CENTRAL COMPANY, AEP TEXAS NORTH COMPANY, AMERICAN ELECTRIC POWER COMPANY, INC., APPALACHIAN POWER COMPANY, COLUMBUS SOUTHERN POWER COMPANY, INDIANA MICHIGAN POWER COMPANY, KENTUCKY POWER COMPANY, OHIO POWER COMPANY, PUBLIC SERVICE COMPANY OF OKLAHOMA AND OHIOSOUTHWESTERN ELECTRIC POWER COMPANY. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EXCEPT FOR AMERICAN ELECTRIC POWER COMPANY, INC., EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANTS. YOU CAN ACCESS FINANCIAL AND OTHER INFORMATION AT AEP'S WEBSITE. THE ADDRESS IS WWW.AEP.COM. AEP MAKES AVAILABLE, FREE OF CHARGE ON ITS WEBSITE, COPIES OF ITS ANNUAL REPORT ON FORM 10-K, QUARTERLY REPORTS ON FORM 10-Q, CURRENT REPORTS ON FORM 8-K AND AMENDMENTS TO THOSE REPORTS FILED OR FURNISHED PURSUANT TO SECTION 13(A) OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 AS SOON AS REASONABLY PRACTICABLE AFTER FILING SUCH MATERIAL ELECTRONICALLY OR OTHERWISE FURNISHING IT TO THE SEC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE NUMBER Glossary of Terms i PART I Item 1. Business 1 Item 2. Properties 29 Item 3. Legal Proceedings 33 Item 4. Submission of Matters to a Vote of Security Holders 34 Executive Officers of the Registrants 34 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 37 Item 6. Selected Financial Data 37 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition 37 Item 8. Financial Statements and Supplementary Data 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 38 PART III Item 10. Directors and Executive Officers of the Registrants 39 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management 44 Item 13. Certain Relationships and Related Transactions 45 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 46 Signatures 48 Index to Financial Statement Schedules S-1 Independent Auditors' Report S-2 Exhibit
PAGE NUMBER ------ Glossary of Terms........................................................... i Forward-Looking Information................................................. 1 PART I Item 1. Business.................................................... 2 Item 2. Properties.................................................. 26 Item 3. Legal Proceedings........................................... 29 Item 4. Submission of Matters to a Vote of Security Holders......... 30 Executive Officers of the Registrants.................................... 30 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 32 Item 6. Selected Financial Data..................................... 32 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition........................ 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................................................... 33 Item 8. Financial Statements and Supplementary Data................. 33 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 33 PART III Item 10. Directors and Executive Officers of the Registrants......... 33 Item 11. Executive Compensation...................................... 34 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters................ 34 Item 13. Certain Relationships and Related Transactions.............. 37 PART IV Item 14. Controls and Procedures..................................... 37 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................................... 37 Signatures.................................................................. 39 Certifications.............................................................. 42 Index to Financial Statement Schedules...................................... S-1 Independent Auditors' Report................................................ S-2 Exhibit Index............................................................... E-1
GLOSSARY OF TERMS WhenThe following abbreviations or acronyms used in this Form 10-K are defined below:
ABBREVIATION OR ACRONYM DEFINITION ----------------------- ---------- AEGCo. ................................ AEP Generating Company, an electric utility subsidiary of AEP AEP.................................... American Electric Power Company, Inc. AEPES.................................. AEP Energy Services, Inc., a subsidiary of AEP AEP Power Pool......................... APCo, CSPCo, I&M, KPCo and OPCo, as parties to the Interconnection Agreement AEPR................................... AEP Resources, Inc., a subsidiary of AEP AEPSC or Service Corporation........... American Electric Power Service Corporation, a service subsidiary of AEP AEP System or the System............... The American Electric Power System, an integrated electric utility system, owned and operated by AEP's electric utility subsidiaries AEP Utilities.......................... AEP Utilities, Inc., subsidiary of AEP, formerly, Central and South West Corporation AFUDC.................................. Allowance for funds used during construction. Defined in regulatory systems of accounts as the net cost of borrowed funds used for construction and a reasonable rate of return on other funds when so used. APCo. ................................. Appalachian Power Company, an electric utility subsidiary of AEP Btu.................................... British thermal unit Buckeye................................ Buckeye Power, Inc., an unaffiliated corporation CAA.................................... Clean Air Act CAAA................................... Clean Air Act Amendments of 1990 Cardinal Station....................... Generating facility co-owned by Buckeye and OPCo Centrica............................... Centrica U.S. Holdings, Inc., and its affiliates collectively, unaffiliated companies CERCLA................................. Comprehensive Environmental Response, Compensation and Liability Act of 1980 CG&E................................... The Cincinnati Gas & Electric Company, an unaffiliated utility company Cook Plant............................. The Donald C. Cook Nuclear Plant, owned by I&M, located near Bridgman, Michigan CSPCo. ................................ Columbus Southern Power Company, a public utility subsidiary of AEP CSW Operating Agreement................ Agreement, dated January 1, 1997, by and among PSO, SWEPCo, TCC and TNC governing generating capacity allocation DOE.................................... United States Department of Energy DP&L................................... The Dayton Power and Light Company, an unaffiliated utility company East Zone Companies of AEP............. APCo, CSPCo, I&M, KPCo and OPCo ECOM................................... Excess cost over market EMF.................................... Electric and Magnetic Fields EPA.................................... United States Environmental Protection Agency ERCOT.................................. Electric Reliability Council of Texas EWG.................................... Exempt wholesale generator, as defined under PUHCA FERC................................... Federal Energy Regulatory Commission Fitch.................................. Fitch Ratings, Inc. FPA.................................... Federal Power Act FUCO................................... Foreign utility company as defined under PUHCA I&M.................................... Indiana Michigan Power Company, a public utility subsidiary of AEP I&M Power Agreement.................... Unit Power Agreement Between AEGCo and I&M, dated March 31, 1982 Interconnection Agreement.............. Agreement, dated July 6, 1951, by and among APCo, CSPCo, I&M, KPCo and OPCo, defining the sharing of costs and benefits associated with their respective generating plants IURC................................... Indiana Utility Regulatory Commission KPCo. ................................. Kentucky Power Company, a public utility subsidiary of AEP LLWPA.................................. Low-Level Waste Policy Act of 1980 LPSC................................... Louisiana Public Service Commission MECPL.................................. Mutual Energy CPL, L.P., a Texas REP and former AEP affiliate MEWTU.................................. Mutual Energy WTU, L.P., a Texas REP and former AEP affiliate MISO................................... Midwest Independent Transmission System Operator Moody's................................ Moody's Investors Service, Inc.
i
ABBREVIATION OR ACRONYM DEFINITION ----------------------- ---------- MTM.................................... Marked-to-market MW..................................... Megawatt NOx.................................... Nitrogen oxide NPC.................................... National Power Cooperatives, Inc., an unaffiliated corporation NRC.................................... Nuclear Regulatory Commission OASIS.................................. Open Access Same-time Information System OATT................................... Open Access Transmission Tariff, filed with FERC OCC.................................... Corporation Commission of the State of Oklahoma Ohio Act............................... Ohio electric restructuring legislation OPCo. ................................. Ohio Power Company, a public utility subsidiary of AEP OVEC................................... Ohio Valley Electric Corporation, an electric utility company in which AEP and CSPCo together own a 44.2% equity interest PJM.................................... PJM Interconnection, L.L.C. Pro Serv............................... AEP Pro Serv, Inc., a subsidiary of AEP PSO.................................... Public Service Company of Oklahoma, a public utility subsidiary of AEP PTB.................................... Price to beat, as defined by the Texas Act PUCO................................... The Public Utilities Commission of Ohio PUCT................................... Public Utility Commission of Texas PUHCA.................................. Public Utility Holding Company Act of 1935, as amended QF..................................... Qualifying facility, as defined under the Public Utility Regulatory Policies Act of 1978 RCRA................................... Resource Conservation and Recovery Act of 1976, as amended REP.................................... Retail electricity provider Rockport Plant......................... A generating plant, consisting of two 1,300,000-kilowatt coal-fired generating units, near Rockport, Indiana RTO.................................... Regional Transmission Organization SEC.................................... Securities and Exchange Commission S&P.................................... Standard & Poor's Ratings Service SO(2).................................. Sulfur dioxide SO(2) Allowance........................ An allowance to emit one ton of sulfur dioxide granted under the Clean Air Act Amendments of 1990 SPP.................................... Southwest Power Pool STPNOC................................. STP Nuclear Operating Company, a non-profit Texas corporation which operates STP on behalf of its joint owners, including TCC SWEPCo. ............................... Southwestern Electric Power Company, a public utility subsidiary of AEP TCA.................................... Transmission Coordination Agreement dated January 1, 1997 by and among, PSO, SWEPCo, TCC, TNC and AEPSC, which allocates costs and benefits in connection with the operation of the transmission assets of the four public utility subsidiaries TCC.................................... AEP Texas Central Company, formerly Central Power and Light Company, a public utility subsidiary of AEP TEA.................................... Transmission Equalization Agreement dated April 1, 1984 by and among APCo, CSPCo, I&M, KPCo and OPCo, which allocates costs and benefits in connection with the operation of transmission assets Texas Act.............................. Texas electric restructuring legislation TNC.................................... AEP Texas North Company, formerly West Texas Utilities Company, a public utility subsidiary of AEP TVA.................................... Tennessee Valley Authority UCOS................................... Unbundled cost of service Virginia Act........................... Virginia electric restructuring legislation VSCC................................... Virginia State Corporation Commission WVPSC.................................. West Virginia Public Service Commission West Zone Companies of AEP............. PSO, SWEPCo, TCC and TNC
ii FORWARD-LOOKING INFORMATION - -------------------------------------------------------------------------------- This report made by AEP and certain of its subsidiaries contains forward-looking statements within the following termsmeaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and abbreviations appeareach of its 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 textforward-looking statements are: - Electric load and customer growth. - Abnormal weather conditions - Available sources and costs of this report, they havefuels. - Availability of generating capacity. - The speed and degree to which competition is introduced to AEP's power generation business. - The ability to recover stranded costs in connection with possible/proposed deregulation of generation. - New legislation and government regulation - Oversight and/or investigation of the meanings indicated below. TERM MEANING AEGCoenergy sector or its participants. - The ability of AEP Generating Company, an electric utility subsidiaryto successfully control its costs. - The success of AEP. AEP American Electric Power Company, Inc. AEP System oracquiring new business ventures and disposing of existing investments that no longer match AEP's corporate profile. - International and country-specific developments affecting AEP's foreign investments, including the Systemdisposition of any current foreign investments and potential additional foreign investments. - The American Electric Power System, an integrated electric utility system, ownedeconomic climate and operated bygrowth in AEP's electric utility subsidiaries. AFUDC Allowance for funds used during construction. Definedservice territory and changes in regulatory systemsmarket demand and demographic patterns. - Inflationary trends. - Electricity and gas market prices. - Interest rates. - Liquidity in the banking, capital and wholesale power markets. - Actions of accounts asrating agencies. - Changes in technology, including the net costincreased use of borrowed funds used for constructiondistributed generation within AEP's transmission and a reasonable ratedistribution service territory. - Other risks and unforeseen events, including wars, the effects of return onterrorism, embargoes and other funds when so used. APCo Appalachian Power Company, an electric utility subsidiary of AEP. Buckeye Buckeye Power, Inc., an unaffiliated corporation. CCD Group CSPCo, CG&E and DP&L. CG&E The Cincinnati Gas & Electric Company, an unaffiliated utility company. Cook Plant The Donald C. Cook Nuclear Plant, owned by I&M. CSPCo Columbus Southern Power Company, an electric utility subsidiary of AEP. DOE United States Department of Energy. DP&L The Dayton Power and Light Company, an unaffiliated utility company. Federal EPA United States Environmental Protection Agency. FERC Federal Energy Regulatory Commission (an independent commission within the DOE). I&M Indiana Michigan Power Company, an electric utility subsidiary of AEP. IURC Indiana Utility Regulatory Commission. KEPCo Kentucky Power Company, an electric utility subsidiary of AEP. KPSC Kentucky Public Service Commission. MPSC Michigan Public Service Commission. NEIL Nuclear Electric Insurance Limited. NPDES National Pollutant Discharge Elimination System. NRC Nuclear Regulatory Commission. Ohio EPA Ohio Environmental Protection Agency. OPCo Ohio Power Company, an electric utility subsidiary of AEP. OVEC Ohio Valley Electric Corporation, an electric utility company in which AEP and CSPCo own a 44.2% equity interest. PCB's Polychlorinated biphenyls. PUCO The Public Utilities Commission of Ohio. PUHCA Public Utility Holding Company Act of 1935, as amended. RCRA Resource Conservation and Recovery Act of 1976, as amended. Rockport Plant A generating plant, consisting of two 1,300,000-kilowatt coal-fired generating units, near Rockport, Indiana. SEC Securities and Exchange Commission. Service Corporation American Electric Power Service Corporation, a service subsidiary of AEP. SO{2} Allowance An allowance to emit one ton of sulfur dioxide granted under the Clean Air Act Amendments of 1990. TVA Tennessee Valley Authority. VEPCo Virginia Electric and Power Company, an unaffiliated utility company. Virginia SCC State Corporation Commission of Virginia. West Virginia PSC Public Service Commission of West Virginia. Zimmer or Zimmer Plant Wm. H. Zimmer Generating Station, commonly owned by CSPCo, CG&E and DP&L. i [THIS PAGE INTENTIONALLY LEFT BLANK]catastrophic events. 1 PART I - -------------------------------------------------------------------------------- Item 1. BUSINESS - -------------------------------------------------------------------------------- GENERAL OVERVIEW AND DESCRIPTION OF SUBSIDIARIES AEP was incorporated under the laws of the State of New York in 1906 and reorganized in 1925. It is a registered public utility holding company whichunder PUHCA that owns, directly or indirectly, all of the outstanding common stock of its electricpublic utility subsidiaries and varying percentages of other subsidiaries. Substantially all of the operating revenues of AEP and its subsidiaries are derived from the furnishing of electric service. The service areaareas of AEP's electricpublic utility subsidiaries coverscover portions of the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The generating and transmission facilities of AEP's public utility subsidiaries are physically interconnected, and their operations are coordinated, as a single integrated electric utility system. Transmission networks are interconnected with extensive distribution facilities in the territories served. The electricpublic utility subsidiaries of AEP, which do business as "American Electric Power," have traditionally provided electric service, consisting of generation, transmission and distribution, on an integrated basis to their retail customers. AsRestructuring legislation in Michigan, Ohio, Texas and Virginia has caused or will cause AEP public utility subsidiaries in those states to unbundle previously integrated regulated rates for their retail customers. The AEP System is an integrated electric utility system and, as a result, the member companies of the changing natureAEP System have contractual, financial and other business relationships with the other member companies, such as participation in the AEP System savings and retirement plans and tax returns, sales of electricity and transportation and handling of fuel. The member companies of the electric business (see COMPETITION AND BUSINESS CHANGE), effective January 1, 1996, AEP's subsidiaries realigned into four functional business units: Power Generation; Nuclear Generation; Energy Delivery;AEP System also obtain certain accounting, administrative, information systems, engineering, financial, legal, maintenance and Corporate Development. In addition, the electric utility subsidiaries began to do business as "American Electric Power." The legal and financial structure of AEP and its subsidiaries, however, did not change.other services at cost from a common provider, AEPSC. At December 31, 1995,2002, the subsidiaries of AEP had a total of 18,50222,083 employees. AEP, as such,because it is a holding company rather than an operating company, has no employees. The operatingpublic utility subsidiaries of AEP are: APCOAPCo (organized in Virginia in 1926) is engaged in the generation, purchase, transmission and distribution of electric power to approximately 859,000925,000 retail customers in the southwestern portion of Virginia and southern West Virginia, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities and municipalities in those states and in Tennessee.other market participants. At December 31, 1995,2002, APCo and its wholly owned subsidiaries had 4,3382,520 employees. Among the principal industries served by APCo are coal mining, primary metals, chemicals textiles, paper, stone, clay, glass and concrete products, rubber, plastic products and furniture.textile mill products. In addition to its AEP System interconnections, APCo also is interconnected with the following unaffiliated utility companies: Carolina Power & Light Company, Duke Energy Corporation and Virginia Electric and Power Company and VEPCo. A comparatively small part of the properties and business of APCo is located in the northeastern end of the Tennessee Valley.Company. APCo has several points of interconnection with TVA and has entered into agreements with TVA under which APCo and TVA interchange and transfer electric power over portions of their respective systems. CSPCOCSPCo (organized in Ohio in 1937, the earliest direct predecessor company having been organized in 1883) is engaged in the generation, purchase, transmission and distribution of electric power to approximately 599,000689,000 retail customers in Ohio, and in supplying and marketing electric power at wholesale to other electric utilities, municipalities and to municipally owned distribution systems within its service area.other market participants. At December 31, 1995,2002, CSPCo had 2,1741,171 employees. CSPCo's service area is comprised of two areas in Ohio, which include portions of twenty-five counties. One area includes the City of Columbus and the other is a predominantly rural area in south central Ohio. Approximately 80% of CSPCo's retail revenues are derived from the Columbus area. Among the principal industries served are food processing, chemicals, primary metals, electronic machinery and paper products. In addition to its AEP System interconnections, CSPCo also is interconnected with the following unaffiliated utility companies: CG&E, DP&L and Ohio Edison Company. I&M (organized in Indiana in 1925) is engaged in the generation, purchase, transmission and distribution of electric power to approximately 537,000571,000 retail customers in northern and eastern Indiana and southwestern Michigan, and in supplying and marketing electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities and municipalities.other market participants. At December 31, 1995,2002, I&M had 3,5252,667 employees. Among the principal industries served are primary metals, transportation equipment, fabricated metal products, electrical and electronic 2 machinery, fabricated metal products, rubber and miscellaneous plastic products and chemicals and allied products. Since 1975, I&M has leased and operated the assets of the municipal system of the City of Fort Wayne, Indiana. In addition to its AEP System interconnections, I&M also is interconnected with the following unaffiliated utility companies: Central Illinois Public Service Company, CG&E, Commonwealth Edison Company, Consumers PowerEnergy Company, Illinois Power Company, Indianapolis Power & Light Company, Louisville Gas and Electric Company, Northern Indiana Public Service Company, PSI Energy Inc. and Richmond Power & Light Company. KEPCOKPCo (organized in Kentucky in 1919) is engaged in the generation, purchase, transmission and distribution of electric power to approximately 165,000174,000 retail customers in an area in eastern Kentucky, and in supplying and marketing electric power at wholesale to other utilitieselectric utility companies, municipalities and municipalities in Kentucky.other market participants. At December 31, 1995, KEPCo2002, KPCo had 748412 employees. In addition to its AEP System interconnections, KEPCoKPCo also is interconnected with the following unaffiliated utility companies: Kentucky Utilities Company and East Kentucky Power Cooperative Inc. KEPCoKPCo is also interconnected with TVA. KINGSPORT POWER COMPANYKingsport Power Company (organized in Virginia in 1917) provides electric service to approximately 42,00046,000 retail customers in Kingsport and eight neighboring communities in northeastern Tennessee. Kingsport Power Company has nodoes not own any generating facilities of its own.facilities. It purchases electric power distributedfrom APCo for distribution to its customers from APCo.customers. At December 31, 1995,2002, Kingsport Power Company had 10157 employees. OPCOOPCo (organized in Ohio in 1907 and reincorporatedre-incorporated in 1924) is engaged in the generation, purchase, transmission and distribution of electric power to approximately 668,000702,000 retail customers in the northwestern, east central, eastern and southern sections of Ohio, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities and municipalities.other market participants. At December 31, 1995,2002, OPCo and its wholly owned subsidiaries had 4,9981,988 employees. Among the principal industries served by OPCo are primary metals, rubber and plastic products, stone, clay, glass and concrete products, petroleum refining chemicals and electrical and electronic machinery.chemicals. In addition to its AEP System interconnections, OPCo also is interconnected with the following unaffiliated utility companies: CG&E, The Cleveland Electric Illuminating Company, DP&L, Duquesne Light Company, Kentucky Utilities Company, Monongahela Power Company, Ohio Edison Company, The Toledo Edison Company and West Penn Power Company. WHEELING POWER COMPANYPSO (organized in Oklahoma in 1913) is engaged in the generation, transmission and distribution of electric power to approximately 505,000 retail customers in eastern and southwestern Oklahoma, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market participants. At December 31, 2002, PSO had 998 employees. Among the principal industries served by PSO are natural gas and oil production, oil refining, steel processing, aircraft maintenance, paper manufacturing and timber products, glass, chemicals, cement, plastics, aerospace manufacturing, telecommunications, and rubber goods. In addition to its AEP System interconnections, PSO also is interconnected with Ameren Corporation, Empire District Electric Co., Oklahoma Gas & Electric Co., Southwestern Public Service Co. and Westar Energy Inc. SWEPCo (organized in Delaware in 1912) is engaged in the generation, transmission and distribution of electric power to approximately 437,000 retail customers in northeastern Texas, northwestern Louisiana and western Arkansas, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market participants. At December 31, 2002, SWEPCo had 1,372 employees. Among the principal industries served by SWEPCo are natural gas and oil production, petroleum refining, manufacturing of pulp and paper, chemicals, food processing, and metal refining. The territory served by SWEPCo also includes several military installations, colleges, and universities. In addition to its AEP System interconnections, SWEPCo is also interconnected with CLECO Corp., Empire District Electric Co., Entergy Corp. and Oklahoma Gas & Electric Co. TCC (organized in Texas in 1945) is engaged in the generation, transmission and sale of power to affiliated and non-affiliated entities and the distribution of electric power to approximately 689,000 retail customers through REPs in southern Texas, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market 3 participants. At December 31, 2002, TCC had 1,248 employees. Among the principal industries served by TCC are oil and gas extraction, food processing, apparel, metal refining, chemical and petroleum refining, plastics, and machinery equipment. In addition to its AEP System interconnections, TCC is a member of ERCOT. TNC (organized in Texas in 1927) is engaged in the generation, transmission and sale of power to affiliated and non-affiliated entities and the distribution of electric power to approximately 189,000 retail customers through REPs in west and central Texas, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market participants. At December 31, 2002, TNC had 595 employees. The principal industry served by TNC is agriculture. The territory served by TNC also includes several military installations and correctional facilities. In addition to its AEP System interconnections, TNC is a member of ERCOT. Wheeling Power Company (organized in West Virginia in 1883 and reincorporated in 1911) provides electric service to approximately 41,000 retail customers in northern West Virginia. Wheeling Power Company has nodoes not own any generating facilities of its own.facilities. It purchases electric power distributedfrom OPCo for distribution to its customers from OPCo.customers. At December 31, 1995,2002, Wheeling Power Company had 13559 employees. Another principal electric utility subsidiary of AEP is AEGCo which was organized(organized in Ohio in 1982 as1982) is an electric generating company. AEGCo sells power at wholesale to I&M KEPCo and VEPCo.KPCo. AEGCo has no employees. See Item 2 for information concerning the properties of the subsidiaries of AEP. The Service CorporationCompany Subsidiary AEP also owns a service company subsidiary, AEPSC. AEPSC provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services at cost to the AEP System companies. The executive officers of AEP and its public utility subsidiaries are all employees of AEPSC. At December 31, 2002, AEPSC had 6,548 employees. CLASSES OF SERVICE The principal classes of service from which the Service Corporation.public utility subsidiaries of AEP derive revenues and the amount of such revenues during the year ended December 31, 2002 are as follows:
AEP SYSTEM(A) APCo CSPCo I&M KPCo ----------- ---------- ---------- ---------- --------- (IN THOUSANDS) Wholesale Business: Residential........................ $ 3,713,000 $ 616,509 $ 533,061 $ 371,329 $ 118,654 Commercial......................... 2,156,000 276,238 442,847 224,843 50,075 Industrial......................... 1,903,000 353,841 138,174 330,428 96,716 Other Retail Customers............. 385,000 80,429 38,018 61,450 16,911 Energy Delivery.................... (3,551,000) (594,089) (492,278) (321,721) (132,054) ----------- ---------- ---------- ---------- --------- Total Retail.................... 4,606,000 732,928 659,822 666,329 150,302 Marketing and Trading-Electricity............. 2,227,000 204,878 134,836 279,705 50,056 Marketing and Trading-Gas.......... 3,021,000 0 0 0 0 Unrealized MTM Income: Electric........................ 136,000 18,089 13,388 0 0 Gas............................. (399,000) 0 0 0 0 Other.............................. 1,397,000 264,486 99,836 259,009 46,271 ----------- ---------- ---------- ---------- --------- Total Wholesale Business........ 10,988,000 1,220,381 907,882 1,205,043 246,629 ----------- ---------- ---------- ---------- --------- Energy Delivery Business: Transmission....................... 922,000 186,960 107,673 118,812 50,381 Distribution....................... 2,629,000 407,129 384,605 202,909 81,673 ----------- ---------- ---------- ---------- --------- Total Energy Delivery........... 3,551,000 594,089 492,278 321,721 132,054 ----------- ---------- ---------- ---------- --------- Total Other Investments......... 16,000 0 0 0 0 ----------- ---------- ---------- ---------- --------- Total Revenues................ $14,555,000 $1,814,470 $1,400,160 $1,526,764 $ 378,683 =========== ========== ========== ========== =========
4
OPCo PSO SWEPCo TCC TNC ---------- --------- ---------- ---------- -------- (IN THOUSANDS) Wholesale Business: Residential........................... $ 475,210 $ 315,711 $ 313,023 $ 49,210 $ 8,651 Commercial............................ 244,943 218,718 212,626 32,518 4,098 Industrial............................ 531,085 162,386 214,622 12,395 2,134 Other Retail Customers................ 71,737 38,998 33,104 3,594 1,638 Energy Delivery....................... (589,673) (275,547) (348,236) (554,547) (73,353) ---------- --------- ---------- ---------- -------- Total Retail....................... 733,302 460,266 425,139 (456,830) (56,832) Marketing and Trading-Electricity..... 219,488 17,394 157,159 811,800 283,883 Marketing and Trading-Gas............. 0 0 0 0 0 Unrealized MTM Income: Electric........................... 25,574 0 (3,686) (8,490) (1,473) Gas................................ 0 0 0 0 0 Other................................. 545,088 40,440 157,872 789,466 151,809 ---------- --------- ---------- ---------- -------- Total Wholesale Business........... 1,523,452 518,100 736,484 1,135,946 377,387 ---------- --------- ---------- ---------- -------- Energy Delivery Business: Transmission.......................... 162,660 63,178 92,076 68,003 25,273 Distribution.......................... 427,013 212,369 256,160 486,544 48,080 ---------- --------- ---------- ---------- -------- Total Energy Delivery.............. 589,673 275,547 348,236 554,547 73,353 ---------- --------- ---------- ---------- -------- Total Other Investments............ 0 0 0 0 0 ---------- --------- ---------- ---------- -------- Total Revenues................... $2,113,125 $ 793,647 $1,084,720 $1,690,493 $450,740 ========== ========= ========== ========== ========
- --------------- (a) Includes revenues of other subsidiaries not shown. Intercompany transactions have been eliminated, including AEGCo's total revenues of $213,281,000 for the year ended December 31, 2002, all of which resulted from its wholesale business, including its marketing and trading of power. REGULATION GENERAL AEPExcept for retail generation sales in Ohio, Virginia and its subsidiaries are subject to the broad regulatory provisionsERCOT area of PUHCA administered by the SEC. TheTexas, AEP's public utility subsidiaries' retail rates and certain other matters are subject to traditional regulation by the publicstate utility commissions of thecommissions. Retail sales in Michigan, while still regulated, are now made at unbundled rates. Other states in which they operate. SuchAEP's service territory have also passed restructuring legislation that has not been implemented or has been repealed. See Electric Restructuring and Customer Choice Legislation and Energy Delivery--Regulation--Rates. AEP's subsidiaries are also subject to regulation by the FERC under the Federal Power Act in respect of rates for interstate sale at wholesaleFPA. I&M and transmission of electric power, accounting and other matters and construction and operation of hydroelectric projects. I&M isTCC are subject to regulation by the NRC under the Atomic Energy Act of 1954, as amended, with respect to the operation of the Cook Plant. POSSIBLE CHANGE TOPlant and STP, respectively. AEP and its subsidiaries are also subject to the broad regulatory provisions of PUHCA administered by the SEC. FERC Under the FPA, FERC regulates rates for interstate sales at wholesale, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects. FERC regulations require AEP to provide open access transmission service at FERC-approved rates. The transmission service regulated by FERC is predominantly wholesale transmission service, which is service not associated with bundled electricity sales to retail customers. FERC also regulates unbundled transmission service to retail customers. Under the FPA, the FERC regulates the sale of power for resale in interstate commerce by (i) approving contracts for wholesale sales to municipal and cooperative utilities and (ii) granting authority to public utilities to sell power at wholesale at market-based rates upon a showing that the seller lacks the ability to improperly influence market prices. AEP has 5 market-rate authority from FERC, under which most of its wholesale marketing activity takes place. In November 2001, the FERC issued an order in connection with its triennial review of AEP's market based pricing authority requiring (i) certain actions by AEP in connection with its sales and purchases within its control area and (ii) posting of information related to generation facility status on AEP's website. AEP has appealed this order, and the FERC has issued an order delaying the effective date of the order. See Note 9 to the consolidated financial statements, entitled Commitments and Contingencies, incorporated by reference in Item 8, for more information on the current status of this proceeding. SEC The provisions of PUHCA, administered by the SEC, regulate allmany aspects of a registered holding company system, such as the AEP System. PUHCA requires thatlimits the operations of a registered holding company system be limited to a single integrated public utility system and such other businesses as are incidental or necessary to the operations of the system. In addition, PUHCA governs, among other things, financings, sales or acquisitions of assets and intra-system transactions. On June 20, 1995, the SEC released a report from its Division of Investment Management recommending a conditional repeal of PUHCA, including its limits on financing and on geographic and business diversification. Specific federal authority, however, would be preserved over access to the books and records of registered holding company systems, audit authority over registered holding companies and their subsidiaries and oversight over affiliate transactions. This authority would be transferred to the FERC. In October 1995, legislation was introduced in the U.S. Senate to repeal PUHCA and transfer certain federal authority to the FERC as recommended in the SEC report. If PUHCA is repealed, registered holding company systems, including the AEP System, will be able to compete in the changing industry without the constraints of PUHCA. Management of AEP believes that removal of these constraints would be beneficial to the AEP System. PUHCA and the rules and orders of the SEC currently require that transactions between associated companies in a registered holding company system be performed at cost with limited exceptions. Over the years, the AEP System has developed numerous affiliated service, sales and construction relationships and, in some cases, invested significant capital and developed significant operations in reliance upon the ability to recover its full costs under these provisions. On December 28, 1994, the SEC proposed revisions to its rules governing transactions between associated companies in a registered holding company system. These proposed revisions to the rules would price transactions governed by SEC rules at a market-based price if it is lower than cost. In its June 1995 report, theThe Division of Investment Management of the SEC has recommended that the proposed revisionsconditional repeal of PUHCA. Under its recommendation, certain oversight authority would be transferred to the rules be withdrawn. In addition, proposals haveFERC. Legislation has since been made forintroduced in numerous sessions of Congress tothat would repeal PUHCA, or modify its provisions governing intra-system transactions.but such legislation has not passed. AEP-CSW MERGER On June 15, 2000, CSW (now known as AEP Utilities, Inc.) merged with and into a wholly-owned merger subsidiary of AEP. As a result, CSW became a wholly owned subsidiary of AEP. The effectfour wholly owned public utility subsidiaries of possible SEC revisions of these cost provisions or the repeal or amendment of PUHCA on AEP's intra-system transactions depends on whether the assurance of full cost recovery is eliminated immediately or phased-inCSW--PSO, SWEPCo, TCC and whether it is eliminated for all intra-system transactions or only some. If the cost recovery assurance is eliminated immediately for all intra-system transactions, it could have a material adverse effect on results of operations and financial condition of AEP and OPCo. CONFLICT OF REGULATION PublicTNC--became indirect wholly owned public utility subsidiaries of AEP can be subject to regulationas a result of the same subject mattermerger. The merger was approved by two or more jurisdictions. In such situations, it is possible that the decisions of such regulatory bodies may conflict or thatFERC and the decision of one such body may affect the cost of providing service and so the rates in another jurisdiction. In a case involving OPCo,SEC (with respect to PUHCA). On January 18, 2002, the U.S. Court of Appeals for the District of Columbia ruled that the SEC failed to properly explain how the merger met the requirements of PUHCA and remanded the case to the SEC for further review. The court held that the determinationSEC had not adequately explained its conclusions that the merger met PUHCA requirements that the merging entities be "physically interconnected" and that the combined entity was confined to a "single area or region." Management believes that the merger meets the requirements of costsPUHCA and expects the matter to be chargedresolved favorably. ELECTRIC RESTRUCTURING AND CUSTOMER CHOICE LEGISLATION Certain states in AEP's service area have adopted restructuring or customer choice legislation. In general, this legislation provides for a transition from bundled cost-based rate regulated electric service to associated companies by the SEC under PUHCA precluded the FERC from determining that such costs were unreasonableunbundled cost-based rates for ratemaking purposes. The U.S. Supreme Court also has held that a state commission may not conclude that a FERC approved wholesale power agreement is unreasonable for state ratemaking purposes. Certain actions that would overturn these decisions or otherwise affect the jurisdiction of the SEC and FERC are under consideration by the U.S. Congress and these regulatory bodies. Such conflicts of jurisdiction often result in litigation and, if resolved adversely to a public utility subsidiary of AEP, could have a material adverse effect on the results of operations or financial condition of such subsidiary or AEP. CLASSES OF SERVICE The principal classes of service from which the major electric utility subsidiaries of AEP derive revenues and the amount of such revenues (from kilowatt-hour sales) during the year ended December 31, 1995 are as follows:
AEGCO APCO CSPCO I&M KEPCO OPCO AEP SYSTEM (a) (IN THOUSANDS) Retail Residential Without Electric Heating $ -- $ 240,385 $ 329,881 $ 239,266 $ 43,938 $ 277,780 $1,151,981 With Electric Heating -- 331,445 115,386 109,504 63,609 145,688 801,956 Total Residential -- 571,830 445,267 348,770 107,547 423,468 1,953,937 Commercial -- 284,866 371,461 256,319 58,606 257,300 1,265,776 Industrial -- 366,329 143,162 298,256 96,647 639,177 1,606,451 Miscellaneous -- 32,270 16,041 6,482 847 8,065 67,047 Total Retail -- 1,255,295 975,931 909,827 263,647 1,328,010 4,893,211 Wholesale (sales for resale) 231,659 269,493 75,466 357,441 60,567 457,758 680,905 Total from KWH Sales 231,659 1,524,788 1,051,397 1,267,268 324,214 1,785,768 5,574,116 Provision for Revenue Refunds -- (1,100) -- -- -- -- (1,100) Total Net of Provision for Revenue Refunds 231,659 1,523,688 1,051,397 1,267,268 324,214 1,785,768 5,573,016 Other Operating Revenues 136 21,351 20,465 15,889 3,930 37,229 97,314 Total Electric Operating Revenues $231,795 $1,545,039 $1,071,862 $1,283,157 $328,144 $1,822,997 $5,670,330
(a) Includes revenues of other subsidiaries not shown and reflects elimination of intercompany transactions. SALE OF POWER AEP's electric utility subsidiaries own or lease generating stations with total generating capacity of 23,759 megawatts. See Item 2 for more information regarding the generating stations. They operate their generating plants as a single interconnected and coordinated electric utility system and share the costs and benefits in the AEP System Power Pool. Most of the electric power generated at these stations is sold, in combination with transmission and distribution services, toservice and market pricing for the supply of electricity with customer choice of supplier. At a minimum, this legislation allows retail customers to select alternative generation suppliers. Electric restructuring and/or customer choice began on January 1, 2001 in Ohio and on January 1, 2002 in Michigan, Virginia and the ERCOT area of AEP's utility subsidiariesTexas. Electric restructuring in their service territories. These sales are made at rates that are establishedthe SPP area of Texas, also scheduled to begin on January 1, 2002, has been delayed by the public utility commissions of the state in which they operate. See RATES. Some of the electric power is sold at wholesale to non-affiliated companies. AEP SYSTEM POWER POOL APCo, CSPCo, I&M, KEPCo and OPCo are parties to the Interconnection Agreement, dated July 6, 1951, as amended (the Interconnection Agreement), defining how they share the costs and benefits associated with the System's generating plants. This sharing is based upon each company's "member-load- ratio," which is calculated monthly on the basis of each company's maximum peak demand in relation to the sum of the maximum peak demands of all five companies during the preceding 12 months. In addition, since 1995, APCo, CSPCo, I&M, KEPCo and OPCo have been parties to the AEP System Interim Allowance Agreement which provides, among other things, for the transfer of SO{2} Allowances associated with transactions under the Interconnection Agreement. The following table shows the net credits or (charges) allocated among the parties under the Interconnection Agreement and Interim Allowance Agreement during the years ended December 31, 1993, 1994 and 1995: 1993 1994 1995(a) (in thousands) APCo $(260,000) $(254,000) $(252,000) CSPCo (141,000) (105,000) (143,000) I&M 183,000 107,000 118,000 KEPCo 1,000 12,000 23,000 OPCo 217,000 240,000 254,000 (a) Includes credits and charges from allowance transfers related to the transactions. In July 1994, APCo, CSPCo, I&M, KEPCo and OPCo entered into the AEP System Interim Allowance Agreement (IAA). Reference is made to ENVIRONMENTAL AND OTHER MATTERS - CLEAN AIR ACT AMENDMENTS OF 1990 for a discussion of SO{2} Allowances. The IAA provides for and governs the terms of the following allowance transactions among the parties which began January 1, 1995: (1) an annual reallocation of certain SO{2} Allowances initially allocated by the Federal EPA to OPCo's Gavin Plant; (2) transfer of SO{2} Allowances associated with energy transactions among APCo, CSPCo, I&M, KEPCo and OPCo, (3) a monthly cash settlement for SO{2} Allowances consumed in connection with power sales to non-affiliated electric utilities; and (4) transfers of SO{2} Allowances for current and future period compliance. The IAA does not provide for the allocation of costs and proceeds related to the sale or purchase of SO{2} Allowances to or from non-affiliated companies. The IAA was accepted by the FERC on December 30, 1994. WHOLESALE SALES OF POWER TO NON-AFFILIATES AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo also sell electric power on a wholesale basis to non-affiliated electric utilities and power marketers. Such sales are either made by the AEP System and then allocated among APCo, CSPCo, I&M, KEPCo and OPCo based on member-load-ratios or made by individual companies pursuant to various long-term power agreements. The following table shows the amounts contributed to operating income of the various companies from such sales during the years ended December 31, 1993, 1994 and 1995: 1993(a) 1994(a) 1995(a) (in thousands) AEGCo(b) $ 32,500 $ 30,800 $ 29,200 APCo(c) 23,600 25,000 24,100 CSPCo(c) 12,000 11,700 12,000 I&M(c)(d) 35,300 34,600 34,700 KEPCo(c) 4,900 4,800 5,000 OPCo(c) 20,700 20,000 20,200 Total System $129,000 $126,900 $125,200 (a) Such sales do not include wholesale sales to full/partial requirement customers of AEP System companies. See the discussion below. (b) All amounts for AEGCo are from sales made pursuant to a long-term power agreement. See AEGCO - UNIT POWER AGREEMENTS. (c) All amounts, except for I&M, are from System sales which are allocated among APCo, CSPCo, I&M, KEPCo and OPCo based upon member-load-ratio. All System sales made in 1993, 1994 and 1995 were made on a short-term basis, except that $16,800,000, $21,800,000 and $22,500,000, respectively, of the contribution to operating income for the total System were from long-term System sales. (d) In addition to its allocation of System sales, the 1993, 1994 and 1995 amounts for I&M include $21,600,000, $21,600,000 and $21,000,000 from a long-term agreement to sell 250 megawatts of power scheduled to terminate in 2009. The AEP System has long-term system agreements to sell 100 megawatts of electric power through 1997 and to sell at times up to 200 megawatts of peaking power through March 1997 to unaffiliated utilities. In addition, commencing January 1996, the AEP System began supplying 205 megawatts of electric power to an unaffiliated utility for 15 years and commencing September 1996, the AEP System will begin supplying 50 megawatts of electric power to an unaffiliated utility for five years. In addition to long-term and short-term sales, APCo, CSPCo, I&M, KEPCo and OPCo serve unaffiliated wholesale customers that are full/partial requirement customers. The aggregate maximum demand for these customers in 1995 was 574, 112, 536, 17 and 138 megawatts for APCo, CSPCo, I&M, KEPCo and OPCo, respectively. Although the terms of the contracts with these customers vary, they generally can be terminated by the customer upon one to four years' notice. In 1995, customers gave notices of termination, effective in 1998, for 419, 5 and 67 megawatts for APCo, I&M and OPCo, respectively. In June 1993, certain municipal customers of APCo, who have since given APCo notice to terminate their contracts in 1998, filed an application with the FERC for transmission service in order to reduce by 50 megawatts the power these customers purchase under existing Electric Service Agreements (ESAs) and to purchase power from a third party. APCo maintains that its agreements with these customers are full-requirements contracts which preclude the customers from purchasing power from third parties. On February 10, 1994, the FERC issued an order finding that the ESAs are not full requirements contracts and that the ESAs give these municipal wholesale customers the option of substituting alternative sources of power for energy purchased from APCo. On May 24, 1994, APCo appealed the February 10, 1994 order of the FERC to the U.S. Court of Appeals for the District of Columbia Circuit. On July 1, 1994, the FERC ordered the requested transmission service and granted a complaint filed by the municipal customers directing certain modifications to the ESAs in order to accommodate their power purchases from the third party. Following FERC's denial of APCo's requests for rehearing, on December 20, 1995, APCo appealed the July 1, 1994 Orders to the U.S. Court of Appeals for the District of Columbia. Effective August 1994, these municipal customers reduced their purchases by 40 megawatts. Certain of these customers further reduced their purchases by an additional 21 megawatts effective February 1996. TRANSMISSION SERVICESPUCT. AEP's electric utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power. See Item 2 for more information regarding the transmission and distribution lines. AEP's electricpublic utility subsidiaries operate their transmission lines as a single interconnectedin both the ERCOT and coordinated systemSPP areas of Texas. Implementation of legislation enacted in Oklahoma and share the cost and benefits in the AEP System Transmission Pool. Most of the transmission and distribution services is sold, in combination with electric power, to retail customers of AEP's utility subsidiaries in their service territories. These sales are made at rates that are established by the public utility commissions of the state in which they operate. See RATES. Some transmission services also are separately sold to non-affiliated companies. AEP SYSTEM TRANSMISSION POOL APCo, CSPCo, I&M, KEPCo and OPCo are parties to the Transmission Agreement, dated April 1, 1984, as amended (the Transmission Agreement), defining how they share the costs associated with their relative ownership of the extra-high- voltage transmission system (facilities rated 345 kv and above) and certain facilities operated at lower voltages (138 kv and above). Like the Interconnection Agreement, this sharing is based upon each company's "member- load-ratio." See SALE OF POWER. The following table shows the net credits or (charges) allocated among the parties to the Transmission Agreement during the years ended December 31, 1993, 1994 and 1995: 1993 1994 1995 (in thousands) APCo $ (3,200) $(10,200) $ (5,400) CSPCo (31,200) (30,100) (31,100) I&M 47,400 50,300 46,700 KEPCo 3,800 4,300 3,500 OPCo (16,800) (14,300) (13,700) TRANSMISSION SERVICES FOR NON-AFFILIATES APCo, CSPCo, I&M, KEPCo, OPCo and other System companies also provide transmission services for non-affiliated companies. The following table shows the amounts contributed to operating income of the various companies from such services during the years ended December 31, 1993, 1994 and 1995: 1993 1994 1995 (in thousands) APCo $ 2,900 $ 4,100 $ 6,000 CSPCo 2,500 3,100 4,200 I&M 7,700 6,700 4,800 KEPCo 600 800 1,200 OPCo 9,900 15,700 17,800 Total System $23,600 $30,400 $34,000 The AEP System has long-term contracts with non-affiliated companies for transmission of approximately 690 megawatts of electric power and contracts with non-affiliated companies for transmission during 1996 of approximately 1,400 megawatts of electric power. On April 12, 1993, APCo, CSPCo, I&M, KEPCo and OPCo and two other AEP System companies filed a transmission tariff with the FERC under which these AEP System companies would provide limited transmission service to certain companies. The tariff covered the terms and conditions of the service, as well as the price which the companies pay for transmission services, regardless of the source of electric power generation. On September 3, 1993, the FERC issued an order accepting the transmission service tariff for filing, with the tariff becoming effective on September 7, 1993, subject to refund. On May 11, 1994, the FERC issued an order on rehearing and indicated that an open access tariff should offer third parties access to the transmission system on the same or comparable basis, and under the same or comparable terms and conditions, as the transmission provider's access to its system. On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking ("Mega- NOPR"). The Mega-NOPR proposes to require each public utility that owns or controls interstate transmission facilities to file open access network and point-to-point transmission tariffs that offer services comparable to the utility's own uses of its transmission system. The Mega-NOPR also proposes to require utilities to functionally unbundle their services, by requiring them to use their own tariffs in making off-system and third-party sales. As part of the proposed rule, the FERC issued recommended PRO-FORMA tariffs which reflect the Commission's preliminary views on the minimum non-price terms and conditions for non-discriminatory transmission service. In connection with the Mega-NOPR, the Commission offered certain waivers of its regulations to utilities willing to adopt the PRO-FORMA tariffs prior to issuance of the final rule. The Mega-NOPR also would allow a utility to seek recovery of certain prudently-incurred stranded costs that result from unbundled transmission service. On July 18, 1995, the AEP System companies filed an Offer of Settlement in their transmission tariff case, in which the companies proposed to adopt the FERC's PRO-FORMA transmission tariffs at certain stated rates that were lower than those requested in their initial tariff filing. The Offer of Settlement was approved by the FERC on February 14, 1996, except for certain pricing issues, which are still pending resolution by FERC. AEP has proposed creation of an independent system operator to operate the transmission system in a region of the United States. See COMPETITION AND BUSINESS CHANGE - AEP POSITION ON COMPETITION. OVEC AEP, CSPCo and several unaffiliated utility companies jointly own OVEC, which supplies the power requirements of a uranium enrichment plant near Portsmouth, Ohio owned by the DOE. The aggregate equity participation of AEP and CSPCo in OVEC is 44.2%. The DOE demand under OVEC's power agreement, which is subject to change from time to time, is 1,305,000 kilowatts. On October 1, 1996, it is scheduled to increase to approximately 1,905,000 kilowatts and to remain at about that level through the remaining term of the contract. The proceeds from the sale of power by OVEC, aggregating $299,000,000 in 1995, are designed to be sufficient for OVEC to meet its operating expenses and fixed costs and to provide a return on its equity capital. APCo, CSPCo, I&M and OPCo, as sponsoring companies, are entitled to receive from OVEC, and are obligated to pay for, the power not required by DOE in proportion to their power participation ratios, which averaged 42.1% in 1995. The power agreement with DOE terminates on December 31, 2005, subject to early termination by DOE on not less than three years notice. The power agreement among OVEC and the sponsoring companies expires by its terms on March 12, 2006. BUCKEYE Contractual arrangements among OPCo, Buckeye and other investor-owned electric utility companies in Ohio provide for the transmission and delivery, over facilities of OPCo and of other investor-owned utility companies, of power generated by the two units at the Cardinal Station owned by Buckeye and back-up power to which Buckeye is entitled from OPCo under such contractual arrangements, to facilities owned by 27 of the rural electric cooperatives which operate in the State of Ohio at 301 delivery points. Buckeye is entitled under such arrangements to receive, and is obligated to pay for, the excess of its maximum one-hour coincident peak demand plus a 15% reserve margin over the 1,226,500 kilowatts of capacity of the generating units which Buckeye currently owns in the Cardinal Station. Such demand, which occurred on January 18, 1994, was recorded at 1,146,933 kilowatts. CERTAIN INDUSTRIAL CUSTOMERS Ravenswood Aluminum Corporation and Ormet Corporation operate major aluminum reduction plants in the Ohio River Valley at Ravenswood, West Virginia and in the vicinity of Hannibal, Ohio, respectively. OPCo supplies all of the power requirements of these plants pursuant to long-term contracts with such companies which, subject to certain curtailment provisions, terminate in 1997 in the case of Ormet and 1998 in the case of Ravenswood. The power requirements of such plants presently aggregate approximately 890,000 kilowatts. OPCo is currently negotiating with Ormet and Ravenswood regarding the extension of their contracts. See LEGAL PROCEEDINGS for a discussion of litigation involving Ormet. AEGCO Since its formation in 1982, AEGCo's business has consisted of the ownership and financing of its 50% interest in the Rockport Plant and, since 1989, leasing of its 50% interest in Unit 2 of the Rockport Plant. The operating revenues of AEGCo are derived from the sale of capacity and energy associated with its interest in the Rockport Plant to I&M, KEPCo and VEPCo, pursuant to unit power agreements. Pursuant to these unit power agreements, AEGCo is entitled to recover its full cost of service from the purchasers and will be entitled to recover future increases in such costs, including increases in fuel and capital costs. See UNIT POWER AGREEMENTS. Pursuant to a capital funds agreement, AEP has agreed to provide cash capital contributions, or in certain circumstances subordinated loans, to AEGCo, to the extent necessary to enable AEGCo, among other things, to provide its proportionate share of funds required to permit continuation of the commercial operation of the Rockport Plant and to perform all of its obligations, covenants and agreements under, among other things, all loan agreements, leases and related documents to which AEGCo is or becomes a party. See CAPITAL FUNDS AGREEMENT. UNIT POWER AGREEMENTS A unit power agreement between AEGCo and I&M (the I&M Power Agreement) provides for the sale by AEGCo to I&M of all the power (and the energy associated therewith) available to AEGCo at the Rockport Plant. I&M is obligated, whether or not power is available from AEGCo, to pay as a demand charge for the right to receive such power (and as an energy charge for any associated energy taken by I&M) such amounts, as when added to amounts received by AEGCo from any other sources, will be at least sufficient to enable AEGCo to pay all its operating and other expenses, including a rate of return on the common equity of AEGCo as approved by FERC, currently 12.16%. The I&M Power Agreement will continue in effect until the date that the last of the lease terms of Unit 2 of the Rockport Plant has expired unless extended in specified circumstances. Pursuant to an assignment between I&M and KEPCo, and a unit power agreement between KEPCo and AEGCo, AEGCo sells KEPCo 30% of the power (and the energy associated therewith) available to AEGCo from both units of the Rockport Plant. KEPCo has agreed to pay to AEGCo in consideration for the right to receive such power the same amounts which I&M would have paid AEGCo under the terms of the I&M Power Agreement for such entitlement. The KEPCo unit power agreement expires on December 31, 1999, unless extended. A unit power agreement among AEGCo, I&M, VEPCo, and APCo provides for, among other things, the sale of 70% of the power and energy available to AEGCo from Unit 1 of the Rockport Plant to VEPCo by AEGCo from January 1, 1987 through December 31, 1999. VEPCo has agreed to pay to AEGCo in consideration for the right to receive such power those amounts which I&M would have paid AEGCo under the terms of the I&M Power Agreement for such entitlement. Approximately 34% of AEGCo's operating revenue in 1995 was derived from its sales to VEPCo. CAPITAL FUNDS AGREEMENT AEGCo and AEP have entered into a capital funds agreement pursuant to which, among other things, AEP has unconditionally agreed to make cash capital contributions, or in certain circumstances subordinated loans, to AEGCo to the extent necessary to enable AEGCo to (i) maintain such an equity component of capitalization as required by governmental regulatory authorities, (ii) provide its proportionate share of the funds required to permit commercial operation of the Rockport Plant, (iii) enable AEGCo to perform all of its obligations, covenants and agreements under, among other things, all loan agreements, leases and related documents to which AEGCo is or becomes a party (AEGCo Agreements), and (iv) pay all indebtedness, obligations and liabilities of AEGCo (AEGCo Obligations) under the AEGCo Agreements, other than indebtedness, obligations or liabilities owing to AEP. The Capital Funds Agreement will terminate after all AEGCo Obligations have been paid in full. INDUSTRY PROBLEMS The electric utility industry, including the operating subsidiaries of AEP, has encountered at various times in the last 15 years significant problems in a number of areas, including: delays in and limitations on the recovery of fuel costs from customers; proposed legislation, initiative measures and other actions designed to prohibit construction and operation of certain types of power plants under certain conditions and to eliminate or reduce the extent of the coverage of fuel adjustment clauses; inadequate rate increases and delays in obtaining rate increases; jurisdictional disputes with state public utilities commissions regarding the interstate operations of integrated electric systems; requirements for additional expenditures for pollution control facilities; increased capital and operating costs; construction delays due, among other factors, to pollution control and environmental considerations and to material, equipment and fuel shortages; the economic effects on net income (which when combined with other factors may be immediate and adverse) associated with placing large generating units and related facilities in commercial operation, including the commencement at that time of substantial charges for depreciation, taxes, maintenance and other operating expenses, and the cessation of AFUDC with respect to such units; uncertainties as to conservation efforts by customers and the effects of such efforts on load growth; depressed economic conditions in certain regions of the United States; increasingly competitive conditions in the wholesale and retail markets; proposals to deregulate certain portions of the industry and revise the rules and responsibilities under which new generating capacity is supplied; and substantial increases in construction costs and difficulties in financing due to high costs of capital, uncertain capital markets, charter and indenture limitations restricting conventional financing, and shortages of cash for construction and other purposes. SEASONALITY Sales of electricity by the AEP System tend to increase and decrease because of the use of electricity by residential and commercial customers for cooling and heating and relative changes in temperature. FRANCHISES The operating companies of the AEP System hold franchises to provide electric service in various municipalities in their service areas. These franchises have varying provisions and expiration dates. In general, the operating companies consider their franchises to be adequate for the conduct of their business. COMPETITION AND BUSINESS CHANGE GENERAL The public utility subsidiaries of AEP, like other electric utilities, have traditionally provided electric generation and energy delivery, consisting of transmission and distribution services, as a single product to their retail customers. FERC has proposed that utilities be required, and the public utility subsidiaries of AEP have agreed, to sell transmission services separately from their other services. Proposals are being made that would also require electric utilities to sell distribution services separately. These proposals generally allow competition in the generation and sale of electric power, but not in its transmission and distribution. Competition in the generation and sale of electric power will require resolution of complex issues, including who will pay for the unused generating plant of, and other stranded costs incurred by, the utility when a customer stops buying power from the utility; will all customers have access to the benefits of competition; how will the rules of competition be established; what will happen to conservation and other regulatory-imposed programs; how will the reliability of the transmission system be ensured; and how will the utility's obligation to serve be changed. As a result, it is not clear how or when competition in generation and sale of electric power will be instituted. However, if competition in generation and sale of electric power is instituted, the public utility subsidiaries of AEP believe that they have a favorable competitive position because of their relatively low costs. If stranded costs are not recovered from customers, however, the public utility subsidiaries of AEP, like all electric utilities, will be required by existing accounting standards to recognize stranded investment losses. WHOLESALE The public utility subsidiaries of AEP, like the electric industry generally, face increasing competition to sell available power on a wholesale basis, primarily to other public utilities and also to power marketers. The Energy Policy Act of 1992 was designed, among other things, to foster competition in the wholesale market (a) through amendments to PUHCA, facilitating the ownership and operation of generating facilities by "exempt wholesale generators" (which may include independent power producers as well as affiliates of electric utilities) and (b) through amendments to the Federal Power Act, authorizing the FERC under certain conditions to order utilities which own transmission facilities to provide wholesale transmission services for other utilities and entities generating electric power. The principal factors in competing for such sales are price (including fuel costs), availability of capacity and reliability of service. The public utility subsidiaries of AEP believe that they maintain a favorable competitive position on the basis of all of these factors. However, because of the availability of capacity of other utilities and the lower fuel prices in recent years, price competition has been, and is expected for the next few years to be, particularly important. The Mega-NOPR proposes that utilities be required to functionally unbundle their transmission services, by requiring them to use their own tariffs in making off-system and third-party sales. See TRANSMISSION SERVICES. The Mega- NOPR also would allow a utility to seek recovery of certain prudently-incurred stranded costs that result from unbundled transmission service. The public utility subsidiaries of AEP are preparing to functionally separate their wholesale power sales from their transmission functions, as proposed in the Mega-NOPR and required by their transmission tariffs. RETAIL The public utility subsidiaries of AEP generally have the exclusive right to sell electric power at retail within their service areas. However, they do compete with self-generation and with distributors of other energy sources, such as natural gas, fuel oil and coal, within their service areas. The primary factors in such competition are price, reliability of service and the capability of customers to utilize sources of energy other than electric power. With respect to self-generation, the public utility subsidiaries of AEP believe that they maintain a favorable competitive position on the basis of all of these factors. With respect to alternative sources of energy, the public utility subsidiaries of AEP believe that the reliability of their service and the limited ability of customers to substitute other cost-effective sources for electric power place them in a favorable competitive position, even though their prices may be higher than the costs of some other sources of energy. Significant changes in the global economy in recent years have led to increased price competition for industrial companies in the United States, including those served by the AEP System. Such industrial companies have requested price reductions from their suppliers, including their suppliers of electric power. In addition, industrial companies which are downsizing or reorganizing often close a facility based upon its costs, which may include, among other things, the cost of electric power. The public utility subsidiaries of AEP cooperate with such customers to meet their business needs through, for example, various off-peak or interruptible supply options and believe that, as low cost suppliers of electric power, they should be less likely to be materially adversely affected by this competition and may be benefitted by attracting new industrial customers to their service territories. The legislatures and/or the regulatory commissions in several states are considering "retail customer choice" which, in general terms, means the transmission by an electric utility of electric power generated by an entity of the customer's choice over its transmission and distribution system to a retail customer in such utility's service territory. A requirement to transmit directly to retail customers would have the result of permitting retail customers to purchase electric power, at the electionchoose their electricity supplier is on hold. In 2001 Oklahoma delayed implementation of such customers, not only from the electric utility in whose service area they are located but from another electric utility, an independent power producer or an intermediary, such as a power marketer. Although AEP's power generation would have competitors under some of these proposals, its transmission and distribution would not. If competition develops in retail power generation, the public utility subsidiaries of AEP believe that they have a favorable competitive position because of their relatively low costs. MICHIGAN: On June 19, 1995, the MPSC approved an experimental five-year retail wheeling program and ordered Consumers Power Company and Detroit Edison Company, unaffiliated utilities, to make retail delivery services available to a group of industrial customers, in the amount of 60 megawatts and 90 megawatts, respectively. The experiment will commence when each utility needs new capacity. The experiment seeks, as its goal, to determine whether a retail wheeling program best serves the public interest in a manner that promotes retail competition in a non-discriminatory fashion. During the experiment, the MPSC will collect information regarding the effects of retail wheeling. In January 1996, the Governor of Michigan endorsed a proposal of the Michigan Jobs Commission to promote competition and customer choice indefinitely. Before West Virginia's choice plan can be effective, tax legislation must be passed to preserve pre-legislation levels of funding for state and local governments. No further legislation has been passed related to restructuring in energy. Under the proposal, by January 1997, industrial and commercial customers would be permitted to choose suppliers for new electrical load and tariffs would be unbundled. By January 1998, an independent wholesale power pool with an independent operator would be formed. By 2001, power generation for industrial and commercial would not be subject to rate regulation and franchise territories would be eliminated. OHIO: On April 15, 1994, the Ohio Energy Strategy Task Force releasedWest Virginia. In February 2003, Arkansas repealed its final report. The report contained seven broad implementation strategies along with 53 specific initiatives to be undertaken by government and the private sector. One strategy recommended continuing to encourage competition in the electric utility industry in a manner which maximizes benefits and efficiencies for all customers. An initiative under this strategy recommends facilitating informal roundtable discussions on issues concerning competition in the electric utility industry and promoting increased competitive options for Ohio businesses that do not unduly harm the interests of utility company shareholders or ratepayers. The PUCO has begun such discussions. As a result, on February 15, 1996, the PUCO adopted guidelines for interruptible electric service, including a buy-through provision that will enable customers to avoid being interrupted during utility capacity deficiencies by having the utility purchase off-system replacement power for the customer. In March 1996, H.B. 653 was introduced in the Ohio House of Representatives. The bill proposes that all customers be permitted to select their electricity suppliers effective January 1, 1998. The bill eliminates price regulation of electricity generation functions in favor of market based prices. Service area rights for Ohio's electricity suppliers would be confined to distribution service. Transmission and distribution services would continue to be regulated at the federal and state levels, respectively. The bill would require Ohio's electric utilities to functionally unbundle their generation, transmission and distribution services. Electric utilities would be permitted to recover transition costs provided that such recovery does not cause prices to exceed those in effect on the effective date of therestructuring legislation. VIRGINIA: In September 1995, the Virginia SCC instituted a proceeding to review and consider policy regarding restructuring and the role of competition in the electric utility industry in Virginia. The Virginia SCC has directed its staff to conduct an investigation of current issues in the electric utility industry and to file a report of its observation and recommendations on issues identified in the Virginia SCC order. In addition, the Virginia legislature has adopted a resolution establishing a subcommittee to study, in consultation with the Virginia SCC, restructuring and potential changes in the electric utility industry in Virginia and determine the need for legislative changes. AEP POSITION ON COMPETITION In October 1995, AEP announced that it favored freedom for customers to purchase electric power from anyone that they choose. Generation and sale of electric power would be in the competitive marketplace. To facilitate reliable, safe and efficient service, AEP supports creation of independent system operators to operate the transmission system in a region of the United States. In addition, AEP supports the evolution of regional power exchanges which would establish a competitve marketplace for the sale of electric power. Transmission and distribution would remain monopolies and subject to regulation with respect to terms and price. Regulators would be able to establish distribution service charges which would provide, as appropriate, for recovery of stranded costs and regulatory assets. Implementation of this proposal would require legislative changes and regulatory approvals. POSSIBLE STRATEGIC RESPONSES In responseSee Note 7 to the competitive forces and regulatory changes being faced by AEP and its public utility subsidiaries, as discussed under this heading and under REGULATION, AEP and its public utility subsidiaries have from time to time considered, and expect to continue to consider, various strategies designed to enhance their competitive position and to increase their ability to adapt to and anticipate changes in their utility business. These strategies may include business combinations with other companies, internal restructurings involving the complete or partial separation of their generation, transmission and distribution businesses, acquisitions of related or unrelated businesses, and additions to or dispositions of portions of their franchised service territories. AEP and its public utility subsidiaries may from time to time be engaged in preliminary discussions, either internally or with third parties, regarding one or more of these potential strategies. No assurances can be given as to whether any potential transaction of the type described above may actually occur, or as to its ultimate effect on the financial condition or competitive position of AEP and its public utility subsidiaries. NEW BUSINESS DEVELOPMENT AEP continues to consider new business opportunities, particularly those which allow use of its expertise. These endeavors began in 1982 and are conducted through AEP Energy Services, Inc. (AEPES) and AEP Resources, Inc. (Resources). Resources' primary business is development of, and investment in, exempt wholesale generators, foreign utility companies, qualifying cogeneration facilities and other power projects. Resources currently does not have an interest in any power projects. Resources, however, has entered into a strategic alliance with Cogentrix Energy, Inc. and Zurn Industries, Inc. to develop, own and operate industrial power projects in the United States and Canada. In addition, Resources is investigating opportunities to develop and invest in new, and invest in existing, generation projects in China, Australia, Mexico and India. In 1994, AEP Resources International, Limited (AEPRI), a wholly owned subsidiary of Resources, signed an agreement of intent with Northeast China Electric Power Group Corp. (NEPG) to design two 1,300-megawatt, coal-fired electric generating units in Suizhong, Liaoning Province, China. The feasibility study for this project has been approved by the Chinese Ministry of Electric Power and is awaiting approval by the State Planning Commission. AEPRI is also involved in the advanced stages of negotiations to establish a joint venture with two Chinese partners to develop and own two 125-megawatt, coal-fired units in Henan Province, China. AEPES offers engineering, construction, project management and other consulting services for projects involving transmission, distribution or generation of electric power both domestically and internationally. AEP has received approval from the SEC under PUHCA to finance up to $300,000,000, and has requested approval to finance up to 50% of its consolidated retained earnings (approximately $700,000,000), for investment in exempt wholesale generators and foreign utility companies. AEP also has requested authority from the SEC under PUHCA to invest up to $100,000,000 in subsidiaries engaged in the business of marketing energy commodities, including electricity and gas. These continuing efforts to invest in and develop new business opportunities offer the potential of earning returns which may exceed those of rate-regulated operations. However, they also involve a higher degree of risk which must be carefully considered and assessed. AEP may make substantial investments in these and other new businesses. CONSTRUCTION PROGRAM NEW GENERATION The AEP System companies are engaged in a continuing construction program, involving assessment of needs, selection of sites, design and acquisition of equipment, and installation of the generating, transmission, distribution and other facilities necessary to provide for generation, transmission and distribution of electric power. At the present time, there are no specific commitments for additions of new generating stations on the AEP System. Size, technology, type, ownership (among AEP operating companies), means of acquisition and precise timing of future capacity additions on the AEP System have not yet been determined. However, the resource plan filed by AEP's electric utility subsidiaries with various state commissions indicates no need for new generation until sometime after the year 2000. Initial future capacity additions will most likely be short lead time, simple-cycle, gas-fired combustion turbines. The current resource plan indicates no need for new coal- fired baseload generation until sometime after the year 2010. The size of any new coal-fired generation will most likely be significantly smaller than the 1,300-megawatt units last added to the AEP System, to better match projected load growth. Proposals have been made, some of which have been adopted, that require the public utility subsidiaries of AEP to file with state commissions resource plans, indicating their plans to satisfy expected demand for electric power in their service territory. When the AEP System needs new generation, some of these proposals also require the public utility subsidiaries of AEP which wish to provide the new generation to compete with exempt wholesale generators, independent power producers and other utilities. Although the specific guidelines for such competition have not yet been developed and may vary from jurisdiction to jurisdiction (see the discussion below), significant factors will include price and reliability. For some years, the AEP System has put in place a series of customer programs for encouraging electric conservation and load management (CLM). The CLM programs also are referred to in the electric utility industry as "demand- side management" programs (DSM) since they affect the demand for electric power as opposed to its supply. The AEP System utilizes integrated resource planning and has in place a detailed analysis procedure in which effective demand-side and supply-side options are both considered in order to determine the least cost approach to provide reliable electric service for its customers, taking into account environmental and other considerations. INDIANA: In May 1995, the IURC adopted rules for integrated resource planning guidelines, including consideration of resource bidding and independent power producers, and for demand-side management. I&M filed its first integrated resource plan in November 1995. MICHIGAN: The MPSC has adopted guidelines governing the acquisition of new capacity by large Michigan electric utilities. The guidelines do not apply to I&M. OHIO: On December 17, 1992, the PUCO issued an order proposing rules for competitive bidding for new generating capacity, including transmission access for winning bidders. The proposed rules would establish a rebuttable presumption of prudence where new generating capacity is acquired through competitive bidding and provide other incentives to use competitive bidding. The proposed rules also contain procedures to ensure that bidders for a utility's new capacity will have open access to certain transmission facilities and prohibit the utility acquiring new capacity from withholding SO{2} Allowances from potential bidders. CSPCo and OPCo filed comments on the proposed rules generally supporting promulgation of rules governing competitive bidding but stating that the rules should not address access to transmission facilities or SO{2} Allowances, because existing federal laws address such concerns. VIRGINIA: On October 24, 1994, the Virginia SCC began a proceeding to consider whether to adopt standards related to integrated resource planning, conservation, demand-side management and energy efficiency in power generation and supply for jurisdictional electric utilities. On September 27, 1995, the Virginia SCC declined to adopt the proposed standards, but reaffirmed its goals for integrated resource planning, investment in cost-effective conservation and demand management programs. Virginia electric utilities are to continue to file biennial twenty-year resource plans. The Virginia SCC also has adopted minimum requirements for any electric utility that elects to acquire new generation through a bidding program. An electric utility is not required to use the bidding process and may participate in the bidding process. WEST VIRGINIA: On October 8, 1993, the West Virginia PSC issued an order proposing rules that generally require electric utilities to procure competitively all new sources of generation. APCo and Wheeling Power Company filed comments stating that the rules should not require competitive bidding and should permit the utility to participate in the bidding process. PROPOSED TRANSMISSION FACILITIES APCO: On March 23, 1990, APCo and VEPCo announced plans, subject to regulatory approval, for major new transmission facilities. APCo will construct approximately 115 miles of 765,000-volt line from APCo's Wyoming station in southern West Virginia to APCo's Cloverdale station near Roanoke, Virginia. VEPCo will construct approximately 102 miles of 500,000-volt line from APCo's Joshua Falls station east of Lynchburg, Virginia to VEPCo's Ladysmith station north of Richmond, Virginia. The construction of the transmission lines and related station improvements will provide needed reinforcement for APCo's internal load, reinforce the ability to exchange electric power between the two companies and relieve present constraints on the transmission of electric power from potential independent power producers in the APCo service area to VEPCo. APCo's cost is estimated at $245,000,000 while VEPCo's cost is estimated at $164,000,000. Completion of the project is presently scheduled for 2000 but the actual service date will be dependent upon the time necessary to meet various regulatory requirements. Hearings before the Virginia SCC were concluded in September 1993. A report was issued by the hearing examiner in December 1993 which recommended that the Virginia SCC grant APCo approval to construct the proposed 765,000-volt line. In an interim order issued on December 13, 1995, the Virginia SCC found that major additional transmission capacity was needed to serve APCo's native load customers. The Virginia SCC further asked that APCo provide additional information on possible routing modifications and utilization of the additional transmission capacity prior to a final ruling. APCo refiled with the West Virginia PSC in February 1993 its application for certification. An application filed in June 1992 was withdrawn at the request of the West Virginia PSC to permit additional time for review by the West Virginia PSC. The West Virginia PSC rejected APCo's application for certification in May 1993, directing APCo to supplement its line siting information. APCo intends to refile its application with the West Virginia PSC. Hearings are expected to be held in late 1996 or early 1997, with a decision expected in late 1997 or early 1998. The Jefferson National Forest (JNF) is directing the preparation of an Environmental Impact Statement (EIS) which will be required prior to the granting of special use permits for crossing Federal lands. The present schedule of the JNF calls for completion of the draft EIS in June 1996 and the final EIS in early 1998. APCO AND KEPCO: APCo and KEPCo have announced an improvement plan to be implemented during a four-year period (1996-1999) to reinforce their 138,000- volt transmission system. Included in this plan is a new transmission line to link KEPCo's Big Sandy Plant to communities in eastern Kentucky. APCo's and KEPCo's estimated project costs are $5,115,000 and $84,184,000, respectively. Work on the project is scheduled to begin later in 1996, pending approval from the KPSC. CONSTRUCTION EXPENDITURES The following table shows the construction expenditures by AEGCo, APCo, CSPCo, I&M, KEPCo, OPCo and the AEP System and their respective consolidated subsidiaries during 1993, 1994 and 1995 and their current estimate of 1996 construction expenditures, in each case including AFUDC but excluding nuclear fuel and other assets acquired under leases. The construction expenditures for the years 1993-1995 were applied, and it is anticipated that the estimated construction expenditures for 1996 will be applied, approximately as follows to construction of the following classes of assets:
1993 1994 1995 1996 ACTUAL ACTUAL ACTUAL ESTIMATE (in thousands) AEGCO Generating plant and facilities $ 3,100 $ 3,900 $ 4,000 $ 1,900 TOTAL $ 3,100 $ 3,900 $ 4,000 $ 1,900 APCO Generating plant and facilities $ 51,200 $ 65,600 $ 42,400 $ 55,700 Transmission lines and facilities 36,700 38,700 35,200 31,300 Distribution lines and facilities 98,200 116,500 121,400 102,900 General plant and other facilities 4,800 9,500 18,600 13,900 TOTAL $190,900 $230,300 $217,600 $203,800 CSPCO Generating plant and facilities $ 33,300 $ 24,800 $ 30,500 $ 20,400 Transmission lines and facilities 10,100 3,600 10,700 10,800 Distribution lines and facilities 40,700 50,800 56,600 50,800 General plant and other facilities 2,200 2,300 1,700 12,500 TOTAL $ 86,300 $ 81,500 $ 99,500 $ 94,500
1993 1994 1995 1996 ACTUAL ACTUAL ACTUAL ESTIMATE (in thousands) I&M Generating plant and facilities $ 50,200 $ 49,700 $ 46,200 $ 33,600 Transmission lines and facilities 10,100 20,300 22,600 17,600 Distribution lines and facilities 41,300 42,300 41,500 40,900 General plant and other facilities 6,700 2,200 2,700 18,500 TOTAL $108,300 $114,500 $113,000 $110,600 KEPCO Generating plant and facilities $ 8,100 $ 22,600 $ 6,200 $ 25,400 Transmission lines and facilities 6,700 6,400 7,900 33,000 Distribution lines and facilities 20,300 23,700 23,900 23,200 General plant and other facilities 0 500 1,300 3,400 TOTAL $ 35,100 $ 53,200 $ 39,300 $ 85,000 OPCO Generating plant and facilities (a) $112,700 $ 83,800 $ 40,000 $ 36,200 Transmission lines and facilities 28,600 15,300 23,500 22,000 Distribution lines and facilities 46,000 45,200 51,400 52,200 General plant and other facilities 10,500 4,700 2,000 12,700 TOTAL $197,800 $149,000 $116,900 $123,100 AEP SYSTEM (b) Generating plant and facilities (a) $258,600 $250,400 $169,300 $173,200 Transmission lines and facilities 92,800 85,400 102,500 115,400 Distribution lines and facilities 252,300 286,900 302,800 277,000 General plant and other facilities 24,400 19,400 26,600 61,400 TOTAL $628,100 $642,100 $601,200 $627,000
(a) Excludes expenditures associated with flue-gas desulfurization system which was constructed by a non-affiliate at the Gavin Plant and is being leased by OPCo. Actual expenditures for such system for 1993, 1994 and 1995 and the current estimate for 1996 are $256,673,000, $176,220,000, $48,804,000 and $12,915,000, respectively. See ENVIRONMENTAL AND OTHER MATTERS - ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN. (b) Includes expenditures of other subsidiaries not shown. Reference is made to the footnotes to the financial statements, entitled COMMITMENTS AND CONTINGENCIESEffects of Regulation, incorporated by reference in Item 8, for a discussion of the effect of restructuring and customer choice legislation on accounting procedures. See Management's Discussion 6 and Analysis of Results of Operations and Financial Condition, under the headings entitled Industry Restructuring and Corporate Separation for a discussion of AEP's corporate separation plan filed with the FERC and related settlement agreements with state commissions and other intervenors. Michigan Customer Choice Customer choice commenced for I&M's Michigan customers on January 1, 2002. Rates for retail electric service for I&M's Michigan customers were unbundled (though they continue to be regulated) to allow customers the ability to evaluate the cost of generation service for comparison with other suppliers. At December 31, 2002, none of I&M's Michigan customers had elected to change suppliers and no alternative electric suppliers are registered to compete in I&M's Michigan service territory. Ohio Restructuring The Ohio Act requires vertically integrated electric utility companies that offer competitive retail electric service in Ohio to separate their generating functions from their transmission and distribution functions. Following the market development period (which will terminate no later than December 31, 2005), retail customers will receive distribution and, where applicable, transmission service from the incumbent utility whose distribution rates will be approved by the PUCO and whose transmission rates will be approved by the FERC. See General--Regulation--FERC for a discussion of FERC regulation of transmission rates and Energy Delivery--Regulation--Rates--Ohio for a discussion of the impact of restructuring on distribution rates. CSPCo and OPCo are each presently operating as functionally separated electric utility companies and no longer charge bundled rates for retail electric service. Each has sought and, from certain regulatory authorities, obtained regulatory approval to legally separate its transmission and distribution assets from its generation assets. CSPCo and OPCo are, however, currently determining the regulatory feasibility of complying with restructuring legislation through continued functional separation. Assuming regulatory compliance, it is currently their intention to remain functionally separated. Texas Restructuring The Texas Act substantially amends the regulatory structure governing electric utilities in Texas in order to allow retail electric competition for all customers and requires each utility to separate into (i) a REP, (ii) a power generation company and (iii) a transmission and distribution utility. Upon separation, neither the REP nor the power generation company will be subject to traditional cost of service rate regulation. See Energy Delivery--Regulation-- Rates--Texas for a discussion of the impact of restructuring on rates. SWEPCo, TCC and TNC initially filed a restructuring plan in January 2000 (which they subsequently updated) that the PUCT approved in February 2002. The updated restructuring plan provided for the legal separation of TCC's and TNC's assets in accordance with the Texas Act into (i) an affiliate power generation company, (ii) a transmission and distribution utility and (iii) various REPs, including those subsequently purchased by Centrica (see below). TCC and TNC continue to pursue legal separation as required by the Texas Act. The PUCT has delayed the implementation of the plan for SWEPCo operations within the SPP area of Texas. Under the Texas Act, a REP, which itself cannot own any generation assets, obtains its electricity from power generation companies, EWGs and other generating entities and provides services at generally unregulated rates, except that the prices that may be charged to residential and small commercial customers by REPs affiliated with a utility within the affiliated utility's service area are set by the PUCT until January 1, 2007. This set price is referred to as the "price to beat" rate (PTB). Affiliate REPs are required to offer the PTB rate to all residential and small commercial customers (with a peak usage of less than 1,000 KW) effective January 1, 2002. As described below, AEP sold its affiliate REPs that must provide PTB service. The PTB rate is still relevant to AEP, however, in determining (i) the contingent portion of the sales price of the affiliate REPs AEP sold and (ii) certain of AEP's obligations in the 2004 true-up proceedings. Prior to the start of retail competition in January 2002, AEP formed MECPL and MEWTU to act as affiliate REPs for TCC and TNC respectively. MECPL and MEWTU were sold in December 2002 to Centrica, which assumed all of the rights and obligations of an affiliated REP, including the provision of PTB service and the obligation to provide data necessary for TCC's and TNC's 2004 true-up proceeding. In connection with the sale, TCC and TNC have contracted to supply approximately 90% of MECPL's and 7 MEWTU's respective power requirements relating to former TCC and TNC PTB customers for a two-year period. See Note 12 to the consolidated financial statements, entitled Acquisitions, Distributions and Discontinued Operations, incorporated by reference in Item 8, for more information on the sale of these REPs and AEP's contractual rights and obligations in connection with the sale. The Texas Act also allows certain transmission and distribution utilities whose generation assets were unbundled to recover certain regulatory assets and stranded costs related to their generation assets. For a discussion of (i) regulatory assets and stranded costs subject to recovery by TCC and (ii) rate adjustments made after implementation of restructuring to allow recovery of certain costs by or with respect to TCC and TNC, see Energy Delivery--Regulatory Assets, Stranded Cost Recovery and Certain Post-Restructuring Rate Adjustments. Virginia Restructuring The Virginia Act was enacted in 1999 providing for retail choice of generation suppliers to be phased in over the January 1, 2002 to January 1, 2004 period. The Virginia Act required jurisdictional utilities to unbundle their power supply and energy delivery rates and to file functional separation plans by January 1, 2002. APCo filed its plan and, following VSCC approval of a settlement agreement, now operates in Virginia as a functionally separated electric utility charging unbundled rates for its retail sales of electricity. The settlement agreement addressed functional separation, leaving decisions related to legal separation for later VSCC consideration. FINANCING General AEP's goal is to use cash from operations to fund capital expenditures, dividends and working capital. Short-term debt is used as an interim bridge for timing differences in the need for cash or to fund debt maturities until permanent financing is arranged. It has been the practice of AEP's operating subsidiaries to finance current construction expenditures in excess of available cash from operations by initially incurring short-term debt, up to levels authorized by regulatory agencies, and then to reduce the short-term debt with the proceeds of subsequent sales by such subsidiaries of long-term debt securities and cash capital contributions by AEP. In the past, short-term debt has come from AEP's commercial paper program and revolving credit facilities. Proceeds were loaned to the subsidiaries through intercompany notes under the AEP money pool. The recent downgrade of AEP's commercial paper rating by Moody's, described below, may limit AEP's access to commercial paper on terms as favorable as those of recent years. Therefore, AEP may establish commercial paper programs for certain of its public utility subsidiaries and AEP Utilities. Certain public utility subsidiaries of AEP also sell accounts receivable to provide liquidity. AEP's revolving credit agreements (which backstop the commercial paper program) include covenants and events of default typical for this type of facility, including a maximum debt/capital test and a $50 million cross-acceleration provision. At December 31, 2002, AEP was in compliance with its debt covenants. With the exception of a voluntary bankruptcy or insolvency, any event of default has either or both a cure period or notice requirement before termination of the agreements. A voluntary bankruptcy or insolvency would be considered an immediate termination event. AEP's subsidiaries have also utilized, and expect to continue to utilize, additional financing arrangements, such as leasing arrangements, including the leasing of utility assets and coal mining and transportation equipment and facilities. Credit Ratings The rating agencies have been conducting credit reviews of AEP and its registrant subsidiaries. The agencies are also reviewing many companies in the energy sector due to issues that impact the entire industry. In February 2003 Moody's completed its review of AEP and its rated subsidiaries. The results of that review were downgrades of the following ratings for unsecured debt: AEP from Baa2 to Baa3, APCo from Baa1 to Baa2, TCC from Baa1 to Baa2, PSO from A2 to Baa1, SWEPCo from A2 to Baa1. TNC, which had no senior unsecured notes outstanding at the time of the ratings action, had its mortgage bond debt downgraded from A2 to A3. AEP's commercial paper was also concurrently downgraded from P-2 to P-3. The completion of this review was a culmination of earlier ratings action in 2002 that had included a downgrade of AEP from Baa1 to Baa2. With the completion of the reviews, Moody's has placed AEP and its rated subsidiaries on stable outlook. 8 In March 2003 S&P completed its review of AEP and its rated subsidiaries. The results of that review were downgrades of the ratings for unsecured debt for AEP and its rated subsidiaries from BBB+ to BBB. AEP's commercial paper rating was affirmed at A-2. With the completion of the reviews, S&P has placed AEP and its rated subsidiaries on stable outlook. In March 2003 Fitch completed its review of AEP. The result of that review was a downgrade of AEP's unsecured debt rating from BBB+ to BBB. AEP's commercial paper rating was affirmed at F-2. With the completion of the reviews, Fitch has placed AEP and its rated subsidiaries on stable outlook. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters, incorporated by reference in Item 7, under the heading entitled Financial Condition for additional information with respect to AEP's credit ratings, liquidity and specific financing activities. ENVIRONMENTAL AND OTHER MATTERS General AEP's subsidiaries are currently subject to regulation by federal, state and local authorities with regard to air and water-quality control and other environmental matters, and are subject to zoning and other regulation by local authorities. The environmental issues that are potentially material to the AEP system include: - The CAA and CAAA and state laws and regulations (including State Implementation Plans) that require compliance, obtaining permits and reporting as to air emissions. - Litigation with the federal and certain state governments and certain special interest groups regarding whether modifications to or maintenance of certain coal-fired generating plants required additional permitting or pollution control technology. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters under the heading entitled Federal EPA Complaint and Notice of Violation and Note 9 to the consolidated financial statements entitled Commitments and Contingencies, incorporated by reference in Items 7 and 8 respectively for further information. - Rules issued by the EPA and certain states that require substantial reductions in NOx emissions. The compliance dates for these rules range from 2003 to 2005. AEP is installing (or has installed) emission control technology and is taking other measures to comply with required reductions. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters and Note 9 to the consolidated financial statements entitled Commitments and Contingencies, incorporated by reference in Items 7 and 8 respectively, under the heading entitled NOx Reductions for further information. - CERCLA, which imposes upon owners and previous owners of sites, as well as transporters and generators of hazardous material disposed of at such sites, costs for environmental remediation. AEP does not, however, anticipate that any of its currently identified CERCLA-related issues will result in material costs or penalties to the AEP System. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters, incorporated by reference in Item 7, under the heading entitled Superfund for further information. - The Federal Clean Water Act, which prohibits the discharge of pollutants into waters of the United States except pursuant to appropriate permits. There are, however, no matters material to the AEP System currently pending under the Clean Water Act. - Solid and hazardous waste laws and regulations, which govern the management and disposal of certain wastes. The majority of solid waste created from the combustion of coal and fossil fuels is fly ash and other coal combustion byproducts, which the EPA has determined are not hazardous waste governed subject to RCRA. In addition to imposing continuing compliance obligations, these laws and regulations authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. AEP's subsidiaries will confront several new environmental policies and regulations over the next decade with the potential for substantial control costs and premature retirement of some generating plants. These could include (i) new or additional controls on sulfur dioxide, NOx and mercury emissions from future laws or regulations, or the possibility of an 9 adverse decision in the new source review litigation; (ii) a new Clean Water Act rule to reduce fish and other aquatic organisms killed at once-through cooled power plants; (iii) finalization and implementation of more stringent water quality-based permit limits; and (iv) a possible future requirement to reduce carbon dioxide emissions. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters, incorporated by reference in Item 7, under the heading entitled Environmental Concerns and Issues for information on current environmental issues. AEP expects costs related to environmental controls to eventually be reflected in some jurisdictions in the rates of AEP's public utility subsidiaries. In Michigan, Ohio, Texas and Virginia, those costs may not be recoverable if future market prices for electricity generated by plants in those jurisdictions are insufficient to permit AEP to recover such costs. Moreover, legislation adopted by certain states and proposed at the state and federal level governing restructuring of the electric utility industry may also affect the recovery of certain of these costs. There can be no assurance that these costs will be recovered. AEP's international operations are subject to environmental regulation by various authorities within the host countries. Under certain circumstances, these authorities may require modifications to these facilities and operations or impose fines and other costs for violations of applicable statutes and regulations. From time to time, these operations are named as parties to various legal claims, actions, complaints or other proceedings related to environmental matters. AEP's UK generation facilities will be subject to additional environmental constraints in 2008 (which become more stringent after 2015) because they are subject to regulation governing large combustion plants. In the fourth quarter of 2002, AEP decided not to install certain emission control technology on its Fiddler's Ferry and Ferrybridge generation facilities in 2008. This decision and its legal and regulatory consequences will result in a significant reduction in the estimated economic life of those facilities. The cost of complying with applicable environmental laws, regulations and rules is expected to be material to the AEP System. See Management's Discussion and Analysis of Results of Operations and Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters and Note 9 to the consolidated financial statements entitled Commitments and Contingencies, incorporated by reference in Items 7 and 8, respectively, for further information with respect to the construction plans of AEP and its operating subsidiaries for the next three years. The System construction program is reviewed continuously and is revised from time to time in response to changes in estimates of customer demand, business and economic conditions, the cost and availability of capital, environmental requirements and other factors. Changes in construction schedules and costs, and in estimates and projections of needs for additional facilities, as well as variations from currently anticipated levels of net earnings, Federal income and other taxes, and other factors affecting cash requirements, may increase or decrease the estimates of capital requirements for the System's construction program. From time to time, as the System companies have encountered the industry problems described above, such companies also have encountered limitations on their ability to secure the capital necessary to finance construction expenditures. ENVIRONMENTAL EXPENDITURES:matters. Environmental Expenditures Expenditures related to generation facility compliance with air and water quality standards included in the gross additions to plant of the System, during 1993, 19942001 and 19952002 and the current estimate for 19962003 are shown below. Substantial expenditures in addition to the amounts set forth below may be required by the System in future years in connection with the modification and addition of facilities at generating plants for environmental quality controls in order to comply with air and water quality standards which have been or may be adopted. 1993 1994 1995 1996 ACTUAL ACTUAL ACTUAL ESTIMATE (in thousands) AEGCo $ 0 $ 0 $ 0 $ 0 APCo 16,800 32,000 7,800 8,500 CSPCo 15,800 13,700 10,000 1,300 I&M 0 0 0 400 KEPCo 1,000 9,500 600 600 OPCo (a) 31,600 22,400 3,100 0Future expenditures could be significantly greater if litigation regarding whether AEP System (a) $65,200 $77,600 $21,500 $10,800 (a)Excludes expenditures associated with flue-gas desulfurization system which was constructed by a non-affiliate at the Gavin Plant andproperly installed emission control equipment on its plants is being leased by OPCo. Actual expenditures for such system for 1993, 1994 and 1995 and the current estimate for 1996 are $256,673,000, $176,220,000, $48,804,000 and $12,915,000, respectively.resolved against AEP. See ENVIRONMENTAL AND OTHER MATTERS - ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN. FINANCING It has been the practice of AEP's operating subsidiaries to finance current construction expenditures in excess of available internally generated funds by initially issuing unsecured short-term debt, principally commercial paper and bank loans, at times up to levels authorized by regulatory agencies, and then to reduce the short-term debt with the proceeds of subsequent sales by such subsidiaries of long-term debt securities and preferred stock, and cash capital contributions by AEP. It has been the practice of AEP, in turn, to finance cash capital contributionsNote 9 to the common stock equities of the operating subsidiaries by issuing unsecured short-term debt, principally commercial paper,consolidated financial statements, entitled Commitments and then to sell additional shares of Common Stock of AEP for the purpose of retiring the short-term debt previously incurred. In 1995, AEP issued 1,400,000 shares of Common Stock pursuant to its Dividend Reinvestment and Stock Purchase Plan. Although prevailing interest costs of short-term bank debt and commercial paper generally have been lower than prevailing interest costs of long-term debt securities, whenever interest costs of short-term debt exceed costs of long-term debt, the companies might be adversely affected by reliance on the use of short-term debt to finance their construction and other apital requirements. During the period 1993-1995, external funds from financings and capital contributions by AEP amounted, with respect to APCo and KEPCo to approximately 31% and 53%, respectively, of the aggregate construction expenditures shown above. During this same period, the amount of funds used to retire long-term and short-term debt and preferred stock of AEGCo, CSPCo, I&M and OPCo exceeded the amount of funds from financings and capital contributions by AEP. The ability of AEP and its operating subsidiaries to issue short-term debt is limited by regulatory restrictions and, in the case of most of the operating subsidiaries, by provisions contained in their charters and in certain debt and other instruments. The approximate amounts of short-term debt which the companies estimate that they were permitted to issue under the most restrictive such restriction, at January 1, 1996, and the respective amounts of short-term debt outstanding on that date, on a corporate basis, are shown in the following tabulation:
TOTAL AEP SHORT-TERM DEBT AEP AEGCO APCO CSPCO I&M KEPCO OPCO SYSTEM(a) (in millions) Amount authorized $150 $80 $228 $175 $175 $150 $223 $1,256 Amount outstanding: Notes payable $ 18 $22 $ -- $ 13 $ 52 $ 16 $ -- $ 128 Commercial paper 32 -- 126 21 38 11 9 237 $ 50 $22 $126 $ 34 $ 90 $ 27 $ 9 $ 365
(a) Includes short-term debt of other subsidiaries not shown. Reference is made to the footnotes to the financial statementsContingencies, incorporated by reference in Item 8, for further information with respect to unused short- term bank lines of credit. In order to issue additional first mortgage bonds and preferred stock, it is necessary for APCo, CSPCo, I&M, KEPCo and OPCo to comply with earnings coverage requirements contained in their respective mortgages and charters. The most restrictive of these provisions in each instance generally requires (1) for the issuance of first mortgage bonds for purposes other than the refunding of outstanding first mortgage bonds, a minimum, before income tax, earnings coverage of twice the pro forma annual interest charges on first mortgage bonds and (2) for the issuance of additional preferred stock by APCo, I&M and OPCo, a minimum, after income tax, gross income coverage of one and one-half times pro forma annual interest charges and preferred stock dividends, in each case for a period of twelve consecutive calendar months within the fifteen calendar months immediately preceding the proposed new issue. In computing such coverages, the companies include as a component of earnings revenues collected subject to refund (where applicable) and, to the extent not limited by the instrument under which the computation is made, AFUDC, including amounts positioned and classified as an allowance for borrowed funds used during construction. These coverage provisions have from time to time restricted the ability of one or more of the above subsidiaries of AEP to issue senior securities. The respective mortgage and preferred stock coverages of APCo, CSPCo, I&M, KEPCo and OPCo under their respective mortgage and charter provisions, calculated on the foregoing basis and in accordance with the respective amounts then recorded in the accounts of the companies, assuming the respective short- term debt of the companies at those dates were to remain outstanding for a twelve-month period at the respective rates of interest prevailing at those dates, were at least those stated in the following table: DECEMBER 31, 1993 1994 1995 APCo Mortgage coverage 3.64 3.12 3.47 Preferred stock coverage 2.04 1.65 1.78 CSPCo Mortgage coverage 2.91 3.64 3.90 I&M Mortgage coverage 5.49 6.23 6.25 Preferred stock coverage 2.48 2.74 2.63 KEPCo Mortgage coverage 2.19 2.60 2.86 OPCo Mortgage coverage 5.24 5.04 6.17 Preferred stock coverage 2.88 2.58 3.04 Although certain other subsidiaries of AEP either are not subject to any coverage restrictions or are not subject to restrictions as constraining as those to which APCo, CSPCo, I&M, KEPCo and OPCo are subject, their ability to finance substantial portions of their construction programs may be subject to market limitations and other constraints unless other assurances are furnished. AEP believes that the ability of its operating subsidiaries to issue short- and long-term debt securities and preferred stock in the amounts required to finance their business may depend upon the timely approval of rate increase applications. If one or more of the operating subsidiaries are unable to continue the issuance and sale of securities on an orderly basis, such company or companies will be required to consider the use of alternative financing arrangements, if available, which may be more costly or the curtailment of construction and other outlays. AEP's subsidiaries have also utilized, and expect to continue to utilize, additional financing arrangements, such as leasing arrangements, including the leasing of utility assets, coal mining and transportation equipment and facilities and nuclear fuel. Pollution control revenue bonds have been used in the past and may be used in the future in connection with the construction of pollution control facilities; however, Federal tax law has limited the utilization of this type of financing except for purposes of certain financing of solid waste disposal facilities and of certain refunding of outstanding pollution control revenue bonds issued before August 16, 1986. Shares of AEP Common Stock may be sold by AEP from time to time at prices below the then current book value per share and repurchased by AEP at prices above book value. Such sales or purchases, if any, would have a dilutive effect on the book value of then outstanding shares but are not expected to have a material adverse effect on AEP's business including its future financing plans or capabilities and pending construction projects. RATES GENERAL The rates charged by the electric utility subsidiaries of AEP are approved by the FERC or one of the state utility commissions as applicable. The FERC regulates wholesale rates and the state commissions regulate retail rates. In recent years the number of rate increase applications filed by the operating subsidiaries of AEP with their respective state commissions and the FERC has decreased. If increases in operating, construction and capital costs exceed increases in revenues resulting from previously granted rate increases and increased customer demand, then it may be appropriate for certain of AEP's electric utility subsidiaries to file rate increase applications in the future. Generally the rates of AEP's operating subsidiaries are determined based upon the cost of providing service including a reasonable return on investment. Certain states served by the AEP System allow alternative forms of rate regulation in addition to the traditional cost-of-service approach. In April 1995, Indiana enacted into law legislation providing that the IURC may approve alternative regulatory plans which could include setting customer rates based on market or average prices, price caps, index-based prices and prices based on performance and efficiency. In March 1996, Virginia enacted into law legislation which provides that the Virginia SCC may approve (i) special rates, contracts or incentives to individual customers or classes of customers and (ii) alternative forms of regulation including, but not limited to, the use of price regulation, ranges of authorized returns, categories of services and price indexing. All of the seven states served by the AEP System, as well as the FERC, either permit the incorporation of fuel adjustment clauses in a utility company's rates and tariffs, which are designed to permit upward or downward adjustments in revenues to reflect increases or decreases in fuel costs above or below the designated base cost of fuel set forth in the particular rate or tariff, or permit the inclusion of specified levels of fuel costs as part of such rate or tariff. AEP cannot predict the timing or probability of approvals regarding applications for additional rate changes, the outcome of action by regulatory commissions or courts with respect to such matters, or the effect thereof on the earnings and business of the AEP System. APCO FERC: On February 14, 1992, APCo filed with the FERC applications for an increase in its wholesale rates to Kingsport Power Company and non-affiliated customers in the amounts of approximately $3,933,000 and $4,759,000, respectively. APCo began collecting the rate increases, subject to refund, on September 15, 1992. In addition, the Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires employers, beginning in 1993, to accrue for the costs of retiree benefits other than pensions. These rates include the higher level of SFAS 106 costs. On November 9, 1993, the administrative law judge issued an initial decision recommending, among other things, the higher level of postretirement benefits other than pensions under SFAS 106. FERC action on APCo's applications is pending. VIRGINIA: On June 27, 1994, the Virginia SCC issued a final order granting APCo an increase in annual revenues of $17,900,000. APCo had requested to increase its Virginia retail rates by $31,400,000 annually and, on May 4, 1993, implemented the rates, subject to refund, based on an interim order. As a result of the final order, APCo made a revenue refund including interest to its Virginia customers in August 1994 of $15,800,000. As a result of certain significant fuel cost reductions, on November 15, 1994, APCo implemented a net decrease in rates charged to its Virginia retail customers of $13,200,000, subject to final approval by the Virginia SCC. The net decrease consisted of a $28,900,000 decrease in the fuel component of its rates offset, in part, by an increase of $15,700,000 in base rates. On December 19, 1994, the Virginia SCC issued an order approving the decrease in the fuel factor component of rates. APCo proposes in the base rate proceeding to amortize Virginia deferred storm damage expenses of $23,900,000 related to two major ice storms in February and March 1994 over a three-year period, consistent with the amortization of previous storm damage expense deferrals approved in a 1992 rate case. The ultimate recovery of the entire deferred storm damage costs is subject to Virginia SCC approval. If not approved, results of operations could be adversely affected. The Virginia SCC Staff has recommended that approximately $12,000,000 of the $23,900,000 in storm damage expenses be treated as if they have previously been recovered in earnings (based on the results of the Staff's earnings test) and the remainder be deferred for future recovery over a five-year period. A hearing examiner's report is pending. CSPCO ZIMMER PLANT: The Zimmer Plant was placed in commercial operation as a 1,300-megawatt coal-fired plant on March 30, 1991. CSPCo owns 25.4% of the Zimmer Plant with the remainder owned by two unaffiliated companies, CG&E (46.5%) and DP&L (28.1%). ZIMMER PLANT - RATE RECOVERY: In May 1992, the PUCO issued an order providing for a phased-in rate increase of $123,000,000 for the Zimmer Plant to be implemented in three steps over a two-year period and disallowed $165,000,000 of Zimmer Plant investment. CSPCo appealed the PUCO ordered Zimmer disallowance and phase-in plan to the Ohio Supreme Court. In November 1993, the Supreme Court issued a decision on CSPCo's appeal affirming the disallowance and finding that the PUCO did not have statutory authority to order phased-in rates. The court instructed the PUCO to fix rates to provide gross annual revenue in accordance with the law and to provide a mechanism to recover the revenues deferred under the phase-in order. As a result of the ruling, 1993 net income was reduced by $144,500,000 after tax to reflect the disallowance and in January 1994, the PUCO approved a 7.11% or $57,167,000 rate increase effective February 1, 1994. The increase is comprised of a 3.72% base rate increase and a temporary 3.39% surcharge, which will be in effect until the phase-in plan deferrals are recovered, currently estimated to be mid-1997. In 1995, $28,500,000 of net phase-in deferrals were collected through the surcharge which reduced the deferrals from $75,400,000 at December 31, 1994 to $46,900,000 at December 31, 1995. In 1993 and 1992, $47,900,000 and $46,000,000, respectively, were deferred under the phase-in plan. The recovery of amounts deferred under the phase-in plan and the increase in rates to the full rate level did not affect net income. From the in-service date of March 1991 until rates went into effect in May 1992, deferred carrying charges of $43,000,000 were recorded on the Zimmer Plant investment. Recovery of the deferred carrying charges will be sought in the next PUCO base rate proceeding in accordance with the PUCO accounting order that authorized the deferral. Reference is made to the caption ENVIRONMENTAL AND OTHER MATTERS - ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN for information regarding AEP's compliance plan which was approved by the PUCO. KEPCO In September 1995, KEPCo, the Kentucky Attorney General and other interested parties filed an application with the KPSC to implement KEPCo's DSM Three-Year Experimental Plan which consisted of DSM programs for residential, commercial and industrial sectors. Under the plan, program costs, as well as net lost revenues and incentives, would be recovered by sector under an annual surcharge tariff. In December 1995, the KPSC issued an order approving the three-year plan for the period ending December 31, 1998. OPCO An application was filed by OPCo in July 1994 with the PUCO seeking a $152,500,000 annual base retail rate increase to recover, among other things, the costs associated with the Gavin Plant's flue gas desulfurization systems (scrubbers). In February 1995, OPCo and certain other parties to the proceeding entered into a settlement agreement to resolve, among other issues, the pending base rate case and the current electric fuel component (EFC) proceeding. On March 23, 1995, the PUCO issued an order approving the settlement agreement, with certain minor exceptions. Under the terms of the settlement agreement, effective March 23, 1995, base rates increase by $66,000,000 annually which includes recovery of the annual cost of the scrubbers; the EFC rate is fixed at 1.465 cents per kwh from June 1, 1995 through November 30, 1998; OPCo is provided with the opportunity to recover its Ohio jurisdictional share of the investment in, and the liabilities and future shutdown costs of, all affiliated mines as well as any fuel costs incurred above the fixed rate; and OPCo may proceed with its Clean Air Act Amendments of 1990 compliance plan as filed with the PUCO (discussed under ENVIRONMENTAL AND OTHER MATTERS - ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN). The settlement agreement allows OPCo to continue to operate its Muskingum and Windsor mines. Based on a stipulation agreement approved by the PUCO in November 1992, beginning December 1, 1994, the cost of coal burned at the Gavin Plant is subject to a 15-year predetermined price of $1.575 per million Btus with quarterly escalation adjustments. As discussed above, the PUCO-approved settlement agreement fixes the EFC factor at 1.465 cents per kwh for the period June 1995 through November 1998. After November 2009, the price that OPCo can recover for coal from its affiliated Meigs mine which supplies the Gavin Plant will be limited to the lower of cost or the then-current market price. The predetermined Gavin Plant price agreement, in conjunction with the above- referenced settlement agreement, provide OPCo with an opportunity to recover any operating losses incurred under the predetermined or fixed price, as well as its investment in, and liabilities and closing costs associated with, its affiliated mining operations attributable to its Ohio jurisdiction, to the extent the actual cost of coal burned at the Gavin Plant is below the predetermined price. Based on the estimated future cost of coal burned at Gavin Plant, management believes that the Ohio jurisdictional portion of the investment in, and liabilities and closing costs of, the affiliated mining operations will be recovered under the terms of the predetermined price agreement. In November 1992, the municipal wholesale customers of OPCo filed a complaint with the SEC requesting an investigation of the sale of the Martinka mining operation to an unaffiliated company and an investigation into the pricing of OPCo's affiliated coal purchases back to 1986. OPCo has filed a response with the SEC seeking to dismiss this complaint. FUEL SUPPLY The following table shows the sources of power generated by the AEP System: 1991 1992 1993 1994 1995 Coal 86% 93% 86% 91% 88% Nuclear 13% 6% 13% 8% 11% Hydroelectric and other 1% 1% 1% 1% 1% Variations in the generation of nuclear power are primarily related to refueling outages and, in 1992, a forced outage at Cook Plant Unit 2. See COOK NUCLEAR PLANT. COAL The Clean Air Act Amendments of 1990 provide for the issuance of annual allowance allocations covering sulfur dioxide emissions at levels below historic emission levels for many coal-fired generating units of the AEP System. Phase I of this program began in 1995 and Phase II begins in 2000, with both phases requiring significant changes in coal supplies and suppliers. The full extent of such changes, particularly in regard to Phase II, however, has not been determined. See ENVIRONMENTAL AND OTHER MATTERS - ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN for the current compliance plan. In order to meet emission standards for existing and new emission sources, the AEP System companies will, in any event, have to obtain coal supplies, in addition to coal reserves now owned by System companies, through the acquisition of additional coal reserves and/or by entering into additional supply agreements, either on a long-term or spot basis, at prices and upon terms which cannot now be predicted. No representation is made that any of the coal rights owned or controlled by the System will, in future years, produce for the System any major portion of the overall coal supply needed for consumption at the coal-fired generating units of the System. Although AEP believes that in the long run it will be able to secure coal of adequate quality and in adequate quantities to enable existing and new units to comply with emission standards applicable to such sources, no assurance can be given that coal of such quality and quantity will in fact be available. No assurance can be given either that statutes or regulations limiting emissions from existing and new sources will not be further revised in future years to specify lower sulfur contents than now in effect or other restrictions. See ENVIRONMENTAL AND OTHER MATTERS herein. The FERC has adopted regulations relating, among other things, to the circumstances under which, in the event of fuel emergencies or shortages, it might order electric utilities to generate and transmit electric power to other regions or systems experiencing fuel shortages, and to rate-making principles by which such electric utilities would be compensated. In addition, the Federal Government is authorized, under prescribed conditions, to allocate coal and to require the transportation thereof, for the use of power plants or major fuel-burning installations. System companies have developed programs to conserve coal supplies at System plants which involve, on a progressive basis, limitations on sales of power and energy to neighboring utilities, appeals to customers for voluntary limitations of electric usage to essential needs, curtailment of sales to certain industrial customers, voltage reductions and, finally, mandatory reductions in cases where current coal supplies fall below minimum levels. Such programs have been filed and reviewed with officials of Federal and state agencies and, in some cases, the state regulatory agency has prescribed actions to be taken under specified circumstances by System companies, subject to the jurisdiction of such agencies. The mining of coal reserves is subject to Federal requirements with respect to the development and operation of coal mines, and to state and Federal regulations relating to land reclamationlitigation and environmental protection, including Federal strip mining legislation enactedexpenditures in August 1977. Continual evaluation and study is given to possible closure of existing coal mines and divestiture or acquisition of coal properties in light of Federal and state environmental and mining laws and regulations which may affect the System's need for or ability to mine such coal. Western coal purchased by System companies is transported by rail to a terminal on the Ohio River for transloading to barges for delivery to generating stations on the river. Subsidiaries of AEP lease approximately 3,535 coal hopper cars to be used in unit train movements, as well as 14 towboats, 295 jumbo barges and 185 standard barges. Subsidiaries of AEP also own or lease coal transfer facilities at various locations on the river. The System generating companies procure coal from coal reserves which are owned or mined by subsidiaries of AEP, and through purchases pursuant to long- term contracts, or on a spot purchase basis, from unaffiliated producers. The following table shows the amount of coal delivered to the AEP System during the past five years, the proportion of such coal which was obtained either from coal-mining subsidiaries, from unaffiliated suppliers under long-term contracts or through spot or short-term purchases, and the average delivered price of spot coal purchased by System companies:general.
1991 1992 1993 1994 19952001 2002 2003 ACTUAL ACTUAL ESTIMATE -------- -------- -------- (IN THOUSANDS) Total coal delivered toAEGCo................ $ 3,500 $ 1,200 $ 11,200 APCo................. 99,200 108,400 65,700 CSPCo................ 22,500 25,400 39,300 I&M.................. 700 1,200 18,500 KPCo................. 11,200 110,600 39,900 OPCo................. 125,300 110,300 53,100 PSO.................. 400 1,200 100 SWEPCo............... 9,200 3,400 9,000 TCC.................. 2,500 600 0 TNC.................. 800 1,900 0 -------- -------- -------- AEP operated plants (thousands of tons) 45,232 44,738 40,561 49,024 46,867 Sources (percentage): Subsidiaries 28% 25% 20% 15% 14% Long-term contracts 62% 65% 66% 65% 75% Spot or short-term purchases 10% 10% 14% 20% 11% Average price per ton of spot-purchased coal $25.40 $23.88 $23.55 $23.00 $25.15System........... $275,300 $364,200 $236,800 ======== ======== ========
The average cost of coal consumed during the past five years by all AEP System companies, AEGCo, APCo, CSPCo, I&M, KEPCoElectric and OPCo is shown in the following tables:
1991 1992 1993 1994 1995 Dollars per ton AEP System Companies $35.16 $34.31 $33.57 $33.95 $32.52 AEGCo 20.65 20.11 17.74 18.59 18.80 APCo 41.99 43.00 42.65 39.89 38.86 CSPCo 35.18 33.87 33.87 32.80 33.23 I&M 25.57 24.23 23.80 22.85 23.25 KEPCo 31.38 30.24 27.08 26.83 26.91 OPCo 40.18 38.36 38.12 41.10 37.58 CENTS PER MILLION BTU'S AEP System Companies 158.88154.41150.89152.41145.26 AEGCo 123.33 120.90 107.71 112.06 112.87 APCo 169.48 173.05 173.32 161.37 156.96 CSPCo 152.55 143.94 143.66 140.45 140.79 I&M 139.16 135.11 129.39 123.62 125.50 KEPCo 132.25 126.92 113.90 113.40 114.77 OPCo 171.65 163.89 161.25 173.51 157.62 The coal supplies at AEP System plants vary from time to time plants vary from time to time depending on various factors, including customers' usage of electric power, space limitations, the rate of consumption at particular plants, labor unrest and weather conditions which may interrupt deliveries. At December 31, 1995, the System's coal inventory was approximately 55 days of normal System usage. This estimate assumes that the total supply would be utilized by increasing or decreasing generation at particular plants. The following tabulation shows the total consumption during 1995 of the coal-fired generating units of AEP's principal electric utility subsidiaries, coal requirements of these units over the remainder of their useful lives and the average sulfur content of coal delivered in 1995 to these units. Reference is made to ENVIRONMENTAL AND OTHER MATTERS for information concerning current emissions limitations in the AEP System's various jurisdictions and the effects of the Clean Air Act Amendments.
ESTIMATED REQUIRE- AVERAGE SULFUR CONTENT TOTAL CONSUMPTION MENTS FOR REMAINDER OF DELIVERED COAL During 1995 of Useful Lives Pounds of SO{2} (IN THOUSANDS OF TONS) (IN MILLIONS OF TONS) BY WEIGHT PER MILLION BTU'S AEGCo (a) 5,267 261 0.3% 0.7 APCo 8,988 446 0.8% 1.3 CSPCo (b) 5,367 234 2.9% 4.9 I&M (c) 6,723 300 0.5% 1.1 KEPCo 2,953 91 1.2% 2.0 OPCo 17,910 650 2.2% 3.7
(a) Reflects AEGCo's 50% interest in the Rockport Plant. (b) Includes coal requirements for CSPCo's interest in Beckjord, Stuart and Zimmer Plants. (c) Includes I&M's 50% interest in the Rockport Plant. AEGCO: See FUEL SUPPLY - I&M for a discussion of the coal supply for the Rockport Plant. APCO: Substantially all of the coal consumed at APCo's generating plants is obtained from unaffiliated suppliers under long-term contracts and/or on a spot purchase basis. The average sulfur content by weight of the coal received by APCo at its generating stations approximated 0.8% during 1995, whereas the maximum sulfur content permitted, for emission standard purposes, for existing plants in the regions in which APCo's generating stationsMagnetic Fields EMF are located ranged between 0.78% and 2% by weight depending in some circumstances on the calorific value of the coal which can be obtained for some generating stations. CSPCO: CSPCo has coal supply agreements with unaffiliated suppliers for the delivery of approximately 3,400,000 tons per year through 1998. Some of this coal is washed to improve its quality and consistency for use principally at Unit 4 of the Conesville Plant. CSPCo has been informed by CG&E and DP&L that, with respect to the CCD Group units partly owned but not operated by CSPCo, sufficient coal has been contracted for or is believed to be available for the approximate lives of the respective units operated by them. Under the terms of the operating agreements with respect to CCD Group units, each operating company is contractually responsible for obtaining the needed fuel. I&M: I&M has three coal supply agreements with unaffiliated suppliers pursuant to which the suppliers are delivering low sulfur coal from surface mines in Wyoming, principally for consumption by the Rockport Plant. Under these agreements, the suppliers will sell to I&M, for consumption by I&M at the Rockport Plant or consignment to other System companies, coal with an average sulfur content not exceeding 1.2 pounds of sulfur dioxide per million Btu's of heat input. One contract with remaining deliveries of 67,750,000 tons expires on December 31, 2014 and another contract with remaining deliveries of 56,400,000 tons expires on December 31, 2004. The third contract with deliveries of 750,000 tons per year expires in late 1996. All of the coal consumed at I&M's Tanners Creek Plant is obtained from unaffiliated suppliers under long-term contracts and/or on a spot purchase basis. KEPCO: Substantially all of the coal consumed at KEPCo's Big Sandy Plant is obtained from unaffiliated suppliers under long-term contracts and/or on a spot purchase basis. KEPCo has coal supply agreements with unaffiliated suppliers pursuant to which KEPCo will receive approximately 2,500,000 tons of coal in 1996. To the extent that KEPCo has additional coal requirements, it may purchase coal from the spot market and/or suppliers under contract to supply other System companies. OPCO: The coal consumed at OPCo's generating plants is obtained from both affiliated and unaffiliated suppliers. The coal obtained from unaffiliated suppliers is purchased under long-term contracts and/or on a spot purchase basis. OPCo and certain of its coal-mining subsidiaries own or control coal reserves in the State of Ohio which contain approximately 212,000,000 tons of clean recoverable coal, which ranges in sulfur content between 3.4% and 4.5% sulfur by weight (weighted average, 3.8%), which can be recovered based upon existing mining plans and projections and employing current mining practices and techniques. OPCo and certain of its mining subsidiaries own an additional 113,000,000 tons of clean recoverable coal in Ohio which ranges in sulfur content between 2.4% and 3.4% sulfur by weight (weighted average 2.7%). Recovery of this coal would require substantial development. OPCo and certain of its coal-mining subsidiaries also own or control coal reserves in the State of West Virginia which contain approximately 106,000,000 tons of clean recoverable coal ranging in sulfur content between 1.4% and 3.3% sulfur by weight (weighted average, 2.0%) of which approximately 29,000,000 tons can be recovered based upon existing mining plans and projections and employing current mining practices and techniques. NUCLEAR I&M has made commitments to meet certain of the nuclear fuel requirements of the Cook Plant. The nuclear fuel cycle consists of the mining and milling of uranium ore to uranium concentrates; the conversion of uranium concentrates to uranium hexafluoride; the enrichment of uranium hexafluoride; the fabrication of fuel assemblies; the utilization of nuclear fuel in the reactor; and the reprocessing or other disposition of spent fuel. Steps currently are being taken, based upon the planned fuel cycles for the Cook Plant, to review and evaluate I&M's requirements for the supply of nuclear fuel beyond the existing contractual commitments shown in the following table. I&M has made and will make purchases of uranium in various forms in the spot and short-term market until it decides that deliveries under mid- or long-term supply contracts are warranted. The following table shows the year through which contracts have been entered into to provide the requirements of the units for the various segments of the nuclear fuel cycle.
URANIUM CONCENTRATES CONVERSION ENRICHMENT (1) FABRICATION REPROCESSING (2) Unit 1 -- -- 2000 2000 -- Unit 2 -- -- 2000 2000 --
1) I&M has a requirements-type contract with DOE. I&M has partially terminated the contract, subject to revocation of the termination, so that it may procure enrichment services cost-effectively from the spot market. 2) No reprocessing facility in the United States currently is in operation. I&M has contracted for reprocessing services at a facility on which construction has been halted. Lack of reprocessing services has resulted in the need to increase on-site storage capacity for spent fuel. For purposes of the storage of high-level radioactive waste in the form of spent nuclear fuel, I&M has completed modifications to its spent nuclear fuel storage pool to permit normal operations through 2010. I&M's costs of nuclear fuel consumed do not assume any residual or salvage value for residual plutonium and uranium. NUCLEAR WASTE AND DECOMMISSIONING The Nuclear Waste Policy Act of 1982, as amended, establishes Federal responsibility for the permanent off-site disposal of spent nuclear fuel and high-level radioactive waste. Disposal costs are paid by fees assessed against owners of nuclear plants and deposited into the Nuclear Waste Fund created by the Act. In 1983, I&M entered into a contract with DOE for the disposal of spent nuclear fuel. Under terms of the contract, for the disposal of nuclear fuel consumed after April 6, 1983 by I&M's Cook Plant, I&M is paying to the fund a fee of one mill per kilowatt-hour, which I&M is currently recovering from customers. For the disposal of nuclear fuel consumed prior to April 7, 1983, I&M must pay the U.S. Treasury a fee estimated at approximately $71,964,000, exclusive of interest of $91,096,000 at December 31, 1995. The aggregate amount has been recorded as long-term debt. Because of the current uncertainties surrounding DOE's program to provide for permanent disposal of spent nuclear fuel, I&M has not yet paid any of the pre-April 1983 fee. At December 31, 1995, funds collected from customers to pay the pre-April 1983 fee and accrued interest approximated the long-term debt liability. On June 20, 1994, a group of 14 unaffiliated utilities owning and operating nuclear plants and a group of states each filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit requesting that the court issue a declaration that the Nuclear Waste Policy Act of 1982 imposes on DOE an unconditional obligation to begin acceptance of spent nuclear fuel and high level radioactive waste by January 31, 1998. DOE has indicated in its Notice of Inquiry of May 25, 1994 that its preliminary view is that it has no statutory obligation to begin to accept spent nuclear fuel beginning in 1998 in the absence of an operational repository. In April 1995, DOE issued its Final Interpretation affirming its earlier view. On May 30, 1995, I&M filed a petition for review seeking the same relief requested earlier by the group of utilities. This action was consolidated with the earlier petition. I&M also seeks, if warranted, relief from the financial burden of fees being paid to DOE. Studies completed in 1994 estimate decommissioning and low-level radioactive waste disposal costs for the Cook Plant to range from $634,000,000 to $988,000,000 in 1993 nondiscounted dollars. The wide range is caused by variables in assumptions, including the estimated length of time spent nuclear fuel must be stored at the Cook Plant subsequent to ceasing operations, which depends on future developments in the federal government's spent nuclear fuel disposal program. Continued delays in the federal fuel disposal program can result in increased decommissioning costs. I&M is recovering decommissioning costs in its three rate-making jurisdictions based on at least the lower end of the range in the most recent respective decommissioning study available at the time of the rate proceeding (the study range utilized in the Indiana rate case, I&M's primary jurisdiction, was $588,000,000 to $1.102 billion in 1991 dollars). I&M records decommissioning costs in other operation expense and records a noncurrent liability equal to the decommissioning cost recovered in rates which was $30,000,000 in 1995, $26,000,000 in 1994 and $13,000,000 in 1993. At December 31, 1995, I&M had recognized a decommissioning liability of $269,000,000. I&M will continue to reevaluate periodically the cost of decommissioning and to seek regulatory approval to revise its rates as necessary. Funds recovered through the rate-making process for disposal of spent nuclear fuel consumed prior to April 7, 1983 and for nuclear decommissioning have been segregated and deposited in external funds for the future payment of such costs. Trust fund earnings decrease the amount to be recovered from ratepayers. The ultimate cost of retiring I&M's Cook Plant may be materially different from the estimates contained in the site-specific study and the funding targets as a result of (a) the type of decommissioning plan selected, (b) the escalation of various cost elements (including, but not limited to, general inflation), (c) the further development of regulatory requirements governing decommissioning, (d) the absence to date of significant experience in decommissioning such facilities and (e) the technology available at the time of decommissioning differing significantly from that assumed in these studies. Accordingly, management is unable to provide assurance that the ultimate cost of decommissioning the Cook Plant will not be significantly greater than current projections. In February 1996, the Financial Accounting Standards Board (FASB) issued an exposure draft entitled ACCOUNTING FOR CERTAIN LIABILITIES RELATED TO CLOSURE OR REMOVAL OF LONG-LIVED ASSETS. The exposure draft proposes that the present value of any decommissioning or other closure or removal obligation be recorded as a liability when the obligation is incurred. A corresponding asset would be recorded in the plant investment account and recovered through depreciation charges over the asset's life. A proposed transition rule would require that an entity report a charge to income for the cumulative effect of initially applying the proposed standard. Management is studying the proposed standard and evaluating its potential impact. The Low-Level Waste Policy Act of 1980 (LLWPA) mandates that the responsibility for the disposal of low-level waste rests with the individual states. Low-level radioactive waste consists largely of ordinary trash and other items that have come in contact with radioactive materials. To facilitate this approach, the LLWPA authorized states to enter into regional compacts for low-level waste disposal subject to Congressional approval. The LLWPA also specified that, beginning in 1986, approved compacts may prohibit the importation of low-level waste from other regions, thereby providing a strong incentive for states to enter into compacts. As 1986 approached it became apparent that no new disposal facilities would be operational, and enforcement of the LLWPA would leave no disposal capacity for the majority of the low-level waste generated in the United States. Congress, therefore, passed the Low-Level Waste Policy Amendments Act of 1985. Michigan, the state where the Cook Plant is located, was a member of the Midwest Compact, but its membership was revoked in 1991. Michigan is responsible for developing a disposal site for the low-level waste generated in Michigan. In 1994, Michigan amended its law regarding disposal sites to provide for allowing a volunteer to host a facility. Although progress has been made, the site selection process is very long and management is unable to predict when a permanent disposal site for Michigan low-level waste will be available. On July 1, 1995, the disposal site in South Carolina reopened to accept waste from most areas of the U.S., including Michigan. This is the first opportunity for the Cook Plant to dispose of waste at that site since November 1990 when South Carolina denied access to its disposal site. To the extent necessary, the Cook Plant's low-level radioactive waste is being stored on- site. I&M has an on-site radioactive material storage facility at the Cook Plant for temporary preshipment storage of the plant's low-level radioactive waste. The facility can hold as much low-level waste as the Cook Plant is expected to produce through approximately 2001, and the building could be expanded to accommodate the storage of such waste through approximately 2017. Currently, the Cook Plant produces less than 7,000 cubic feet of low-level waste annually. ENERGY POLICY ACT - NUCLEAR FEES The Energy Policy Act of 1992 (Energy Act), contains a provision to fund the decommissioning and decontamination of DOE's existing uranium enrichment facilities from a combination of sources including assessments against electric utilities which purchased enrichment services from DOE facilities. I&M's remaining estimated liability is $45,703,000, subject to inflation adjustments, and is payable in annual assessments over the next 11 years. I&M recorded a regulatory asset concurrent with the recording of the liability. The payments are being recorded and recovered as fuel expense. In a case involving an unaffiliated utility, the U.S. Court of Federal Claims decided in June 1995 that these assessments are unlawful. On November 13, 1995, the Federal Government appealed this decision to the U.S. Court of Appeals for the Federal Circuit. I&M has filed with DOE claims for refunds under certain of its enrichment services contracts based on this decision. I&M also intends to pursue refund claims on other enrichment services contracts directly to the U.S. Court of Federal Claims. ENVIRONMENTAL AND OTHER MATTERS AEP's subsidiaries are subject to regulation by Federal, state and local authorities with regard to air and water-quality control and other environmental matters, and are subject to zoning and other regulation by local authorities. It is expected that costs related to environmental requirements will eventually be reflected in the rates of AEP's electric utility subsidiaries and that, in the long term, AEP's electric utility subsidiaries will be able to provide for such environmental controls as are required. However, some customers may curtail or cease operations as a consequence of higher energy costs. There can be no assurance that all such costs will be recovered. Except as noted herein, AEP's subsidiaries which own or operate generating facilities generally are in compliance with pollution control laws and regulations. AIR POLLUTION CONTROL CLEAN AIR ACT AMENDMENTS OF 1990: For the AEP System, compliance with the Clean Air Act Amendments of 1990 (CAAA) is requiring substantial expenditures which are being recovered through increases in the rates of AEP's operating subsidiaries. OPCo is incurring a major portion of such costs. There can be no assurance that all such costs will be recovered. See CONSTRUCTION PROGRAM - CONSTRUCTION EXPENDITURES. The Acid Rain Program provisions of the CAAA create an emission allowance program pursuant to which utilities are authorized to emit a designated quantity of sulfur dioxide, measured in tons per year, on a system wide or aggregate basis. Emission reductions are required by virtue of the establishment of annual allowance allocations at a level below historical emission levels for many utility units. For units that emitted sulfur dioxide above a rate of 2.5 pounds per million Btu heat input in 1985, the CAAA establish sulfur dioxide allowance limitations (caps or ceilings on emissions) premised upon sulfur dioxide emissions at a rate of 2.5 pounds per million Btu heat input at 1985 utilization levels as of the Phase I deadline of January 1, 1995. The following AEP System units are Phase I-affected units: I&M's Breed Plant and Tanners Creek Unit 4; CSPCo's Beckjord Unit 6, Conesville Units 1-4, Picway Unit 5 and Stuart Units 1-4; and OPCo's Gavin Units 1-2, Muskingum River Units 1-5, Cardinal Unit 1, Mitchell Units 1-2 and Kammer Units 1-3. Phase I permits have been issued for all Phase I-affected units in the AEP System. All fossil fuel-fired steam generating units with capacity greater than 25 megawatts are affected in Phase II of the acid rain control program. All Phase II-affected units are allocated allowances with which compliance must be accomplished beginning January 1, 2000. The basis for Phase II allowance allocation depends on 1985 sulfur dioxide emission rates - if a unit emitted sulfur dioxide in 1985 at a rate in excess of 1.2 pounds per million Btu heat input, the allowance allocation is premised upon an emission rate of 1.2 pounds at 1985 utilization levels as of the Phase II deadline of January 1, 2000; if a unit emitted sulfur dioxide in 1985 at a rate of less than 1.2 pounds, the allowance allocation is in most instances premised upon the actual 1985 emission rate. The Acid Rain Title also contains provisions concerning nitrogen oxides emissions. In March 1994, Federal EPA issued final regulations governing nitrogen oxides emissions from tangentially fired and dry bottom wall-fired boilers at Phase I units which were appealed to the U.S. Court of Appeals for the District of Columbia Circuit by APCo, CSPCo, I&M, KEPCo and OPCo and a group of unaffiliated utilities based on the failure of Federal EPA to correctly define low NOx burner technology. On November 29, 1994, the court remanded the rules to Federal EPA and on April 13, 1995, Federal EPA issued revised regulations pursuant to the court's remand. Compliance with these emission limitations is determined on an annual basis beginning in 1996. OPCo's Mitchell Units 1 & 2 and CSPCo's Conesville Units 3 & 4 and Picway Unit 5 are Phase I units subject to these regulations. On January 19, 1996, Federal EPA published proposed Nox emission limitations in the FEDERAL REGISTER for wet bottom wall-fired boilers, cyclone boilers, units applying cell burner technology and all other types of boilers. These proposed emission limitations are purported to be comparable in cost to the controls applicable to tangentially fired boilers and non-cell burner dry bottom wall-fired boilers. These emission limitations are required to be met by Phase II-affected sources after January 1, 2000. Also on January 19, 1996, Federal EPA published proposed revisions to the existing emission limitations for tangentially fired and dry bottom wall-fired boilers. Federal EPA must take final action on the proposed revisions by January 1, 1997. These limitations are expected to be more restrictive than those which are currently applicable. The CAAA contain additional provisions, other than the Acid Rain Title, which could require reductions in emissions of nitrogen oxides from fossil fuel-fired power plants. Title I, dealing generally with non-attainment of ambient air quality standards, establishes a tiered system for classifying degrees of non-attainment with air quality standards for ozone. Depending upon the severity of non-attainment within a given non-attainment area, reductions in nitrogen oxides emissions from fossil fuel-fired power plants may be required as part of a state's plan for achieving attainment with ozone air quality standards. On February 25, 1994, the West Virginia Division of Environmental Protection issued a consent order for APCo's Amos Units 1 and 2, requiring reductions in nitrogen oxides emissions from these units after June 1, 1995. The reduction in nitrogen oxides emissions will be less than that required under Title IV of the CAAA but will be required at an earlier time. On September 6, 1994, Federal EPA officially redesignated Putnam, Wood and Kanawha counties to ozone attainment. West Virginia does not plan to impose Nox reduction requirements under Title I of the CAAA as part of its ozone maintenance plan in any of the five former moderate ozone non-attainment counties, barring any other mandate from Federal EPA to do so. While ozone non-attainment is largely restricted to urban areas, AEP System generating stations could be determined to be affecting ozone concentrations and may therefore, eventually be required to reduce nitrogen oxides emissions pursuant to Title I. In addition, certain environmental organizations and northeastern states have filed comments with Federal EPA contending that nitrogen oxides emissions from the midwest must be reduced in order to achieve the National Ambient Air Quality Standard for ozone in the northeast. Similar comments have been filed by these organizations and others with the FERC in connection with the proposed rulemaking involving open access to transmission facilities. See TRANSMISSION SERVICES - TRANSMISSION SERVICES FOR NON-AFFILIATES. All AEP coal-fired plants are potentially subject to the imposition of additional emission controls resulting from these initiatives. The Environmental Council of States formed the Ozone Transport Assessment Group (OTAG) in early 1995 to develop estimates of levels of reduction in volatile organic compound and/or nitrogen oxides emissions required for significant reductions in ozone concentrations in the eastern United States. OTAG, consisting of the environmental commissioners and air directors of 37 eastern states, Federal EPA and representatives from environmental and industry groups, is currently scheduled to complete modeling and technical work by the fall of 1996 - with evaluation of technical findings and recommendations on regional emission controls to be submitted to Federal EPA by January 1997. The cost of meeting Nox emissions reduction requirements which might be imposed to achieve the ozone ambient air quality standard cannot be precisely predicted but could be substantial. Utility boilers are potentially subject to additional control requirements under Title III of the CAAA governing hazardous air pollutant emissions. Federal EPA is directed to conduct studies concerning the potential public health impacts of pollutants identified by the legislation as hazardous in connection with their emission from electric utility steam generating units. Federal EPA was required to report the results of this study to Congress by November 1993 and is required to regulate emissions of these pollutants from electric utility steam generating units if it is determined that such regulation is necessary and appropriate, based on the results of the study. Federal EPA informed Congress that completion of this study has been delayed significantly beyond the November 1993 deadline. Federal EPA is subject to a judicial consent decree requiring completion of the study and submission of it by April 15, 1996. Additionally, Federal EPA is directed to study the deposition of hazardous pollutants to the Great Lakes, the Chesapeake Bay, Lake Champlain and other coastal waters. As part of this assessment, Federal EPA is authorized to adopt regulations to prevent serious adverse effects to public health and serious or widespread environmental effects. It is possible that emissions from electric utility steam generating units may be regulated under this water body deposition assessment program. The CAAA expand the enforcement authority of the Federal government by increasing the range of civil and criminal penalties for violations of the Clean Air Act and enhancing administrative civil provisions, adding a citizen suit provision and imposing a national operating permit system, emission fee program and enhanced monitoring, record keeping and reporting requirements for existing and new sources. ACID RAIN PROGRAM - AEP SYSTEM COMPLIANCE PLAN: In 1992, the PUCO approved a system-wide Phase I Acid Rain Program compliance plan. The AEP System's compliance plan centers around the compliance method selected for OPCo's two- unit 2,600-megawatt Gavin Plant which was emitting about 25% of the System's total sulfur dioxide emissions. Under an Ohio law, utilities could obtain advance PUCO approval of a least-cost compliance plan which would be deemed prudent in subsequent PUCO rate proceedings. The PUCO approved least-cost plan set forth compliance measures for the System's affected generating units, which included (i) installing leased flue gas desulfurization equipment (scrubbers) to burn Ohio high-sulfur coal at Gavin and (ii) designating Gavin's coal supply sources to include the affiliated Meigs mine at a reduced operating capacity and under predetermined prices, new long-term contracts with unaffiliated sources and spot market purchases. Pursuant to a settlement agreement approved by the PUCO in connection with OPCo's rate case discussed in RATES - OPCO, the PUCO reaffirmed its approval of the compliance plan, which does not seek to fuel switch Cardinal Unit 1 or Muskingum River Units 1-4 to low-sulfur coal at the beginning of Phase I of the CAAA. Under the terms of the compliance plan, OPCo's Muskingum River Unit 5 has been switched to low-sulfur coal. CSPCo's Conesville Units 1-3 have been modified to enable these units to burn coal or natural gas to comply. Actual fuel choice will depend on the cost and availability of gas. Although the compliance plan originally contemplated that CSPCo's Picway Unit 5 also would be modified to enable this unit to burn coal or natural gas to comply, this proposed modification has been indefinitely deferred. Beckjord Unit 6 (owned with CG&E and DP&L) has been switched to moderate sulfur coal. I&M's Tanners Creek Unit 4 has also been switched to moderate sulfur coal and I&M's Breed Plant was retired in 1994. Eight additional units are subject to Phase I rules, but no operating or fuel changes are planned, because they will hold allowances sufficient for compliance. Since the approved plan reflects fuel switching to comply at OPCo's Muskingum River Plant and Cardinal Unit 1, mining operations at OPCo's wholly- owned coal-mining subsidiaries, Central Ohio Coal Company and Windsor Coal Company, could be shut down resulting in substantial costs. Central Ohio Coal Company and Windsor Coal Company supply coal to Muskingum River Plant and Cardinal Plant, respectively. As a result of the aforementioned PUCO approval of OPCo's least-cost compliance plan, OPCo entered into an agreement in 1992 for construction and lease of the Gavin Plant scrubbers with JMG Funding, Limited Partnership (JMG), an unaffiliated entity. The scrubbers on Gavin Units 1 and 2 commenced operation in December 1994 and March 1995, respectively. On March 15, 1995, OPCo began to lease the scrubbers from JMG. See CONSTRUCTION PROGRAM - CONSTRUCTION EXPENDITURES. Recovery of compliance costs has been and will be sought through the rate- making process. The aforementioned OPCo settlement agreement provides, among other things, for OPCo to recover the annual lease cost of the scrubbers and other compliance costs and provides OPCo with an opportunity to recover its Ohio jurisdictional share of its investment in and the liabilities and closing costs of the affiliated Central Ohio and Windsor mining operations to the extent the actual cost of coal burned at the Gavin Plant is below a predetermined price. AEP intends to also seek timely recovery of all compliance costs, including mine shutdown costs, from its non-Ohio jurisdictional customers. OPCo's non-Ohio jurisdictional portion of shutdown costs for these mines, which includes the investment in the mines, leased asset buy-outs, reclamation costs and employee benefits is estimated to be approximately $195,000,000 net of tax at December 31, 1995. There can be no assurance that regulators will provide for recovery of all CAAA compliance costs. Compliance with the CAAA, including potential mine closure costs, could have an adverse effect on results of operations and possibly financial condition unless the costs can be recovered from ratepayers and/or from asset dispositions. GLOBAL CLIMATE CHANGE: Increasing concentrations of "greenhouse gases," including carbon dioxide (CO{2}), in the atmosphere have led to concerns about the potential for the earth's climate to change in ways that could result in adverse human health effects, destruction of sensitive ecosystems, inundated low-lying areas caused by sea-level rise, shifts in agricultural production and other serious environmental consequences. The proponents of this view maintain that rising levels of greenhouse gas emissions will cause some of the sun's energy that is normally radiated back into space to be trapped in the atmosphere, warming the biosphere and triggering these detrimental effects. At the Earth Summit in Rio de Janeiro, Brazil in June 1992, 165 nations, including the United States, signed a global climate change treaty. Each country that ratifies the treaty commits itself to a process of achieving the aim of reducing greenhouse gas emissions, including CO{2}, to their 1990 level by the year 2000. On October 7, 1992, the U.S. Senate ratified the treaty. The treaty went into effect on March 21, 1994. In April 1995, the first meeting of the nations that have ratified was held. The parties declared that the existing commitments under the treaty are not adequate to address the threat of global climate change and authorized the immediate commencement of negotiations on a protocol or other legal instrument for emission controls in the post-2000 period. The protocol or other legal instrument is required to set forth "policies and measures," and "quantified limitation and reduction objectives within specified time frames, such as 2005, 2010 and 2020" to be adopted by signatory nations. The negotiations are expected to be complete in early 1997. In accordance with the obligations set forth in the global climate change treaty, on April 21, 1993, President Clinton committed the United States to reducing greenhouse gas emissions to 1990 levels by the year 2000. On October 19, 1993, the President unveiled the Administration's Climate Change Action Plan for meeting this emission reduction target. The plan emphasizes reductions in fossil fuel use, the largest source of CO{2} emissions, primarily through reliance on voluntary energy efficiency programs and partnerships between the Federal government and U.S. industry. One such collaboration is between the electric utility industry and DOE. Known as the Climate Challenge, this initiative has identified flexible, cost-effective measures to reduce, avoid or sequester future greenhouse gas emissions. AEP System companies joined with nearly 800 investor-owned, municipal, rural electric cooperative and Federal utilities in a voluntary agreement signed with DOE on April 20, 1994 that has led to individual utility Participation Accords resulting in substantial reductions in future greenhouse gas emissions. On February 3, 1995, the AEP System entered into its Climate Challenge Participation Accord with DOE. The Accord contains a diverse portfolio of supply-side, demand-side and forest management/tree planting activities that will be undertaken on the AEP System between now and the year 2000 with a projected reduction in CO{2} emissions of 9,550,000 tons from what would have otherwise been emitted but for these actions. As a result of the AEP System's historical practice of using low-cost indigenous coal supplies to produce electricity, AEP System power plants are significant sources of CO{2} emissions. Management is working to support further efforts to properly study the issue of global climate change to define the extent, if any, to which it poses a threat to the environment. Management is concerned that new laws may be passed or new regulations promulgated without sufficient scientific study and support. Since the AEP System is a major emitter of carbon dioxide, its financial condition and results of operations could be materially adversely affected by the imposition of stringent command-and-control limitations on CO{2} emissions if the compliance costs incurred are not fully recovered from ratepayers. In addition, any such severe program to stabilize or reduce CO{2} emissions could impose substantial costs on industry and society and seriously erode the economic base that AEP's operations serve. WEST VIRGINIA: West Virginia promulgated sulfur dioxide limitations which Federal EPA approved in February 1978. The emission limitations for the Mitchell Plant have been approved by Federal EPA for primary ambient air quality (health-related) standards only. West Virginia is obliged to reanalyze sulfur dioxide emission limits for the Mitchell Plant with respect to secondary ambient air quality (welfare-related) standards. Because the Clean Air Act provides no specific deadline for approval of emission limits to achieve secondary ambient air quality standards, it is not certain when Federal EPA will take dispositive action regarding the Mitchell Plant. West Virginia has had a request to increase the sulfur dioxide emission limitation for Kammer pending before Federal EPA for many years, although the change has not been acted upon by Federal EPA. On August 4, 1994, however, Federal EPA issued a Notice of Violation to OPCo alleging that Kammer Plant was operating in violation of the applicable federally enforceable sulfur dioxide emission limit. See Item 3. LEGAL PROCEEDINGS - KAMMER PLANT. A portion of the Notice of Violation relating to compliance has been resolved. Separate proceedings have been initiated by OPCo with both the West Virginia Division of Environmental Protection and Region III, Federal EPA in an effort to obtain approval for utilization of the existing fuel supply beyond the current final compliance date of May 15, 1996. While it is likely that the May 15, 1996 final compliance date will be extended, management cannot predict at this time how long it will be able to utilize the existing fuel supply at the Kammer Plant. STACK HEIGHT REGULATIONS: On June 27, 1985, Federal EPA issued stack height regulations pursuant to an order of the United States Court of Appeals for the District of Columbia Circuit. These regulations were appealed by a number of states, environmental groups and investor-owned electric utilities (including APCo, CSPCo, I&M, KEPCo and OPCo), along with three electric utility trade associations. OPCo also filed a separate petition for review to raise issues unique to its Kammer Plant. Various petitions for reconsideration filed with and denied by Federal EPA were also appealed. This litigation was consolidated into a single case. On January 22, 1988, the U.S. Court of Appeals issued a decision in part upholding the June 1985 stack height rules and remanding certain of the June 1985 rules to Federal EPA for further consideration. With respect to Kammer Plant, the January 1988 court decision rejected OPCo's appeal, holding that Federal EPA acted lawfully in revoking stack height credit previously granted for Kammer Plant in October 1982. As discussed above, OPCo has also commenced administrative proceedings with the State of West Virginia and Federal EPA in an effort to preserve stack height credit for Kammer Plant. While it is not possible to state with particularity the ultimate impact of the final rules on AEP System operations, at present it appears that the most likely AEP System plants at which the final rules could possibly result in more stringent emission limitations are CSPCo's Conesville Plant, AEGCo's and I&M's Rockport Plant, I&M's Tanners Creek Plant and OPCo's Gavin and Kammer plants. Gavin and Rockport plants were not affected by Federal EPA's stack height rules as issued in June 1985. However, the provision exempting these plants was remanded to Federal EPA in the January 1988 court decision. Accordingly, the ultimate impact of the stack height rules on Gavin and Rockport plants will not be known until Federal EPA completes administrative proceedings on remand and reissues final stack height rules. OPCo and AEGCo and I&M intend to participate in the remand rulemaking affecting Gavin and Rockport plants, respectively. State air pollution control agencies will be required to implement the stack height rules by revising emission limitations for sources subject to the rules and submitting such revisions to Federal EPA. On June 1, 1989, Ohio EPA adopted a rule concerning CSPCo's Conesville Plant in response to Federal EPA's stack height rules adopted in 1985. Under Federal EPA policy published in January 1988, emission reductions required by the stack height rules may be obtained at plants other than the plant directly affected by the rules, and thereafter credited to the directly affected plant. Under Ohio EPA's June 1 rule, the sulfur dioxide emission limitations for Conesville Units 5 and 6 remain at 1.2 pounds sulfur dioxide per million Btu heat input as long as the emission rate at CSPCo's retired Poston Units 1-4 remains at 0.0 pounds sulfur dioxide per million Btu heat input. Federal EPA has yet to take action concerning Ohio EPA's June 1 rule. ADMINISTRATIVE DEVELOPMENTS REGARDING SULFUR DIOXIDE: On November 15, 1994, Federal EPA published a notice in the FEDERAL REGISTER proposing to retain the present 24-hour national ambient air quality standard for sulfur dioxide. Federal EPA also sought comment on the need to adopt additional regulations to address short-term peak exposures to sulfur dioxide. Federal EPA is soliciting comments on three alternatives, including the adoption of a short-term standard averaged over a five-minute period. Adoption of any of these proposed approaches, or other targeted programs, could require substantial reductions in sulfur dioxide emissions from the System's coal-fired generating plants which would entail substantial capital and operating costs. In a related action, Federal EPA, on March 7, 1995, proposed requirements for implementing strategies to reduce short-term (five-minute) peak concentrations of sulfur dioxide in order to reduce health risks to exercising asthmatics. The effect on AEP operations of Federal EPA's proposed risk-based targeting strategies for further regulating sulfur dioxide emissions, if finalized, cannot be predicted, but may be significant. Federal EPA is expected to take final action on these proposals in the spring of 1996. LIFE EXTENSION: On July 21, 1992, Federal EPA published final regulations in the FEDERAL REGISTER governing application of new source rules to generating plant repairs and pollution control projects undertaken to comply with the Clean Air Act Amendments of 1990. Generally, the rule provides that plants undertaking pollution control projects will not trigger new source review requirements. The Natural Resources Defense Council and a group of utilities, including five AEP System companies, have filed petitions in the U.S. Court of Appeals for the District of Columbia Circuit seeking a review of the regulations. OTHER REGULATORY DEVELOPMENTS: Federal EPA is considering whether the National Ambient Air Quality Standard for ozone should be revised and is currently expected to make a final decision on this issue in 1997. Federal EPA is also considering revision of the National Ambient Air Quality Standard for particulate matter. Federal EPA is required by court order to make a final determination on this issue by June 28, 1997. WATER POLLUTION CONTROL Under the Clean Water Act, effluent limitations requiring application of the best available technology economically achievable are to be applied, and those limitations require that no pollutants be discharged if Federal EPA finds elimination of such discharges is technologically and economically achievable. The Clean Water Act provides citizens with a cause of action to enforce compliance with its pollution control requirements. Since 1982, many such actions against NPDES permit holders have been filed. To date, no AEP System plants have been named in such actions. All System Plants are operating with NPDES permits. Under EPA's regulations, operation under an expired NPDES permit is authorized provided an application is filed at least 180 days prior to expiration. Renewal applications are being prepared or have been filed for renewal of NPDES permits which expire in 1996. The NPDES permits generally require that certain thermal impact study programs be undertaken. These studies have been completed for all System plants. Thermal variances are in effect for all plants with once-through cooling water. The thermal variances for Conesville and Muskingum River plants impose thermal management conditions that could result in load curtailment under certain conditions, but the cost impacts are not expected to be significant. Based on favorable results of in-stream biological studies, OPCo has requested a modification of the thermal management plan in the renewed permit for Muskingum River expected to be issued this year. Certain mining operations conducted by System companies as discussed under FUEL SUPPLY are also subject to Federal and state water pollution control requirements, which may entail substantial expenditures for control facilities, not included at present in the System's construction cost estimates set forth herein. See Item 3. LEGAL PROCEEDINGS - MEIGS MINE with respect to litigation regarding certain discharges from OPCo's Meigs 31 mine. The Federal Water Quality Act of 1987 requires states to adopt stringent water quality standards for a large category of toxic pollutants and to identify specialized control measures for dischargers to waters where water quality standards are not being met. Implementation of these provisions could result in significant costs to the AEP System if biological monitoring requirements and water quality-based effluent limits are placed in NPDES permits. In March 1995, Federal EPA finalized a set of rules which establish minimum water quality standards, anti-degradation policies and implementation procedures for more stringently controlling releases of toxic pollutants into the Great Lakes system. This regulatory package is called the Great Lakes Water Quality Initiative (GLWQI). The most direct compliance cost impact could be related to I&M's Cook Plant. Management cannot presently determine whether the GLWQI would have a significant adverse impact on AEP operations. The significance of such impact will depend on the outcome of Federal EPA's policy on intake credits and site specific variables as well as Michigan's implementation strategy. Federal EPA's rule is presently under review by the District of Columbia Circuit Court of Appeals in litigation initiated by several industry groups. If Indiana and Ohio eventually adopt the GLWQI criteria for statewide application, AEP System plants located in those states could also be affected. HAZARDOUS SUBSTANCES AND WASTES Section 311 of the Clean Water Act imposes substantial penalties for spills of Federal EPA-listed hazardous substances into water and for failure to report such spills. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) expanded the reporting requirements to cover the release of hazardous substances generally into the environment, including water, land and air. AEP's subsidiaries store and use some of these hazardous substances, including PCB's contained in certain capacitors and transformers, but the occurrence and ramifications of a spill or release of such substances cannot be predicted. CERCLA provides governmental agencies with the authority to require clean-up of hazardous waste sites and releases of hazardous substances into the environment. Since liability under CERCLA is strict and can be applied retroactively, AEP System companies which previously disposed of PCB-containing electrical equipment and other hazardous substances may be required to participate in remedial activities at such disposal sites should environmental problems result. AEP System companies are presently identified by Federal EPA as potentially responsible parties (PRPs) for cleanup of seven federal sites, including I&M at four sites, KEPCo at one site, OPCo at one site, and Wheeling Power Company at one site. OPCo is a defendant in a cost recovery suit for the site where OPCo is a PRP and at two additional CERCLA sites. I&M is a defendant in a cost recovery action at one of the sites where I&M is a PRP and for one additional CERCLA site. APCo and I&M each have been named as parties potentially responsible at a state remediation site. Management's present estimates do not anticipate material cleanup costs for identified sites for which AEP subsidiaries have been declared PRPs. However, if for reasons not currently identified significant costs are incurred for cleanup, future results of operations and possibly financial condition would be adversely affected unless the costs can be recovered through rates. Regulations issued by Federal EPA under the Toxic Substances Control Act govern the use, distribution and disposal of PCBs, including PCBs in electrical equipment. Deadlines for removing certain PCB-containing electrical equipment from service have been met. In addition to handling hazardous substances, the System companies generate solid waste associated with the combustion of coal, the vast majority of which is fly ash, bottom ash and flue gas desulfurization wastes. These wastes presently are considered to be non-hazardous under RCRA and applicable state law and the wastes are treated and disposed in surface impoundments or landfills in accordance with state permits or authorization or beneficially utilized. As required by RCRA, EPA evaluated whether high volume coal combustion wastes (such as fly ash, bottom ash and flue gas desulfurization wastes) should be regulated as hazardous waste. In August, 1993 EPA issued a regulatory determination that such high volume coal combustion wastes should not be regulated as hazardous waste. For low volume coal combustion wastes, such as metal and boiler cleaning wastes, Federal EPA will gather additional information and make a regulatory determination by April 1998. Until that time, these low volume wastes are provisionally excluded from regulation under the hazardous waste provisions of RCRA. All presently generated hazardous waste is being disposed of at permitted off-site facilities in compliance with applicable Federal and state laws and regulations. For System facilities which generate such wastes, System companies have filed the requisite notices and are complying with RCRA and applicable state regulations for generators. Nuclear waste produced at the Cook Plant regulated under the Atomic Energy Act is excluded from regulation under RCRA. Federal EPA's technical requirements for underground storage tanks containing petroleum will require retrofitting or replacement of an appreciable number of tanks. Compliance costs for tank replacement and site remediation have not been significant to date. ELECTRIC AND MAGNETIC FIELDS (EMF) EMF is found everywhere there is electricity. Electric fields are created by the presence of electric charges. Magnetic fields are produced by the flow of those charges. This means that EMF is created by electricity flowing in transmission and distribution lines, or being used inelectrical equipment, household wiring, and appliances. A number of studies in the past several years have examined the possibility of adverse health effects from EMF. While some of the epidemiological studies have indicated some association between exposure to 10 EMF and health effects, the majority of studies have indicated no such association. The epidemiological studiesnone has produced any conclusive evidence that have received the most public attention reflect a weak correlation between surrogateEMF does or indirect estimates of EMF exposure and certain cancers. Studies using direct measurements of EMF exposure show no such association. There were two residential epidemiological studies of childhood brain cancer published in early 1996 which showed no association with EMF exposure. Research to date hasdoes not shown any causal relationship between EMF exposure and cancer, or any othercause adverse health effects. Additional studies, which are intended to provide a better understanding of the subject, are continuing. Federal EPA is currently studying whether exposure to EMF is associated with cancer in humans. In 1990, Federal EPA issued a draft report on EMF, received interagency review and public comment, and is in the process of preparing its final report. A December 1992 brochure from Federal EPA, QUESTIONS AND ANSWERS ABOUT ELECTRIC AND MAGNETIC FIELDS (EMFS), states at page 3, "The bottom line is that there is no established cause and effect relationship between EMF exposure and cancer or other disease." The Energy Policy Act of 1992 established a coordinated Federal EMF research program. The program funding is $65,000,000 over five years, half of which is to be provided by private parties including utilities. AEP has committed to contribute $446,571 over the five-year period. AEP's participation is a continuation of its efforts to support further research and to communicate with its customers and employees about this issue. Its operating company subsidiaries provide their residential customers with information and field measurements on request, although there is no scientific basis for interpreting such measurements. A number of lawsuits based on EMF-related grounds have been filed in recent years against electric utilities. A suit was filed on May 23, 1990 against I&M involving claims that EMF from a 345 KV transmission line caused adverse health effects. No specific amount has been requested for damages in this case and no trial date has been set. Some states have enacted regulations to limit the strength of magnetic fields at the edge of transmission line rights-of-way. No state which the AEP System serves has done so. In March 1993, The Ohio Power Siting Board issued its amended rules providing for additional consideration of the possible effects of EMF in the certification of electric transmission facilities. Under the amended EMF rules, persons seeking approval to build electric transmission lines have to provide estimates of EMF from transmission lines under a variety of conditions. In addition, applicants are required to address possible health effects and discuss the consideration of design alternatives with respect to EMF. In April 1993, the State of Indiana enacted a law which provides that the IURC shall determine, based on the preponderance of evidence in the scientific literature, whether rules are necessary to protect the public health from EMF. If the IURC determines that such rules are necessary, the IURC is required to adopt rules that reasonably protect the public health from EMF. Management cannot predict the ultimate impact of the question of EMF exposure and adverse health effects. If further research shows that EMF exposure contributes to increased risk of cancer or other health problems, or if the courts conclude that EMF exposure harms individuals and that utilities are liable for damages, or if states limit the strength of magnetic fields to such a level that the current electricity delivery system must be significantly changed, then the results of operations and financial condition of AEP and its operating subsidiaries could be materially adversely affected unless these costs can be recovered from ratepayers. RESEARCH AND DEVELOPMENTcustomers. WHOLESALE OPERATIONS GENERAL AEP conducts its wholesale business operations through its public utility subsidiaries (through which AEP also conducts its energy delivery operations), AEPES, AEPR and Pro Serv. Wholesale operations use and manage the following assets: - Power generation facilities (or interests therein) owned by AEP's public utility and other subsidiaries; - Natural gas pipeline, storage and processing facilities; - Coal mines and related facilities; and - Barge, rail and other fuel transportation related assets. Wholesale operations include the following activities: - Through AEP's public utility subsidiaries, the generation and sale of power (i) to retail customers at unbundled or bundled rates regulated at least in part by state public utility commissions and (ii) at wholesale at rates regulated, in certain instances, by the FERC. - Trading and marketing energy commodities in transactions predominantly limited to risk management around assets used or managed by AEP's wholesale operations, including electric power, natural gas, natural gas liquids, oil, coal, and SO(2) allowances in North America and, where applicable, Europe. Electric power transactions in the United States are conducted principally through AEP's public utility subsidiaries. Other energy commodity and allowances transactions are conducted through AEPES and AEPR. - Entering into long-term transactions to buy or sell capacity, energy, and ancillary services of electric generating facilities, either existing or to be constructed, at various locations in North America and Europe. - Through Pro Serv, providing engineering, construction, project management and other consulting services for energy-related projects. In October 2002 AEP announced its plans to reduce the exposure to energy trading markets and to downsize the trading and wholesale marketing operations. It is expected that in the future power trading and marketing operations will be smaller in scope and size, will generally be limited to risk management around AEP's assets and, accordingly, focused in those regions in which AEP owns assets. POWER GENERATION General Power generation accounts for the majority of wholesale operations revenue. In 2002, on an as-reported basis, power generation revenue included the following components: (i) 63% from retail sales at predominantly regulated rates; (ii) 33% from power marketing transactions of a type AEP intends to continue and which are regulated in certain instances by the FERC; (iii) 3% from retail sales at rates not regulated by states; and (iv) 1% attributable to power marketing transactions of a type that management has stated are transitional. This final category of transactions will be reduced consistent with AEP's decision to scale back certain trading and marketing operations as described in the preceding paragraph. AEP's public utility subsidiaries own approximately 38,000 MW of domestic generation. See Deactivation and Planned Disposition of Generating Facilities for a discussion of planned reductions in AEP's generating fleet. Other AEP subsidiaries hold interests in entities owning 1,879 MW of domestic power facilities and 5,235 MW of international power facilities. The AEP public utility subsidiaries operate their generating plants as a single interconnected and coordinated electric utility system. See Item 2 - Properties for more information regarding generation facilities. 11 AEP Power Pool and CSW Operating Agreement APCo, CSPCo, I&M, KPCo and OPCo are involvedparties to the Interconnection Agreement, dated July 6, 1951, as amended (Interconnection Agreement), defining how they share the costs and benefits associated with their generating plants. This sharing is based upon each company's "member-load-ratio." The member-load ratio is calculated monthly by dividing such company's highest monthly peak demand for the last twelve months by the aggregate of the highest monthly peak demand for the last twelve months for all east zone operating companies. As of December 31, 2002, the member-load ratios were as follows:
PEAK DEMAND MEMBER-LOAD (KW) RATIO (%) ------ ----------- APCo..................... 6,010 28.2 CSPCo.................... 4,040 19.0 I&M...................... 4,323 20.3 KPCo..................... 1,551 7.3 OPCo..................... 5,360 25.2
Although the FERC has approved the right of withdrawal of CSPCo and OPCo from the AEP Power Pool as part of its order approving the settlement agreements and AEP's FERC restructuring application, CSPCo and OPCo have remained a party to the AEP Power Pool. If CSPCo and OPCo continue to remain in the AEP Power Pool, notification to or approval by the FERC may be required. See Management's Discussion and Analysis of Results of Operations and Financial Condition, under the headings entitled Industry Restructuring and Corporate Separation for a discussion of AEP's corporate separation plan filed with the FERC and related settlement agreements with state commissions and other intervenors. The following table shows the net credits or (charges) allocated among the parties under the Interconnection Agreement and AEP System Interim Allowance Agreement during the years ended December 31, 2000, 2001 and 2002:
2000 2001 2002 --------- --------- --------- (IN THOUSANDS) APCo. ............... $(274,000) $(256,700) $(127,000) CSPCo................ (250,400) (251,200) (267,000) I&M.................. 93,900 166,200 113,600 KPCo. ............... (21,500) (27,600) (46,500) OPCo. ............... 452,000 369,300 326,900
PSO, SWEPCo, TCC and TNC, and AEPSC are parties to a Restated and Amended Operating Agreement originally dated as of January 1, 1997 (CSW Operating Agreement). The CSW Operating Agreement requires the west zone public utility subsidiaries to maintain specified annual planning reserve margins and requires the subsidiaries that have capacity in excess of the required margins to make such capacity available for sale to other AEP west zone subsidiaries as capacity commitments. The CSW Operating Agreement also delegates to AEP Service Corporation the authority to coordinate the acquisition, disposition, planning, design and construction of generating units and to supervise the operation and maintenance of a central control center. The following table shows the net credits or (charges) allocated among the parties under the CSW Operating Agreement during the years ended December 31, 2000, 2001 and 2002:
2000 2001 2002 ------- ------- -------- (IN THOUSANDS) PSO.................. $(9,000) $(6,500) $(53,700) SWEPCo............... 55,400 62,300 67,800 TCC.................. 3,600 (13,500) 15,400 TNC.................. (50,000) (42,300) (29,500)
Power generated by or allocated or provided under the Interconnection Agreement or CSW Operating Agreement to any public utility subsidiary is often sold to customers (or in the case of the ERCOT area of Texas, REPs) by such public utility subsidiary at rates approved (other than in the ERCOT area of Texas) by the public utility commission in the jurisdiction of sale. In Ohio, Virginia and the ERCOT area of Texas, such rates are based on a statutory formula as those jurisdictions transition to the use of market rates for generation. See Energy Delivery -- Regulation -- Rates. Under the Interconnection Agreement, power allocated to a public utility subsidiary that is not required to serve its native load is sold at wholesale on behalf of such subsidiary. Under the CSW Operating Agreement, power generated that is not needed to serve the native load of any public utility subsidiary is sold at wholesale by the generating subsidiary. See Trading and Marketing of Energy Commodities for a discussion of the trading and marketing of such power. AEP's System Integration Agreement provides for the integration and coordination of AEP's east and west zone operating subsidiaries, joint dispatch of generation within the AEP System, and the distribu- 12 tion, between the two operating zones, of costs and benefits associated with the System's generating plants. It is designed to function as an umbrella agreement in addition to the Interconnection Agreement and the CSW Operating Agreement, each of which controls the distribution of costs and benefits within each zone. Competition and Regulation Retail Sales: AEP's public utility subsidiaries have the right (which in some cases is exclusive) to sell electric power at retail within their respective service areas in the states of Arkansas, Indiana, Kentucky, Louisiana, Oklahoma, Tennessee, West Virginia and the SPP area of Texas. In Michigan, Ohio and Virginia, AEP's public utility subsidiaries continue to provide service to customers who have not been offered or have not selected alternate service from competing suppliers. In those states, service is currently being provided according to prescribed rules and rates. In the ERCOT area of Texas, TCC and TNC sell power to Centrica, which provides PTB service to certain former customers of TCC and TNC and must compete for customers. AEP's public utility subsidiaries also compete with self-generation and with distributors of other energy sources, such as natural gas, fuel oil and coal, within their service areas. The primary factors in such competition are price, reliability of service and the capability of customers to utilize sources of energy other than electric power. With respect to competing generators and self-generation, the public utility subsidiaries of AEP believe that they generally maintain a favorable competitive position. With respect to alternative sources of energy, the public utility subsidiaries of AEP believe that the reliability of their service and the limited ability of customers to substitute other cost-effective sources for electric power place them in a favorable competitive position, even though their prices may be higher than the costs of some other sources of energy. Significant changes in the global economy in recent years have led to increased price competition for industrial customers in the United States, including those served by the AEP System. Some of these industrial customers have requested price reductions from their suppliers of electric power. In addition, industrial customers that are downsizing or reorganizing often close a facility based upon its costs, which may include, among other things, the cost of electric power. The public utility subsidiaries of AEP cooperate with such customers to meet their business needs through, for example, providing various off-peak or interruptible supply options pursuant to tariffs filed with the various state commissions. Occasionally, these rates are first negotiated, and then filed with the state commissions. The public utility subsidiaries believe that they are unlikely to be materially adversely affected by this competition. See Energy Delivery -- Regulation -- Rates for a description of the setting of rates for power sold at bundled or unbundled state-regulated rates. Wholesale Sales: The public utility subsidiaries of AEP, like the electric industry generally, face increasing competition in the sale of available power on a wholesale basis, primarily to other public utilities and power marketers. The Energy Policy Act of 1992 was designed, among other things, to foster competition in the wholesale market by creating a generation market with fewer barriers to entry and mandating that all generators have equal access to transmission services. As a result, there are more generators able to participate in this market. The principal factors in competing for wholesale sales are price (including fuel costs), availability of capacity and power and reliability of service. The public utility subsidiaries of AEP are subject to regulation by the FERC under the Federal Power Act in respect of rates for interstate sales at wholesale. See General -- Regulation -- FERC. Seasonality Sale of electric power is generally a seasonal business. In many parts of the country, demand for power peaks during the hot summer months, with market prices also peaking at that time. In other areas, power demand peaks during the winter. The pattern of this fluctuation may change due to the nature and location of AEP's facilities and the terms of power sale contracts AEP enters into. In addition, AEP has historically sold less power, and consequently earned less income, when weather conditions are milder. Unusually mild weather in the future could diminish AEP's results of operations and may impact its financial condition. 13 Fuel Supply The following table shows the sources of power generated by the AEP System:
2000 2001 2002 ---- ---- ---- Coal........................ 78% 74% 78% Natural Gas................. 13% 12% 8% Nuclear..................... 5% 11% 11% Hydroelectric and other..... 4% 3% 3%
Variations in the generation of nuclear power are primarily related to refueling outages and, in a portion of 2000, the shutdown of the Cook Plant to respond to issues raised by the NRC. Variations in the generation of natural gas power are primarily related to the availability of cheaper alternatives to fulfill certain power requirements and to deactivate certain of its gas-fired plants. Coal and Lignite: AEP System generating companies procure coal and lignite under a combination of purchasing arrangements including long-term contracts, affiliate operations, short-term, and spot agreements with various producers and coal trading firms. AEP believes, but cannot provide assurances that, it will be able to secure coal and lignite of adequate quality and in adequate quantities to operate its coal and lignite-fired units. The following table shows the amount of coal delivered to the AEP System during the past three years and the average delivered price of spot coal purchased by System companies:
2000 2001 2002 ------- ------- ------- Total coal delivered to AEP operated plants (thousands of tons)........... 73,259 73,889 76,442 Average price per ton of spot-purchased coal............... $ 24.03 $ 27.30 $ 27.06
The coal supplies at AEP System plants vary from time to time depending on various factors, including customers' usage of electric power, space limitations, the rate of consumption at particular plants, labor unrest and weather conditions which may interrupt deliveries. At December 31, 2002, the System's coal inventory was roughly 56 days of normal usage. This estimate assumes that the total supply would be utilized through the operation of plants that use coal most efficiently. In cases of emergency or shortage, system companies have developed programs to conserve coal supplies at their plants. Such programs have been filed and reviewed with officials of federal and state agencies and, in some cases, the state regulatory agency has prescribed actions to be taken under specified circumstances by System companies, subject to the jurisdiction of such agencies. The FERC has adopted regulations relating, among other things, to the circumstances under which, in the event of fuel emergencies or shortages, it might order electric utilities to generate and transmit electric power to other regions or systems experiencing fuel shortages, and to ratemaking principles by which such electric utilities would be compensated. In addition, the federal government is authorized, under prescribed conditions, to allocate coal and to require the transportation thereof, for the use of power plants or major fuel-burning installations. Natural Gas: AEP, through its public utility subsidiaries, consumed over 163 billion cubic feet of natural gas during 2002 for generating power. A majority of the gas fired electric generation plants are connected to at least two natural gas pipelines, which provides greater access to competitive supplies and improves reliability. A portfolio of long-term and short-term purchase and transportation agreements (that are acquired on a competitive basis and based on market prices) supplies natural gas requirements for each plant. Nuclear: I&M and STPNOC have made commitments to meet certain of the nuclear fuel requirements of the Cook Plant and STP, respectively. Steps currently are being taken, based upon the planned fuel cycles for the Cook Plant, to review and evaluate I&M's requirements for the supply of nuclear fuel. I&M has made and will make purchases of uranium in various forms in the spot, short-term, and mid-term markets until it decides that deliveries under long-term supply contracts are warranted. TCC and the other STP participants have entered into contracts with suppliers for (i) 100% of the uranium concentrate sufficient for the operation of both STP units through spring 2006 and (ii) 50% of the uranium concentrate needed for STP through spring 2007. For purposes of the storage of high-level radioactive waste in the form of spent nuclear fuel, I&M has completed modifications to its spent nuclear fuel storage pool. AEP anticipates that the Cook Plant has storage capacity to permit normal operations through 2012. STP has on-site storage facilities with the 14 capability to store the spent nuclear fuel generated by the STP units over their licensed lives. Nuclear Waste and Decommissioning I&M, as the owner of the Cook Plant, and TCC, as a partial owner of STP, have a significant future financial commitment to safely dispose of SNF and decommission and decontaminate the plants. The ultimate cost of retiring the Cook Plant and STP may be materially different from estimates and funding targets as a result of the: - Type of decommissioning plan selected; - Escalation of various cost elements (including, but not limited to, general inflation); - Further development of regulatory requirements governing decommissioning; - Limited availability to date of significant experience in decommissioning such facilities; - Technology available at the time of decommissioning differing significantly from that assumed in these studies; and - Availability of nuclear waste disposal facilities. Accordingly, management is unable to provide assurance that the ultimate cost of decommissioning the Cook Plant and STP will not be significantly different than current projections. See Management's Discussion and Analysis of Results of Operations and Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters and Note 9 to the consolidated financial statements, entitled Commitments and Contingencies, which are incorporated by reference in Items 7 and 8, respectively, for information with respect to nuclear waste and decommissioning and related litigation. Low-Level Radioactive Waste: The LLWPA mandates that the responsibility for the disposal of low-level radioactive waste rests with the individual states. Low-level radioactive waste consists largely of ordinary refuse and other items that have come in contact with radioactive materials. Michigan and Texas do not currently have disposal sites for such waste available. AEP cannot predict when such sites may be available, but South Carolina and Utah operate low-level radioactive waste disposal sites and accept low-level radioactive waste from Michigan and Texas. AEP's access to the South Carolina facility is currently allowed through the end of fiscal year 2008. Deactivation and Planned Disposition of Generation Facilities In September 2002, AEP indicated to ERCOT its intent to deactivate 16 gas-fired power plants (8 TCC plants and 8 TNC plants). ERCOT subsequently conducted reliability studies that determined that seven plants (4 TCC plants and 3 TNC plants) would be required to ensure reliability of the electricity grid. As a result of these studies, ERCOT and AEP agreed to enter into reliability must run agreements (which expired in December 2002, but have been renewed for all but two units of these plants) to continue operation of these plants. With ERCOT's approval, AEP proceeded with its planned deactivation of the remaining nine plants. TCC has also filed a plan of divestiture with the PUCT proposing to sell all of its power generation assets in an effort to determine its level of stranded costs in accordance with the Texas Act. The PUCT has dismissed its proceeding relating to TCC's plan of divestiture in anticipation of promulgating rules of general application regarding stranded cost determination for nuclear facilities. See Energy Delivery-Regulatory Assets and Stranded Cost Recovery and Post-Restructuring Wires Charges. The assets to be sold have a generating capacity of 4,497 MW and include eight gas-fired generating plants, one coal-fired plant, TCC's interest in another coal-fired plant, a hydroelectric facility and TCC's interest in STP. See Note 8 to the consolidated financial statements entitled Customer Choice and Industry Restructuring, incorporated by reference in Item 8, for more information on the planned disposition of TCC generation facilities. TRADING AND MARKETING OF ENERGY COMMODITIES AEP enters into transactions for the purchase and sale of electricity and natural gas as part of wholesale trading operations. Electric and gas transactions are executed over-the-counter with counterparties or through brokers. Gas transactions are also executed through brokerage accounts with brokers who are registered with the Commodity Futures Trading Commission. Brokers and counterparties may require cash or cash related instruments to be deposited on these transactions as margin against open positions. AEP trades electricity and gas contracts with numerous counterparties. Since AEP's open energy trading contracts are valued based on changes in 15 market prices of the related commodities, our exposures change daily. In October 2002, AEP announced its plans to reduce its exposure to energy trading markets and to downsize the trading and wholesale marketing operations. It is expected that in the future power trading and marketing operations will be smaller in scope, will generally be limited to risk management around AEP assets and, accordingly, focused in regions in which AEP owns assets. Energy Market Investigations During 2002, several governmental entities launched investigations of participants in energy trading markets, including AEP. A number of research projects which are directed toward developing more efficient methodsthose investigations resulted in data requests of burningAEP. See Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters, incorporated by reference in Item 7, under the heading Energy Market Investigations. NATURAL GAS PIPELINE, STORAGE AND PROCESSING FACILITIES AEP, through certain subsidiaries, operates and owns an interest in a significant amount of gas-related assets, including: - 6,400 miles of natural gas pipelines between two systems; - 128 billion cubic feet of storage among two facilities; - Five natural gas processing plants; and - Certain gas marketing contracts. COAL MINES AND RELATED FACILITIES AEP, through certain subsidiaries, holds various properties, coal reducingreserves, mining operations and royalty interests in Colorado, Kentucky, Louisiana, Ohio, Pennsylvania and West Virginia. BARGE, RAIL AND OTHER FUEL TRANSPORTATION RELATED ASSETS AEP, through MEMCO Barge Line Inc., is engaged in the contaminants resulting from combustiontransportation of coal and improvingdry bulk commodities, primarily on the efficiencyOhio, Illinois, and reliabilityLower Mississippi rivers for AEP, as well as unaffiliated customers. AEP, through certain subsidiaries, owns or leases 7,000 railcars, 1,800 barges, 37 tug boats and two coal handling terminals with 20 million tons of power transmission, distribution and utilization, including load management.annual capacity. STRUCTURED ARRANGEMENTS INVOLVING CAPACITY, ENERGY, AND ANCILLARY SERVICES Dow AEP System operating companies are membershas entered into an agreement with The Dow Chemical Company to construct a 900 MW cogeneration facility at Dow's chemical facility in Plaquemine, Louisiana. Commercial operation is expected in November 2003. AEP is entitled to 100% of the Electric Power Research Institute (EPRI),facility's capacity and energy over The Dow Chemical Company's requirements and has contracted to sell the power from this facility to an unaffiliated party. Buckeye In January 2000, OPCo and NPC, an affiliate of Buckeye, entered into an agreement relating to the construction and operation of a nonprofit organization that manages research and development on behalf510 MW gas-fired electric generating peaking facility to be owned by NPC. From the commercial operation date (which occurred in 2002) until the end of 2005, OPCo will be entitled to 100% of the U.S. electric utility industry. EPRI, foundedpower generated by the facility, and responsible for the fuel and other costs of the facility. After 2005, NPC and OPCo will be entitled to 80% and 20%, respectively, of the power of the facility, and both parties will generally be responsible for the fuel and other costs of the facility. OPCo will also provide certain back-up power to NPC. CERTAIN POWER AGREEMENTS AEGCo Since its formation in 1973, manages technical research1982, AEGCo's business has consisted of the ownership and development programsfinancing of its 50% interest in Unit 1 of the Rockport Plant and, since 1989, leasing of its 50% interest in Unit 2 of the Rockport Plant. The operating revenues of AEGCo are derived from the sale of capacity and energy associated with its interest in the Rockport Plant to I&M and KPCo pursuant to unit power agreements. The I&M Power Agreement provides for the sale by AEGCo to I&M of all the power (and the energy associated therewith) available to AEGCo at the Rockport Plant. I&M is obligated, whether or not power is available from AEGCo, to pay as a demand charge for the right to receive such power (and as an energy charge for any associated energy taken by I&M). Such amounts, when added to amounts received by AEGCo from any other sources, will be at least 16 sufficient to enable AEGCo to pay all its membersoperating and other expenses, including a rate of return on the common equity of AEGCo as approved by FERC, currently 12.16%. The I&M Power Agreement will continue in effect until the date that the last of the lease terms of Unit 2 of the Rockport Plant has expired unless extended in specified circumstances. Pursuant to improvean assignment between I&M and KPCo, and a unit power production, deliveryagreement between KPCo and use. Approximately 700 utilities are members. EPRIAEGCo, AEGCo sells KPCo 30% of the power (and the energy associated therewith) available to AEGCo from both units of the Rockport Plant. KPCo has agreed to pay to AEGCo the same amounts which I&M would have paid AEGCo under the terms of the I&M Power Agreement for such entitlement. The KPCo unit power agreement expires on December 31, 2004. The agreement will be extended until December 31, 2009 for Unit 1 and December 31, 2022 for Unit 2 if AEP's restructuring settlement agreement filed with the FERC becomes effective. AEGCo and AEP have entered into a membership programcapital funds agreement pursuant to which, among other things, AEP has unconditionally agreed to make cash capital contributions, or in certain circumstances subordinated loans, to AEGCo to the extent necessary to enable AEGCo to (i) maintain such an equity component of capitalization as required by governmental regulatory authorities; (ii) provide its proportionate share of the funds required to permit commercial operation of the Rockport Plant; (iii) enable AEGCo to perform all of its obligations, covenants and agreements under, among other things, all loan agreements, leases and related documents to which AEGCo is or becomes a party (AEGCo Agreements); and (iv) pay all indebtedness, obligations and liabilities of AEGCo (AEGCo Obligations) under the AEGCo Agreements, other than indebtedness, obligations or liabilities owing to AEP. The capital funds agreement will terminate after all AEGCo Obligations have been paid in full. OVEC AEP, CSPCo and several unaffiliated utility companies jointly own OVEC. The aggregate equity participation of AEP and CSPCo in OVEC is 44.2%. Until September 1, 2001, OVEC supplied the power requirements of a uranium enrichment plant near Portsmouth, Ohio owned by the DOE. The sponsoring companies are now entitled to receive and pay for all OVEC capacity (approximately 2,200 MW) in proportion to their power participation ratios. The aggregate power participation ratio of APCo, CSPCo, I&M and OPCo is 42.1%. The proceeds from the sale of power by OVEC are designed to be sufficient for OVEC to meet its operating expenses and fixed costs and to provide a return on its equity capital. The Inter-Company Power Agreement, which defines the rights of the owners and sets the power participation ratio of each, will expire by its terms on March 12, 2006. Buckeye Contractual arrangements among OPCo, Buckeye and other investor-owned electric utility companies in Ohio provide for the transmission and delivery, over facilities of OPCo and of other investor-owned utility companies, of power generated by the two units at the Cardinal Station owned by Buckeye and back-up power to which Buckeye is entitled from OPCo under such contractual arrangements, to facilities owned by 25 of the rural electric cooperatives which operate in the State of Ohio at 342 delivery points. Buckeye is entitled under such arrangements to receive, and is obligated to pay for, the excess of its maximum one-hour coincident peak demand plus a 15% reserve margin over the 1,226,500 kilowatts of capacity of the generating units which Buckeye currently owns in the Cardinal Station. Such demand, which occurred on August 1, 2002, was recorded at 1,398,559 kilowatts. ENERGY DELIVERY GENERAL AEP's public utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power. See Item 2--Properties for more information regarding the transmission and distribution lines. Most of the transmission and distribution services are sold, in combination with AEP whereby dueselectric power, to retail customers of AEP's public utility subsidiaries in their service territories. These sales are being phasedmade at rates established by the state utility commissions of the states in from 1994 through 1996. Recovery ofwhich they operate, and in some instances, the FERC as well. See Regulation-- Rates. The FERC regulates and approves the rates for wholesale transmission transactions. See General--Regulation-- FERC. As discussed below, some transmission services also are separately sold to non-affiliated companies. AEP's public utility subsidiaries hold franchises or other rights to provide electric service in various municipalities and regions in their service areas. In some cases, these dues through rates by AEP'sfranchises provide the utility with the exclusive right to provide electric service. These franchises have varying provisions and expiration 17 dates. In general, the operating companies has reasonably coincidedconsider their franchises to be adequate for the conduct of their business. For a discussion of competition in the sale of power, see Wholesale Operations-- Generation-- Competition and Regulation. REGULATION AEP is in the business of providing generation, transmission and distribution services. The transmission and distribution functions are part of AEP's energy delivery segment. The generation function is part of AEP's wholesale operations segment. This discussion covers the regulation of transmission and distribution, but also generation sold at retail (which would otherwise be included in the wholesale operations segment discussion). Rates Historically, state utility commissions have established electric service rates on a cost-of-service basis, which is designed to allow a utility an opportunity to recover its cost of providing service and to earn a reasonable return on its investment used in providing that service. A utility's cost of service is generally comprised of its operating expenses, including operation and maintenance expense, depreciation expense and taxes. State utility commissions periodically adjust rates pursuant to a review of (i) a utility's revenues and expenses during a defined test period and (ii) such utility's level of investment. Absent a legal limitation, such as a law limiting the frequency of rate changes or capping rates for a period of time as part of a transition to customer choice of generation suppliers, a state utility commission can review and change rates on its own initiative. Some states may initiate reviews at the request of a utility, customer, governmental or other representative of a group of customers. Such parties may, however, agree with their phase-in dates. It is anticipated thatone another not to request reviews of or changes to rates for a specified period of time. The rates of AEP's public utility subsidiaries are generally based on the cost of providing traditional bundled electric service (i.e., generation, transmission and distribution service). In Ohio, Virginia and the ERCOT area of Texas, rates are transitioning from bundled cost-based rates for electric service to unbundled cost-based rates for transmission and distribution service on the one hand, and market pricing for and/or customer choice of generation on the other. Historically, the state regulatory frameworks in the service area of the AEP System reflected specified fuel costs as part of bundled (or, more recently, unbundled) rates or incorporated fuel adjustment clauses in a utility's rates and tariffs. Fuel adjustment clauses permit periodic adjustments to fuel cost recovery from customers and therefore provide protection against exposure to fuel cost changes. While the historical framework remains in a portion of AEP's service territory, recovery of increased fuel costs (i) is no longer provided for in Ohio and (ii) may be limited in Indiana and Michigan, which have capped rates. Fuel recovery is also limited in the final 1996 dues phase-inERCOT area of Texas, but because AEP sold MECPL and MEWTU, there is little impact on AEP of fuel recovery procedures related to service in ERCOT. The following state-by-state analysis summarizes the regulatory environment of each jurisdiction in which AEP operates. Several public utility subsidiaries operate in more than one jurisdiction. Indiana: I&M provides retail electric service in Indiana at a bundled rate approved by the IURC. While rates are set on a cost-of-service basis, utilities may also generally seek to adjust fuel clause rates quarterly. I&M's base rate is capped through December 31, 2004 and its fuel recovery rate is capped through February 29, 2004. Ohio: CSPCo and OPCo operate as functionally separated utilities and provide "default" retail electric service to customers at unbundled rates established by the Ohio Act through December 31, 2005. Thereafter, CSPCo and OPCo will continue to provide distribution services to retail customers at rates approved by the PUCO. These rates will be soughtfrozen from December 31, 2005 to (i) December 31, 2008 for CSPCo and (ii) December 31, 2007 for OPCo. Transmission services will continue to be provided at rates established by the FERC. Default retail generation service rates will be based on market prices pursuant to rules currently under consideration by the PUCO. Oklahoma: PSO provides retail electric service in Oklahoma at a bundled rate approved by the OCC. PSO's rates are set on a cost-of-service basis. Fuel and purchased power costs above the amount included in base rates are recovered by applying a fuel adjustment factor to retail kilowatt-hour sales. The factor is adjusted quarterly and is based upon forecasted fuel and purchased power costs. Over or under collections of fuel costs for prior periods can be recovered when new quarterly factors are established. Texas: The Texas Act requires the legal separation of generation-related assets from transmission and 18 distribution assets. TCC and TNC currently operate on a functionally separated basis. In January 2002, TCC and TNC transferred all their retail customers in the ERCOT area of Texas to MECPL, MEWTU and AEP Commercial and Industrial REP (an AEP affiliate). TNC's retail SPP customers were ultimately transferred to Mutual Energy SWEPCo L.P. (an AEP affiliate). TCC and TNC provide retail transmission and distribution service on a cost-of-service basis at rates approved by the PUCT and wholesale transmission service under tariffs approved by the FERC consistent with PUCT rules. The implementation of the business separation plan for SWEPCo operations in the SPP area of Texas was delayed by the PUCT. As such, SWEPCo's Texas operations continue to operate and to be regulated as a traditional bundled utility with both base and fuel rates. Virginia: APCo provides unbundled retail electric service in Virginia. APCo's unbundled generation, transmission (which reflect FERC approved transmission rates) and distribution rates as well as its functional separation plan were approved by the VSCC in December 2001. The Virginia Act capped base rates at their mid-1999 levels until the end of the transition period (July 1, 2007), or sooner if the VSCC finds that a competitive market for generation exists in Virginia. The Virginia Act permits APCo to seek a one-time change to its capped non-generation rates after January 1, 2004. The Virginia Act allows adjustments to fuel rates during the transition period and continues to permit utilities to recover their actual fuel costs, the fuel component of their purchased power costs and certain capacity charges. APCo recovers its generation capacity charges through capped base rates. West Virginia: APCo and Wheeling Power Company provide retail electric service at bundled rates approved by the WVPSC. A plan to introduce customer choice was approved by the West Virginia Legislature in its 2000 legislative session. However, implementation of that plan was placed on hold pending necessary changes to the state's tax laws in a subsequent session. Those changes have not been made. While West Virginia generally allows recovery of fuel costs, the most recent proceeding resulted in the suspension of an active fuel clause for APCo and WPCo (though they continue to recover fuel costs through fixed bundled rates). APCo and Wheeling Power Company are currently unable to change the current level of fuel cost recovery, though this ability could be reinstated in a future proceeding. Other Jurisdictions: The public utility subsidiaries of AEP also provide service at regulated bundled rates in Arkansas, Kentucky, Louisiana and Tennessee and regulated unbundled rates in Michigan. 19 The table below illustrates the current rate cases. Total research and development expenditures byregulation status of the states in which the public utility subsidiaries of AEP and its subsidiaries were approximately $19,300,000operate:
FUEL CLAUSE RATES PERCENTAGE ------------------------------------------------- OF AEP STATUS OF BASE RATES FOR SYSTEM SALES SYSTEM ----------------------------------------------- PROFITS SHARED RETAIL JURISDICTION POWER SUPPLY ENERGY DELIVERY STATUS INCLUDES W/RATEPAYERS REVENUES(1) - ------------ ---------------------- ---------------------- -------------- -------------- --------------- ----------- Ohio Frozen through 2005 Distribution frozen None Not applicable Not applicable 30% through 2007 for OPCo and 2008 for CSP; Transmission frozen through 2005 Texas (TCC, TNC) See footnote 2 Not capped or frozen Not applicable Not applicable Not applicable 17%(2) Texas (SWEPCo) Capped until 6/15/03 Active Fuel and fuel Yes, above base 3% portion of levels purchased power Indiana Capped until 1/1/05(3) Capped until Fuel and fuel No 10% 3/1/04(3) portion of purchased power Virginia Capped until as late Capped until as late Active Fuel and fuel No 9% as 7/1/07(4) as 7/1/07(4) portion of purchased power West Virginia Fixed(5) Suspended(5) Fuel and fuel Yes, but 9% portion of suspended purchased power Oklahoma Cap expired 1/1/03 Active Fuel and fuel Yes 9% portion of purchased power Louisiana Capped until 6/15/05 Active Fuel and fuel Yes, above base 5% portion of levels purchased power Kentucky Frozen until 6/15/03(6) Active Fuel and fuel Yes, above base 3% portion of levels purchased power Arkansas Capped until 6/15/03 Active Fuel and fuel Yes, above base 2% portion of levels purchased power Michigan Capped until 1/1/05(7) Capped until 1/1/05(7) Capped until Fuel and fuel Yes, in some 2% 1/1/04(8) portion of areas, but purchased suspended power Tennessee Not capped or frozen Active Fuel and fuel No 1% portion of purchased power
- --------------------------------- (1) Represents the percentage of revenues from sales to retail customers from AEP utility companies operating in each state to the total AEP System revenues from sales to retail customers for the year ended December 31, 1995, $7,600,0002002. (2) Retail electric service in the ERCOT area of Texas is provided to most customers through unaffiliated REPs which must offer PTB rates until January 1, 2007. The percentage of revenues shown includes revenues from power sales contracts between MECPL and TCC and MEWTU and TNC. 20 (3) Capped base and fuel rates pursuant to a 1999 settlement with base rate freeze extended pursuant to merger stipulation. (4) Base rates are capped until the earlier of 7/1/07 or a finding by the VSCC that a competitive market for generation exists. One-time change in non-generation rates is allowed in Virginia after 1/1/04. (5) Rates fixed and expanded net energy clause suspended in West Virginia pursuant to a 1999 rate case stipulation, but subject to change in a future proceeding. (6) Utilities may request that an environmental surcharge be imposed to recover costs associated with the installation of emission control equipment. (7) Capped base and fuel rates pursuant to a 1999 settlement and base rates extended pursuant to merger stipulation. (8) Michigan fuel rates capped until 1/1/04 pursuant to a 1999 fuel settlement. AEP TRANSMISSION POOL Transmission Equalization Agreement APCo, CSPCo, I&M, KPCo and OPCo operate their transmission lines as a single interconnected and coordinated system and are parties to the Transmission Equalization Agreement, dated April 1, 1984, as amended (TEA), defining how they share the costs and benefits associated with their relative ownership of the extra-high-voltage transmission system (facilities rated 345 KV and above) and certain facilities operated at lower voltages (138 KV and above). This sharing is based upon each company's "member-load ratio." The member-load ratio is calculated monthly by dividing such company's highest monthly peak demand for the yearlast twelve months by the aggregate of the highest monthly peak demand for the last twelve months for all east zone operating companies. As of December 31, 2002, the member-load ratios were as follows:
PEAK DEMAND MEMBER-LOAD (KW) RATIO (%) ------ ----------- APCo..................... 6,010 28.2 CSPCo.................... 4,040 19.0 I&M...................... 4,323 20.3 KPCo..................... 1,551 7.3 OPCo..................... 5,360 25.2
The following table shows the net credits or (charges) allocated among the parties to the TEA during the years ended December 31, 19942000, 2001 and $13,800,0002002:
2000 2001 2002 -------- -------- ------- (IN THOUSANDS) APCo................. $ 3,400 $ 3,100 $ 13,400 CSPCo................ (38,300) (40,200) (42,200) I&M.................. 43,800 41,300 36,100 KPCo................. 6,000 4,600 5,400 OPCo................. (14,900) (8,800) (12,700)
Transmission Coordination Agreement PSO, SWEPCo, TCC, TNC and AEPSC are parties to a Transmission Coordination Agreement originally dated as of January 1, 1997 (TCA). The TCA establishes a coordinating committee, which is charged with the responsibility of overseeing the coordinated planning of the transmission facilities of the west zone public utility subsidiaries, including the performance of transmission planning studies, the interaction of such subsidiaries with independent system operators and other regional bodies interested in transmission planning and compliance with the terms of the OATT filed with the FERC and the rules of the FERC relating to such tariff. Under the TCA, the west zone public utility subsidiaries have delegated to AEPSC the responsibility of monitoring the reliability of their transmission systems and administering the AEP OATT on their behalf. The TCA also provides for the yearallocation among the west zone public utility subsidiaries of revenues collected for transmission and ancillary services provided under the AEP OATT. The following table shows the net credits or (charges) allocated among the parties to the TCA during the years ended December 31, 1993. This includes expenditures2000, 2001 and 2002:
2000 2001 2002 ------ ------ ------ (IN THOUSANDS) PSO................... $ 3,300 $ 4,000 $ 4,200 SWEPCo................ 5,900 5,400 5,000 TCC................... (3,400) (3,900) (3,600) TNC................... (5,800) (5,500) (5,600)
Transmission Services for Non-Affiliates In addition to providing transmission services in connection with their own power sales, AEP's public utility subsidiaries and other System companies also provide transmission services for non-affiliated compa- 21 nies. See Regulation--Regional Transmission Organizations. AEP's public utility subsidiaries are subject to regulation by the FERC under the FPA in respect of $6,700,000transmission of electric power. Coordination of East and West Zone Transmission AEP's System Transmission Integration Agreement provides for 1995, $2,200,000the integration and coordination of the planning, operation and maintenance of the transmission facilities of AEP's east and west zone public utility subsidiaries. The System Transmission Integration Agreement functions as an umbrella agreement in addition to the TEA and the TCA. The System Transmission Integration Agreement contains two service schedules that govern: - The allocation of transmission costs and revenues and - The allocation of third-party transmission costs and revenues and System dispatch costs. The System Transmission Integration Agreement contemplates that additional service schedules may be added as circumstances warrant. COMPETITION The public utility subsidiaries of AEP, like many other electric utilities, have traditionally provided electric generation and energy delivery, consisting of transmission and distribution services, as a single product to their retail customers. Legislation has been enacted in Michigan, Ohio, Texas and Virginia that allows for 1994customer choice of generation supplier. Although restructuring legislation has been passed in Oklahoma and $10,900,000West Virginia, it has been delayed indefinitely in Oklahoma and not implemented in West Virginia. In addition, restructuring legislation in Arkansas has been repealed. See General--Electric Restructuring Legislation. Customer choice legislation generally allows competition in the generation and sale of electric power, but not in its transmission and distribution. See Management's Discussion and Analysis of Results of Operations and Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters and Note 8 to the consolidated financial statements entitled Customer Choice and Industry Restructuring incorporated by reference in Items 7 and 8, respectively, for 1993further information with respect to restructuring legislation affecting AEP subsidiaries. SEASONALITY Sale of electric power is generally a seasonal business. In many parts of the country, demand for power peaks during the hot summer months, with market prices also peaking at that time. In other areas, power demand peaks during the winter. The pattern of this fluctuation may change due to the nature and location of AEP's facilities and the terms of power sale contracts AEP enters into. In addition, AEP has historically sold less power, and consequently earned less income, when weather conditions are milder. Unusually mild weather in the future could diminish AEP's results of operations and may impact its financial condition. REGIONAL TRANSMISSION ORGANIZATIONS On April 24, 1996, the FERC issued orders 888 and 889. These orders require each public utility that owns or controls interstate transmission facilities to file an open access network and point-to-point transmission tariff that offers services comparable to the utility's own uses of its transmission system. The orders also require utilities to functionally unbundle their services, by requiring them to use their own tariffs in making off-system and third-party sales. As part of the orders, the FERC issued a pro-forma tariff that reflects the Commission's views on the minimum non-price terms and conditions for non-discriminatory transmission service. In addition, the orders require all transmitting utilities to establish an Open Access Same-time Information System (OASIS), which electronically posts transmission information such as available capacity and prices, and require utilities to comply with Standards of Conduct that prohibit utilities' system operators from providing non-public transmission information to the utility's merchant employees. The orders also allow a utility to seek recovery of certain prudently incurred stranded costs that result from unbundled transmission service. In December 1999, FERC issued Order 2000, which provides for the voluntary formation of RTOs, entities created to operate, plan and control utility transmission assets. Order 2000 also prescribes certain characteristics and functions of acceptable RTO proposals. AEP is required, as a condition of FERC's approval in 2000 of AEP's merger with CSW, to transfer functional control of its transmission facilities to one or more RTOs. In May 2002, AEP announced an agreement with PJM to pursue terms for its east zone public utility subsidiaries to participate in PJM, a 22 FERC approved RTO. In July 2002, the FERC tentatively approved AEP subsidiaries' decision to join PJM, subject to certain conditions being met. The satisfaction of these conditions is only partially within AEP's control. AEP's public utility subsidiaries have filed applications with the state utility commissions of Indiana, Kentucky, Ohio and Virginia requesting approval of the transfer of functional control of transmission assets in those states to PJM. Those applications are pending. In February 2003, the Virginia legislature enacted legislation that would prohibit the transfer of functional control of transmission assets to an RTO until at least July 2004. In July 2002, FERC conditionally accepted filings related to pressurized fluidized-bed combustion, a processproposed consolidation of MISO and the SPP. In that order the FERC required AEP's west zone subsidiaries in SPP to file reasons why those subsidiaries should not be required to join MISO. SWEPCo has filed an application with the LPSC requesting approval of the transfer of functional control of its Louisiana transmission assets to MISO and intends to make a similar filing in Arkansas with respect to its Arkansas transmission assets. AEP presently plans to transfer functional control of its transmission facilities in SPP to MISO or the merged MISO/SPP. TEXAS REGULATORY ASSETS AND STRANDED COST RECOVERY AND POST-RESTRUCTURING WIRES CHARGES Certain transmission and distribution utilities in Texas whose generation assets were unbundled pursuant to the Texas Act may recover generation-related regulatory assets and generation-related stranded costs. Regulatory assets consist of the Texas jurisdictional amount of generation-related regulatory assets and liabilities in the audited financial statements as of December 31, 1998. Stranded costs consist of the positive excess of the net regulated book value of generation assets over the market value of those assets, taking specified factors into account. The Texas Act allows alternative methods of valuation to determine the fair market value of generation assets, including outright sale, full and partial stock valuation and asset exchanges, and also, for nuclear generation assets, the ECOM model. The Texas Act further permits utilities to establish a special purpose entity to issue securitization bonds for the recovery of regulatory assets and, after the 2004 true-up proceeding, the amount of stranded costs and remaining regulatory assets not previously securitized. Securitization bonds allow for regulatory assets and stranded costs to be refinanced with recovery of the bond principal and financing costs ensured through a non-bypassable rate surcharge by the regulated transmission and distribution utility over the life of the securitization bonds. Any stranded costs not recovered through the sale of securitization bonds may be recovered through a separate non-bypassable competitive transition charge to transmission and distribution customers. Regulatory Assets In 1999, TCC filed an application with the PUCT to securitize approximately $1.27 billion of its retail generation-related regulatory assets and approximately $47 million in other qualified restructuring costs. On March 27, 2000, the PUCT issued an order authorizing issuance of up to $797 million of securitization bonds including $764 million for recovery of net generation- related regulatory assets and $33 million for other qualified refinancing costs. The securitization bonds were issued in February 2002. TCC has included a transition charge in its distribution rates to repay the bonds over a 14-year period. In addition, another $185 million of generation-related regulatory assets are being recovered through distribution rates beginning in January 2002. Remaining generation-related regulatory assets of approximately $214 million originally included by TCC in its 1999 securitization request along with certain other regulatory assets will be included in TCC's request to recover stranded costs in the 2004 true-up proceeding. Stranded Costs In a March 2000 filing with the PUCT to determine unbundled transmission and distribution charges and initial stranded cost recovery, TCC requested recovery of an additional $1.1 billion of stranded costs and regulatory assets that were not securitized. In October 2001, the PUCT issued an order in the UCOS proceeding determining an initial amount of TCC ECOM or stranded costs of approximately negative $615 million based upon the PUCT's ECOM model. The ruling indicated that TCC costs were below market after securitization of regulatory assets. TCC disagrees with the ruling and believes it has positive stranded costs in addition to the securitized regulatory assets. As a result of this stranded cost determination, the PUCT ordered TCC to refund $55 million of estimated excess earnings for the period 1999 through 2001 to customers through a credit applied to distribu- 23 tion rates over a five-year period. TCC appealed the PUCT's estimate of stranded costs and refund of excess earnings, among other issues, to the Travis County District Court. This estimate may be superseded by a final determination made as part of the 2004 true-up proceedings. The final amount of TCC's stranded costs including regulatory assets and ECOM will be established by the PUCT in the 2004 true-up proceeding. Pursuant to PUCT rules, if TCC's total stranded costs determined in the 2004 true-up proceeding are less than the amount of securitized regulatory assets, the PUCT can implement an offsetting credit to transmission and distribution rates. The Texas Third Circuit Court of Appeals ruled in February 2003 that the Texas Act does not contemplate the refunding to customers of negative stranded costs. In addition, the Court ruled that negative stranded costs cannot be offset against other true-up adjustments, including under-recovered fuel amounts. This ruling may be appealed to the Texas Supreme Court, which sulfurhas discretion as to whether to accept and consider the appeal. 2004 True-Up Proceedings Beginning as early as January 2004, the PUCT will conduct true-up proceedings (with respect to the ERCOT area of Texas) for each investor-owned utility, its affiliated REP and affiliated power generation company. The purpose of the true-up proceeding is removedto (i) quantify and reconcile the amount of stranded costs and generation-related regulatory assets that have not yet been securitized, (ii) conduct a true-up of the PUCT ECOM model for 2002 and 2003 to reflect market prices determined in required capacity auctions, (iii) establish final fuel recovery balances and (iv) determine the price to beat clawback component. The true-up proceeding will generally result in either additional charges or credits to retail customers through transmission and distribution rates collected by their REPs and remitted to the utility. Stranded Cost and Generation-Related Regulatory Asset Determination: The Texas Act authorized the use of several valuation methodologies to quantify stranded costs and generation-related regulatory assets in the 2004 true-up proceeding, including by the sale of assets. TCC filed a plan of divestiture with the PUCT in December 2002 seeking approval to sell its generation assets to determine their market value. The PUCT has dismissed its proceeding relating to TCC's plan of divestiture in anticipation of promulgating rules of general application regarding stranded cost determination. If the PUCT determines the sale of assets methodology cannot be used to determine the market value of STP, TCC intends to pursue the use of one or more market valuation methods. Divestiture of TCC's interest in STP to a nonaffiliate will also require NRC approval. TNC does not have any recoverable stranded costs or generation-related regulatory assets that can be considered as part of the 2004 true-up. ECOM/Capacity Auction Component: The PUCT used a computer model or projection, called an ECOM model, to estimate stranded costs related to generation plant assets in the UCOS proceeding. In connection with using the ECOM model to calculate the stranded cost estimate, the PUCT estimated the market power prices that will be received in the competitive wholesale generation market. Any difference between the ECOM model market prices and actual market power prices as measured by generation capacity auctions required by the Texas Act during coal combustionthe period of January 1, 2002 through December 31, 2003 will be a component of the 2004 true-up proceeding, either increasing or decreasing the amount of recovery for TCC. Auctions to date have generally indicated that market prices have been lower than the PUCT's ECOM estimates. Unless this is reversed, TCC's recovery in the 2004 true-up proceeding would be increased. In the event TCC has transferred its generation assets to an affiliate, the Texas Act would require TCC to remit to its affiliate the recovery amount accruing after the transfer. See Note 8 to the consolidated financial statements, entitled Customer Choice and nitrogen oxide formationIndustry Restructuring, incorporated by reference in Item 8, for a discussion of the current calculation of the difference between the market price and ECOM estimate. Fuel Recovery Balance Determination: The amount TCC or TNC recovers in the 2004 true-up proceeding could be increased or reduced (or the amount TCC must refund could be increased) by any under or over-recovery of fuel. The fuel component will be determined by the amount of fuel costs and expenses the PUCT approves based on a final fuel reconciliation that TCC filed on December 2, 2002 and that TNC filed on June 3, 2002. TCC's fuel reconciliation covers its fuel costs from the period beginning July 1, 1998 and ending December 31, 2001. TCC's fuel reconciliation filing seeks approval for $1.6 billion in fuel expense collected from retail customers during that period. TCC's fuel reconciliation filing reflects a fuel over-recovery balance, as of December 31, 2001, of $63.5 million, including 24 interest. A procedural schedule has been set with a hearing scheduled to begin May 7, 2003. TNC's fuel reconciliation requests approval of $292 million in fuel costs associated with serving both ERCOT and SPP retail customers from July 1, 2000 through December 31, 2001. It reflects a fuel under-recovery balance, as of December 31, 2001, of $26.9 million, including interest. The amounts in this paragraph may periodically be adjusted as filings are updated or adjusted. A final order from the PUCT is minimized. EPRI duesexpected in the first half of $9,600,0002003. Any under or over-recovery, plus interest thereon, will be recovered from or returned to customers as a component of the 2004 true-up proceeding. Price to Beat Clawback Component: The amount TCC or TNC recovers in the 2004 true-up proceeding could be reduced (or the amount TCC or TNC must refund could be increased) by the PTB clawback component. If MECPL and MEWTU (which are no longer affiliated with TCC or TNC) continue to serve 60% or more of TCC's and TNC's respective PTB load as of January 1, 2004 and the PTB (reduced by non-bypassable wires charges) exceeds the market price of electricity, any such excess must be credited to customers of TCC and TNC in the 2004 true-up proceeding, by up to $150 per customer, subject to certain adjustments. The Texas Act provides that MECPL and MEWTU effectively indemnify TCC and TNC, respectively, for 1995any PTB clawback amounts assessed them. The MECPL and $3,200,000MEWTU sale agreements provide that Centrica (as purchaser of MECPL and MEWTU) and AEP Utilities (the parent of TCC and TNC, as seller of MECPL and MEWTU) will share responsibility for 1994this indemnity. Further Securitization Bonds and Wires Charges: After final determination of its stranded costs and other true-up adjustments by the PUCT, TCC expects to issue securitization bonds in the amount of its non-securitized stranded costs and generation-related regulatory assets determined in the 2004 true-up proceeding. The bonds can have a maximum term of 15 years. If securitization bonds are not issued to finance all non-securitized stranded costs and generation-related regulatory assets, TCC will seek recovery of these amounts as well as its other true-up adjustments, through a non-bypassable competition transition charge in transmission and distribution rates. For a discussion of recovery of regulatory assets and stranded costs in Ohio and Virginia, see Note 8 to the consolidated financial statements entitled Customer Choice and Industry Restructuring, incorporated by reference in Item 8. OTHER INVESTMENTS AEP has made certain investments in telecommunications, international energy and other concerns. In 2002, AEP wrote down the value of certain of those investments. See Management's Discussion and Analysis of Results of Operations and Management's Discussion and Analysis of Financial Condition, Accounting Policies and Other Matters and Note 13 to the consolidated financial statements entitled Asset Impairment and Investment Value Losses, incorporated by reference in Items 7 and 8, respectively. AEP also included.sold the following foreign investments in 2002: - SEEBOARD, an electricity supply and distribution company in the United Kingdom serving 2,000,000 customers and covering 3,000 square miles of service territory. - CitiPower, a retail electricity and gas supply and distribution subsidiary in Australia serving 240,000 customers. 25 Item 2. PROPERTIES - -------------------------------------------------------------------------------- GENERATION FACILITIES General At December 31, 1995, subsidiaries of2002, the AEP System owned (or leased where indicated) generating plants with the net power capabilities (winter(east zone public utility subsidiaries-winter rating; west zone public utility subsidiaries-summer rating) shown in the following table:
NET KILOWATT OWNER, PLANT TYPE AND NAME LOCATION (NEAR) CAPABILITYCOAL NATURAL GAS HYDRO NUCLEAR LIGNITE OTHER TOTAL COMPANY STATIONS MW MW MW MW MW MW MW - ------------------------------------------------------------------------------------------------------------ AEP GENERATING COMPANY: Steam AEGCo 1(a) 1,300 1,300 APCo 17(b) 5,073 777 5,850 CSPCo 6(e) 2,595 2,595 I&M 10(a) 2,295 11 2,110 4,416 KPCo 1 1,060 1,060 OPCo 8(b)(f) 8,472 48 8,520 PSO 8(c) 1,043 3,169 25(g) 4,237 SWEPCo 9 1,848 1,797 842 4,487 TCC 12(c)(d)(h) 686 3,175 6 630 4,497 TNC 12(c) 377 999 16(g) 1,392 - Coal-Fired: Rockport Plant (AEGCo share) Rockport, Indiana 1,300,000(a) APPALACHIAN POWER COMPANY: Steam------------------------------------------------------------------------------------------------------------ Totals: 84 24,749 9,140 842 2,740 842 41 38,354 - Coal-Fired: John E. Amos, Units 1 & 2 St. Albans, West Virginia 1,600,000 John E. Amos, Unit 3 (APCo share) St. Albans, West Virginia 433,000(b) Clinch River Carbo, Virginia 705,000 Glen Lyn Glen Lyn, Virginia 335,000 Kanawha River Glasgow, West Virginia 400,000 Mountaineer New Haven, West Virginia 1,300,000 Philip Sporn, Units 1 & 3 New Haven, West Virginia 308,000 Hydroelectric - Conventional: Buck Ivanhoe, Virginia 10,000 Byllesby Byllesby, Virginia 20,000 Claytor Radford, Virginia 76,000 Leesville Leesville, Virginia 40,000 London Montgomery, West Virginia 16,000 Marmet Marmet, West Virginia 16,000 Niagara Roanoke, Virginia 3,000 Reusens Lynchburg, Virginia 12,000 Winfield Winfield, West Virginia 19,000 Hydroelectric - Pumped Storage: Smith Mountain Penhook, Virginia 565,000 5,858,000 COLUMBUS SOUTHERN POWER COMPANY: Steam - Coal-Fired: Beckjord, Unit 6 New Richmond, Ohio 53,000(c) Conesville, Units 1-3, 5 & 6 Coshocton, Ohio 1,165,000 Conesville, Unit 4 Coshocton, Ohio 339,000(c) Picway, Unit 5 Columbus, Ohio 100,000 Stuart, Units 1-4 Aberdeen, Ohio 608,000(c) Zimmer Moscow, Ohio 330,000(c) 2,595,000 INDIANA MICHIGAN POWER COMPANY: Steam - Coal-Fired: Rockport Plant (I&M share) Rockport, Indiana 1,300,000(a) Tanners Creek Lawrenceburg, Indiana 995,000 Steam - Nuclear: Donald C. Cook Bridgman, Michigan 2,110,000 Gas Turbine: Fourth Street Fort Wayne, Indiana 18,000(d) Hydroelectric - Conventional: Berrien Springs Berrien Springs, Michigan 3,000 Buchanan Buchanan, Michigan 2,000 Constantine Constantine, Michigan 1,000 Elkhart Elkhart, Indiana 1,000 Mottville Mottville, Michigan 1,000 Twin Branch Mishawaka, Indiana 3,000 4,434,000 KENTUCKY POWER COMPANY: Steam - Coal-Fired: Big Sandy Louisa, Kentucky 1,060,000 OHIO POWER COMPANY: Steam - Coal-Fired: John E. Amos, Unit 3 (OPCo share) St. Albans, West Virginia 867,000(b) Cardinal, Unit 1 Brilliant, Ohio 600,000 General James M. Gavin Cheshire, Ohio 2,600,000(e) Kammer Captina, West Virginia 630,000 Mitchell Captina, West Virginia 1,600,000 Steam - Coal-Fired: Muskingum River Beverly, Ohio 1,425,000 Philip Sporn, Units 2, 4 & 5 New Haven, West Virginia 742,000 Hydroelectric - Conventional: Racine Racine, Ohio 48,000 8,512,000 Total Generating Capability 23,759,000 SUMMARY: Total Steam - Coal-Fired 20,795,000 Nuclear 2,110,000 Total Hydroelectric - Conventional 271,000 Pumped Storage 565,000 Other 18,000 Total Generating Capability 23,759,000------------------------------------------------------------------------------------------------------------
- ------------------------------------ (a)Unit 1 of the Rockport Plant is owned one-half by AEGCo and one-half by I&M. Unit 2 of the Rockport Plant is leased one-half by AEGCo and one-half by I&M. The leases terminate in 2022 unless extended. (b)Unit 3 of the John E. Amos Plant is owned one-third by APCo and two-thirds by OPCo. (c)Represents CSPCo's PSO, TCC and TNC jointly own the Oklaunion power station. Their respective ownership interests are reflected in this table. (d) Reflects TCC's interest in STP. (e) CSPCo owns generating units owned in common with CG&E and DP&L. (d)Leased from the CityIts ownership interest of Fort Wayne, Indiana. Since 1975, I&M has leased and operated the assets of the municipal system of the City of Fort Wayne, Indiana under a 35-year lease with a provision for an additional 15-year extension at the election of I&M. (e)1,330 MW is reflected in this table. (f) The scrubber facilities at the General James M. Gavin Plant are leased. The lease terminates in 2010 unless extended. (g) PSO and TNC have 25 MW and 10 MW respectively of facilities designed primarily to burn oil. TNC has one 6 MW wind farm facility. (h) See Item 1 under FUEL SUPPLY,-- Wholesale Operations -- Power Generation -- Planned Deactivation and Planned Disposition of Generation Facilities for a discussion of TCC's planned disposition of its generation facilities. In addition to the generating facilities described above, AEP has ownership interests in other electrical generating facilities, both foreign and domestic. Information concerning these facilities at December 31, 2002 is listed below.
CAPACITY OWNERSHIP FACILITY FUEL LOCATION TOTAL MW INTEREST STATUS - ---------------------------------------------------------------------------------------------------------- Brush II Natural gas Colorado 68 47.75% QF Eastex Natural gas Texas 440 50% QF Indian Mesa Wind Texas 161 100% EWG Mulberry Natural gas Florida 120 46.25% QF Newgulf Natural gas Texas 85 100% EWG Orange Cogen Natural gas Florida 103 50% QF Sweeny Natural gas Texas 480 50% QF Thermo Cogeneration Natural gas Colorado 272 50% QF Trent Wind Farm Wind Texas 150 100% EWG - ---------------------------------------------------------------------------------------------------------- Total U.S. 1,879 - ----------------------------------------------------------------------------------------------------------
26
CAPACITY OWNERSHIP FACILITY FUEL LOCATION TOTAL MW INTEREST STATUS - ---------------------------------------------------------------------------------------------------------- Bajio Natural gas Mexico 605 50% FUCO Ferrybridge Coal United Kingdom 2,000 100% FUCO Fiddler's Ferry Coal United Kingdom 2,000 100% FUCO Nanyang Coal China 250 70% FUCO Southcoast Natural gas United Kingdom 380 50% FUCO - ---------------------------------------------------------------------------------------------------------- Total International 5,235 - ----------------------------------------------------------------------------------------------------------
See Item 1 -- Wholesale Operations for information concerning natural gas pipelines, storage and processing facilities, transportation related assets and coal operations and reserves owned or controlled by subsidiariesAEP subsidiaries. Cook Nuclear Plant and STP The following table provides operating information relating to the Cook Plant and STP.
COOK PLANT STP(A) --------------------- --------------------- UNIT 1 UNIT 2 UNIT 1 UNIT 2 --------- --------- --------- --------- YEAR PLACED IN OPERATION.......... 1975 1978 1988 1989 YEAR OF EXPIRATION OF NRC LICENSE (B).... 2014 2017 2027 2028 NOMINAL NET ELECTRICAL RATING IN KILOWATTS....... 1,020,000 1,090,000 1,250,600 1,250,600 NET CAPACITY FACTORS 2002............... 86.6% 80.5% 99.2% 75.0% 2001 (C)........... 87.3% 83.4% 94.4% 87.1% 2000 (D)........... 1.4% 50.0% 78.2% 96.1%
- ------------------------------------ (a) Reflects total plant. (b) For economic or other reasons, operation of AEP.the Cook Plant and STP for the full term of their operating licenses cannot be assured. (c) The capacity factor for both units of the Cook Plant was significantly reduced in 2001 due to an unplanned dual maintenance outage in September 2001 to implement design changes that improved the performance of the essential service water system. (d) The Cook Plant was shut down in September 1997 to respond to issues raised regarding the operability of certain safety systems. The restart of both units of the Cook Plant was completed with Unit 2 reaching 100% power on July 5, 2000 and Unit 1 achieving 100% power on January 3, 2001. Costs associated with the operation (excluding fuel), maintenance and retirement of nuclear plants continue to be of greater significance and less predictable than costs associated with other sources of generation, in large part due to changing regulatory requirements and safety standards, availability of nuclear waste disposal facilities and experience gained in the construction and operation of nuclear facilities. I&M and TCC may also incur costs and experience reduced output at Cook Plant and STP, respectively, because of the design criteria prevailing at the time of construction and the age of the plant's systems and equipment. Nuclear industry-wide and Cook Plant and STP initiatives have contributed to slowing the growth of operating and maintenance costs at these plants. However, the ability of I&M and TCC to obtain adequate and timely recovery of costs associated with the Cook Plant and STP, respectively, including replacement power, any unamortized investment at the end of the useful life of the Cook Plant and STP (whether scheduled or premature), the carrying costs of that investment and retirement costs, is not assured. See Item 1 -- Wholesale Operations -- Power Generation -- Planned Deactivation and Planned Disposition of Generation Facilities for a discussion of TCC's planned disposition of its interest in STP. POTENTIAL UNINSURED LOSSES Some potential losses or liabilities may not be insurable or the amount of insurance carried may not be sufficient to meet potential losses and liabilities, including liabilities relating to damage to the Cook Plant or STP and costs of replacement power in the event of a nuclear incident at the Cook Plant or STP. Future losses or liabilities which are not completely insured, unless allowed to be recovered through rates, could have a material adverse effect on results of operations and the financial condition of AEP, I&M, TCC and other AEP System companies. See Note 9 to the consolidated financial statements entitled Commitments and Contingencies, incorporated by reference in Item 8, for information with respect to nuclear incident liability insurance. 27 TRANSMISSION AND DISTRIBUTION FACILITIES The following table sets forth the total overhead circuit miles of transmission and distribution lines of the AEP System APCo, CSPCo, I&M, KEPCo and OPCoits operating companies and that portion of the total representing 765,000-volt lines: TOTAL CIRCUIT MILES OF TRANSMISSION AND CIRCUIT MILES OF DISTRIBUTION LINES 765,000-VOLT LINES AEP System (a) 125,545(b) 2,022 APCo 48,961 641 CSPCo (a) 14,710 --- I&M 20,784 614 KEPCo 9,944 258 OPCo 28,286
TOTAL OVERHEAD CIRCUIT MILES OF TRANSMISSION AND CIRCUIT MILES OF DISTRIBUTION LINES 765,000-VOLT LINES ------------------ ------------------ AEP System (a)....... 226,330(b) 2,023 APCo. ............. 50,756 642 CSPCo (a).......... 12,255 -- I&M................ 25,128 615 Kingsport Power Company......... 1,335 -- KPCo. ............. 10,555 258 OPCo. ............. 35,551 509 PSO................ 21,539 -- SWEPCo............. 20,075 -- TCC................ 33,515 -- TNC................ 13,637 -- Wheeling Power Company......... 1,941 --
- ------------------------------------ (a) Includes 766 miles of 345,000-volt jointly owned lines. (b) Includes 73 miles of transmission lines of other AEP System companies not shown.identified with an operating company. TITLES The AEP System's electric generating stations are generally located on lands owned in fee simple. The greater portion of the transmission and distribution lines of the System has been constructed over lands of private owners pursuant to easements or along public highways and streets pursuant to appropriate statutory authority. The rights of the System in the realty on which its facilities are located are considered by it to be adequate for its use in the conduct of its business. Minor defects and irregularities customarily found in title to properties of like size and character may exist, but such defects and irregularities do not materially impair the use of the properties affected thereby. System companies generally have the right of eminent domain whereby they may, if necessary, acquire, perfect or secure titles to or easements on privately-heldprivately held lands used or to be used in their utility operations. Substantially all the fixed physical properties and franchises of APCo, CSPCo, I&M, KEPCo and OPCothe AEP System operating companies, except for limited exceptions, are subject to the lien of the mortgage and deed of trust securing the first mortgage bonds of each such company. SYSTEM TRANSMISSION LINES AND FACILITY SITING Legislation in the states of Arkansas, Indiana, Kentucky, Michigan, Ohio, Texas, Virginia, and West Virginia requires prior approval of sites of generating facilities and/or routes of high-voltage transmission lines. Delays and additional costs in constructing facilities have been experienced as a result of proceedings conducted pursuant to such statutes, as well as in proceedings in which operating companies have sought to acquire rights-of-way through condemnation, and such proceedings may result in additional delays and costs in future years. PEAK DEMANDCONSTRUCTION PROGRAM General The AEP System is interconnected through 120 high-voltagecontinuously involved in assessing the adequacy of its generation, transmission, interconnectionsdistribution and other facilities to plan and provide for the reliable supply of electric power and energy to its customers. In this assessment process, assumptions are continually being reviewed as new information becomes available, and assessments and plans are modified, as appropriate. Thus, System reinforcement plans are subject to change, particularly with 29 neighboringthe restructuring of the electric utility systems.industry. Proposed Transmission Facilities APCo is proceeding with its plan to build the Wyoming-Jacksons Ferry 765,000-volt transmission line. The all-timeWVPSC and 1995 one-hour peak System demands were 25,940,000 and 24,888,000 kilowatts, respectively (which included 7,314,000 and 4,934,000 kilowatts, respectively, of scheduled deliveries to unaffiliated systems which the System might, on appropriate notice,VSCC have elected not to schedule for delivery) and occurred on June 17, 1994 and August 15, 1995, respectively. The net dependable capacity to serve the System load on such date, including power available under contractual obligations, was 23,457,000 and 23,364,000 kilowatts, respectively. The all-time and 1995 one-hour internal peak demands were 19,557,000 and 19,516,000 kilowatts, respectively, and occurred on February 5, 1996 and August 14, 1995, respectively. The net dependable capacity to serve the System load on such date, including power dedicated under contractual arrangements, was 23,670,000 and 23,364,000 kilowatts, respectively. The all-time one-hour integrated and internal net system peak demands and 1995 peak demands for AEP's generating subsidiaries are shown in the following tabulation: ALL-TIME ONE-HOUR INTEGRATED 1995 ONE-HOUR INTEGRATED NET SYSTEM PEAK DEMAND NET SYSTEM PEAK DEMAND (in thousands) Number of Number of KILOWATTS DATE KILOWATTS DATE APCo 8,214 February 5, 1996 7,327 February 6, 1995 CSPCo 4,172 June 17, 1994 4,085 August 14, 1995 I&M 5,027 June 17, 1994 4,949 August 15, 1995 KEPCo 1,686 February 5, 1996 1,512 February 6, 1995 OPCo 7,291 June 17, 1994 6,913 August 15, 1995 ALL-TIME ONE-HOUR INTEGRATED 1995 ONE-HOUR INTEGRATED NET INTERNAL PEAK DEMAND NET INTERNAL PEAK DEMAND (in thousands) Number of Number of KILOWATTS DATE KILOWATTS DATE APCo 6,908 February 5, 1996 6,507 February 9, 1995 CSPCo 3,378 August 14, 1995 3,378 August 14, 1995 I&M 3,864 August 14, 1995 3,864 August 14, 1995 KEPCo 1,418 February 5, 1996 1,363 February 9, 1995 OPCo 5,641 August 14, 1995 5,641 August 14, 1995 HYDROELECTRIC PLANTS Licenses for hydroelectric plants, issued under the Federal Power Act, reserve to the United States the right to take over the project at the expiration of the license term, to issue a new license to another entity, or to relicense the project to the existing licensee. In the event that a project is taken over by the United States or licensed to a new licensee, the Federal Power Act provides for payment to the existing licensee of its "net investment" plus severance damages. Licenses for six System hydroelectric plants expired in 1993 and applications for new licenses for these plants were filed in 1991. The existing licenses for these plants were extended on an annual basis and will be renewed automatically until new licenses are issued. No competing license applications were filed. Four new licenses were issued in 1994. New licenses for two other projects, one in Indiana and one in Michigan, are still pending before the FERC. An original license for the previously unlicensed Constantine project was issued in 1993. In 1995, a notice of intent to relicense the Elkhart project located in Indiana was filed. COOK NUCLEAR PLANT Unit 1 of the Cook Plant, which was placed in commercial operation in 1975, has a nominal net electric rating of 1,020,000 kilowatts. Unit 1's availability factor was 66.3% during 1995 and 71.0% during 1994. Unit 2, of slightly different design, has a nominal net electrical rating of 1,090,000 kilowatts and was placed in commercial operation in 1978. Unit 2's availability factor was 94.4% during 1995 and 54.3% during 1994. Outages to refuel affected the availability of Unit 1 in 1995 and Units 1 and 2 in 1994. Units 1 and 2 are licensed by the NRC to operate at 100% of rated thermal power to October 25, 2014 and December 23, 2017, respectively. Costs associated with the operation, maintenance and retirement of nuclear plants continue to be significant and less predictable than costs associated with other sources of generation, in large part due to changing regulatory requirements and safety standards and experience gained in thecertificates authorizing construction and operation of nuclear facilities. I&M may also incurthe line. On December 31, 2002, the U.S. Forest Service issued a final environmental impact statement and record of decision to allow the use of federal lands in the Jefferson National Forest for construction of a portion of the line. Additional state and federal permits are expected to be issued in the first half of 2003. Through December 31, 2002 APCo had invested approximately $51 million in this project. The line is estimated to cost $287 million with completion scheduled in 2006. 28 Construction Expenditures The following table shows construction expenditures during 2000, 2001 and 2002 and current estimates of 2003 construction expenditures, in each case including AFUDC but excluding assets acquired under leases.
2000 2001 2002 2003 ACTUAL ACTUAL ACTUAL ESTIMATE ---------- ---------- ---------- ---------- (IN THOUSANDS) AEP System (a)....... $1,773,400 $1,832,000 $1,709,800 $1,458,100 AEGCo. ............ 5,200 6,900 5,300 21,400 APCo. ............. 199,300 306,000 276,500 247,900 CSPCo. ............ 128,000 132,500 136,800 142,300 I&M................ 171,100 91,100 159,400 188,000 KPCo. ............. 36,200 37,200 178,700 72,300 OPCo. ............. 254,000 344,600 354,800 241,000 PSO................ 176,900 124,900 89,400 81,500 SWEPCo. ........... 120,200 112,100 111,800 104,900 TCC................ 199,500 194,100 151,500 126,800 TNC................ 64,500 39,800 43,600 46,500
(a) Includes expenditures of other subsidiaries not shown. See Note 9 to the consolidated financial statements entitled Commitments and Contingencies, incorporated by reference in Item 8, for further information with respect to the construction plans of AEP and its operating subsidiaries for the next three years. The System construction program is reviewed continuously and is revised from time to time in response to changes in estimates of customer demand, business and economic conditions, the cost and availability of capital, environmental requirements and other factors. Changes in construction schedules and costs, and experience reduced output at its Cook Plant becausein estimates and projections of needs for additional facilities, as well as variations from currently anticipated levels of net earnings, Federal income and other taxes, and other factors affecting cash requirements, may increase or decrease the design criteria prevailing at the time of construction and the age of the plant's systems and equipment. In addition, for economic or other reasons, operation of the Cook Plantestimated capital requirements for the full term of its now assumed life cannot be assured. Nuclear industry-wide and Cook Plant initiatives have contributed to slowing the growth of operating and maintenance costs. However, the ability of I&M to obtain adequate and timely recovery of costs associated with the Cook Plant, including replacement power and retirement costs, is not assured. NUCLEAR INCIDENT LIABILITY The Price-Anderson Act limits public liability for a nuclear incident at any licensed reactor in the United States to $8.9 billion. I&M has insurance coverage for liability from a nuclear incident at its Cook Plant. Such coverage is provided through a combination of private liability insurance, with the maximum amount available of $200,000,000, and mandatory participation for the remainder of the $8.9 billion liability, in an industry retrospective deferred premium plan which would, in case of a nuclear incident, assess all licensees of nuclear plants in the U.S. Under the deferred premium plan, I&M could be assessed up to $158,600,000 payable in annual installments of $20,000,000 in the event of a nuclear incident at Cook or any other nuclear plant in the U.S. There is no limit on the number of incidents for which I&M could be assessed these sums. I&M also has property damage, decontamination and decommissioning insurance for loss resulting from damage to the Cook Plant facilities in the amount of $3.6 billion. Energy Insurance Bermuda (EIB), Nuclear Mutual Limited (NML) and Nuclear Electric Insurance Limited (NEIL) provide $2.75 billion of coverage and nuclear insurance pools provide the remainder. If EIB's, NML's and NEIL's losses exceed their available resources, I&M would be subject to a total retrospective premium assessment of up to $33,000,000. NRC regulations require that, in the event of an accident, whenever the estimated costs of reactor stabilization and site decontamination exceed $100,000,000, the insurance proceeds must be used, first, to return the reactor to, and maintain it in, a safe and stable condition and, second, to decontaminate the reactor and reactor station site in accordance with a plan approved by the NRC. The insurers then would indemnify I&M for property damage up to $3.35 billion less any amounts used for stabilization and decontamination. The remaining $250,000,000, as provided by NEIL (reduced by any stabilization and decontamination expenditures over $3.35 billion), would cover decommissioning costs in excess of funds already collected for decommissioning. See FUEL SUPPLY - NUCLEAR WASTE. NEIL's extra-expense program provides insurance to cover extra costs resulting from a prolonged accidental outage of a nuclear unit. I&M's policy insures against such increased costs up to approximately $3,500,000 per week (starting 21 weeks after the outage) for one year, $2,800,000 per week for the second and third years, or 80% of those amounts per unit if both units are down for the same reason. If NEIL's losses exceed its available resources, I&M would be subject to a total retrospective premium assessment of up to $7,900,000. POTENTIAL UNINSURED LOSSES Some potential losses or liabilities may not be insurable or the amount of insurance carried may not be sufficient to meet potential losses and liabilities, including liabilities relating to damage to the Cook Plant and costs of replacement power in the event of a nuclear incident at the Cook Plant. Future losses or liabilities which are not completely insured, unless allowed to be recovered through rates, could have a material adverse effect on results of operations and the financial condition of AEP, I&M and other AEP System companies. System's construction program. Item 3. LEGAL PROCEEDINGS On April 4, 1991, then Secretary of Labor Lynn Martin announced that the U.S. Department of Labor (DOL) had issued a total of 4,710 citations to operators of 847 coal mines who allegedly submitted respirable dust sampling cassettes that had been altered so as to remove a portion of the dust. The cassettes were submitted in compliance with DOL regulations which require systematic sampling of airborne dust in coal mines and submission of the entire cassettes (which include filters for collecting dust particulates) to the Mine Safety and Health Administration (MSHA) for analysis. The amount of dust contained on the cassette's filter determines an operator's compliance with respirable dust standards under the law. OPCo's Meigs No. 2, Meigs No. 31, Martinka, and Windsor Coal mines received 16, 3, 15 and 2 citations, respectively. MSHA has assessed civil penalties totalling $56,900 for all these citations. OPCo's samples in question involve about 1 percent of the 2,500 air samples that OPCo submitted over a 20-month period from 1989 through 1991 to the DOL. OPCo is contesting the citations before the Federal Mine Safety and Health Review Commission. An administrative hearing was held before an administrative law judge with respect to all affected coal operators. On July 20, 1993, the administrative law judge rendered a decision in this case holding that the Secretary of Labor failed to establish that the presence of a "white center" on the dust sampling filter indicated intentional alteration. In the case of an unaffiliated mine, the administrative law judge ruled on April 20, 1994, that there was not an intentional alteration of the dust sampling filter. The Secretary of Labor appealed to the Federal Mine Safety and Health Review Commission the July 20, 1993 and April 20, 1994 administrative law judge decisions and in November 1995 the Commission affirmed these decisions. All remaining cases, including the citations involving OPCo's mines, have been stayed. On September 30, 1994, Federal EPA served APCo and Global Power Company, an independent contractor retained by APCo, with a complaint alleging violations of the Clean Air Act. The complaint is based on alleged violations of the National Emission Standard for Asbestos related to an asbestos abatement project at APCo's Kanawha River Plant. The complaint seeks a civil administrative penalty of $167,500. On October 27, 1994, APCo and Global jointly filed an answer to this complaint and requested both a formal hearing and informal settlement conference. On February 28, 1994, Ormet Corporation filed a complaint in the U.S. District Court, Northern District of West Virginia, against AEP, OPCo, the Service Corporation and two of its employees, Federal EPA and the Administrator of Federal EPA. Ormet is the operator of a major aluminum reduction plant in Ohio and is a customer of OPCo. See CERTAIN INDUSTRIAL CUSTOMERS. Pursuant to the Clean Air Act Amendments of 1990, OPCo received SO{2} Allowances for its Kammer Plant. See ENVIRONMENTAL AND OTHER MATTERS. Ormet's complaint sought a declaration that it is the owner of approximately 89% of the Phase I and Phase II SO{2} allowances issued for use by the Kammer Plant. On March 31, 1995, the District Court issued an opinion and order dismissing Ormet's claims based on a lack of jurisdiction. On April 11, 1995, Ormet appealed the District Court's decision to the U.S. Court of Appeals for the Fourth Circuit with respect to the Service Corporation and OPCo only. See Item 1 for- -------------------------------------------------------------------------------- For a discussion of certain environmental and rate matters. MEIGS MINE: On July 11, 1993, water from an adjoining sealed and abandoned mine owned by Southern Ohio Coal Company (SOCCo), a mining subsidiary of OPCo, entered Meigs 31 mine, one of two mines currently being operated by SOCCo. Ohio EPA approved a plan to pump water from the mine to certain Ohio River tributaries under stringent conditions for biological and water quality monitoring and restoring the streams after pumping. On July 30, pumping commenced in accordance with the Ohio EPA approved plan and, after all water was removed from the mine, the mine was returned to service in February 1994. In April 1994, the U.S. Court of Appeals for the Sixth Circuit reversed the judgement of the U.S. District Court for the Southern District of Ohio which had granted a preliminary injunction to SOCCo preventing Federal EPA and the Federal Office of Surface Mining, Reclamation and Enforcement (OSM) from interfering with the removal of water from SOCCo's Meigs 31 mine. The West Virginia Division of Environmental Protection (West Virginia DEP) had proposed fining SOCCo $1,800,000 for violations of West Virginia Water Quality Standards and permitting requirements alleged to have resulted from the release of mine water into the Ohio River. As a result of the West Virginia DEP proposing to fine SOCCo, SOCCo filed an action on June 1, 1994 in the U.S. District Court for the Southern District of West Virginia seeking a determination that the state of West Virginia has no jurisdiction to impose penalties with respectmaterial legal proceedings, see Note 9 to the mine water discharges. SOCCoconsolidated financial statements, entitled Commitments and the West Virginia DEP have entered into a settlement agreement dated May 8, 1995, under which the West Virginia DEP has released SOCCo from any claims which it may have had and SOCCo has made a donation of $260,000 to the Water Quality Management Fund of the West Virginia DEP. SOCCo has entered into a consent decree and settlement agreement with Federal EPA and OSM which was lodged with the U.S. District Court, Southern District of Ohio, on January 30, 1996 and noticedContingencies, incorporated by reference in the FEDERAL REGISTER on February 15, 1996. The decree and settlement agreement resolve all disputes between SOCCo and Federal EPA and OSM over the legality of the removal of water from SOCCo's Meigs 31 mine. Under the terms of the settlement agreement, SOCCo is responsible for the return of pre-pumping biological conditions in the affected streams if those conditions do not return to pre-pumping status under the plan previously agreed to by SOCCo and the Ohio EPA as a condition to the pumping. SOCCo will pay to the U.S. $1,900,000 as compensation for natural resources alleged to have been affected by the mine dewatering. The $1,900,000 will be used to fund Leading Creek watershed enhancement projects in three Ohio counties. Under the settlement agreement, SOCCo is also required to pay to the U.S. $242,200 as reimbursement for costs incurred in monitoring and assessing the effects of its discharge of water. SOCCo will also pay to the U.S. a civil penalty of $300,000. Of this amount, $200,000 is designated as settlement for claims under the Clean Water Act, and $100,000 is designated as settlement for claims under the Surface Mining Control and Reclamation Act. Finally, SOCCo will provide $100,000 to the State of West Virginia for work in the Ohio River for the benefit of Leading Creek on acceptance by the U.S. Fish and Wildlife Service of an acceptable plan from the State. KAMMER PLANT: In August 1994, Federal EPA issued a Notice of Violation (NOV) to OPCo alleging that its Kammer Plant has been operating in violation of applicable federally enforceable air pollution control requirements for sulfur dioxide since at least January 1, 1989. The Clean Air Act provides that Federal EPA may commence a civil action for injunctive relief and/or civil penalties of up to $25,000 per day for each day of violation. On November 15, 1994, a civil complaint containing the allegations included in the NOV was filed by Federal EPA against OPCo in the U.S. District Court, Northern District of West Virginia. A Partial Consent Decree has been entered by the court, extending until May 15, 1996 the date by which OPCo would need to reduce the sulfur content of the fuel supply for Kammer. Negotiations are in an advanced stage to extend the final compliance date beyond May 15, 1996 and to resolve the penalty issues raised by the civil complaint. It is not anticipated that the ultimate resolution of this matter will have a material adverse impact on results of operations.Item 8. 29 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - -------------------------------------------------------------------------------- AEP, APCO, I&M, OPCO, SWEPCO AND OPCO.TCC. None. AEGCO, CSPCO, KPCO, PSO AND KEPCO.TNC. Omitted pursuant to Instruction J(2)I(2)(c). --------------------- EXECUTIVE OFFICERS OF THE REGISTRANTS AEPAEP. The following persons are, or may be deemed, executive officers of AEP. Their ages are given as of March 15, 1996. NAME AGE OFFICE (a) E. Linn Draper, Jr. 541, 2003.
NAME AGE OFFICE (A) - ---- --- ---------- E. Linn Draper, Jr. ........... 61 Chairman of the Board, President and Chief Executive Officer of AEP and of the Service Corporation Thomas V. Shockley, III........ 57 Vice Chairman of AEP and Vice Chairman and Chief Operating Officer of the Service Corporation Henry W. Fayne................. 56 Vice President of AEP, Executive Vice President of the Service Corporation Thomas M. Hagan................ 58 Executive Vice President-Shared Services of the Service Corporation Holly K. Koeppel............... 44 Executive Vice President of the Service Corporation Robert P. Powers............... 49 Executive Vice President-Nuclear Generation and Technical Services of the Service Corporation Susan Tomasky.................. 49 Vice President of AEP, Executive Vice President-Policy, Finance and Strategic Planning of the Service Corporation Peter J. DeMaria 61 Controller of AEP; Executive Vice President- Administration
- --------------- (a) Dr. Draper and Chief Accounting Officer of the Service Corporation William J. Lhota 56 Executive Vice President of the Service Corporation Gerald P. Maloney 63 Vice President and Secretary of AEP; Executive Vice President-Chief Financial Officer of the Service Corporation James J. Markowsky 51 Executive Vice President-Power Generation of the Service Corporation (a)All of the executive officers listed aboveMr. Fayne have been employed by the Service Corporation or System companies in various capacities (AEP, as such, has no employees) duringfor the past five years, except E. Linn Draper, Jr. whoyears. Prior to joining the Service Corporation in July 1998 as Senior Vice President-Generation, Mr. Powers was ChairmanVice President of Pacific Gas & Electric and plant manager of its Diablo Canyon Nuclear Generating Station (1996-1998). Prior to joining the Service Corporation in July 1998 as Senior Vice President, Ms. Tomasky was a partner with the law firm of Hogan & Hartson (August 1997-July 1998) and General Counsel of the Board,Federal Energy Regulatory Commission (May 1993-August 1997). Prior to joining the Service Corporation in June 2000 as Senior Vice President- Governmental Affairs, Mr. Hagan was Senior Vice President-External Affairs of CSW. Prior to joining the Service Corporation in July 2000 as Vice President-New Ventures, Ms. Koeppel was Regional Vice President of Asia-Pacific Operations for Consolidated Natural Gas International (1996-2000). Messrs. Hagan and Powers, Ms. Koeppel and Ms. Tomasky became executive officers of AEP effective with their promotions to Executive Vice President on September 9, 2002, October 24, 2001, November 18, 2002 and January 26, 2000, respectively. Prior to joining the Service Corporation in his current position upon the merger with CSW, Mr. Shockley was President and Chief ExecutiveOperating Officer of Gulf States Utilities Company from 1987 until 1992 when he joined AEPCSW (1997-2000) and the Service Corporation.Executive Vice President of CSW (1990-1997). All of the above officers are appointed annually for a one- yearone-year term by the board of directors of AEP, the board of directors of the Service Corporation, or both, as the case may be. APCO, I&M, OPCO, SWEPCO AND TCC. The names of the executive officers of APCo, I&M, OPCo, SWEPCo and TCC, the positions they hold with APCo,these companies, their ages as of March 15, 1996,1, 2003, and a brief account of their business experience during the past five years appearsappear below. The directors and executive officers of APCo, I&M, OPCo, SWEPCo and TCC are elected annually to serve a one-year term. 30
NAME AGE POSITION (a)(A)(B) PERIOD - ---- --- --------------- ------ E. Linn Draper, Jr. 54........... 61 Director of SWEPCo and TCC 2000-Present Chairman of the Board and Chief Executive Officer of SWEPCo and TCC 2000-Present Director of APCo, I&M and OPCo 1992-Present Chairman of the Board and Chief Executive Officer of APCo, I&M and OPCo 1993-Present Vice President 1992-1993 Chairman of the Board, President and Chief Executive Officer of AEP and the Service Corporation 1993-Present Thomas V. Shockley, III........ 57 Director and Vice President of AEP 1992-1993 PresidentAPCo, I&M, OPCo, SWEPCo and TCC 2000-Present Chief Operating Officer of the Service Corporation 1992-19932001-Present Vice Chairman of the Board, PresidentAEP and Chief Executive Officer of Gulf States Utilities Company 1987-1992 Peter J. DeMaria 61 Director 1988-Present Vice President 1991-Present Controller 1995-Present Treasurer 1978-1995 Controller of AEP 1995-Present Treasurer of AEP 1978-1995 Executive Vice President-Administration and Chief Accounting Officer of the Service Corporation 1984-Present Treasurer of the Service Corporation 1989-1990 William J. Lhota 56 Director 1990-Present2000-Present President and Chief Operating Officer 1996-Presentof CSW 1997-2000 Executive Vice President 1989-1995of CSW 1990-1997 Henry W. Fayne................. 56 President of APCo, I&M, OPCo, SWEPCo and TCC 2001-Present Director of SWEPCo and TCC 2000-Present Director of APCo 1995-Present Director of OPCo 1993-Present Director of I&M 1998-Present Vice President of SWEPCo and TCC 2000-2001 Vice President of APCo, I&M and OPCo 1998-2001 Vice President of AEP 1998-Present Chief Financial Officer of AEP 1998-2001 Executive Vice President of the Service Corporation 1993-Present2001-Present Executive Vice President-OperationsPresident-Finance and Analysis of the Service Corporation 1989-1993 Gerald P. Maloney 632000-2001 Executive Vice President-Financial Services of the Service Corporation 1998-2000 Senior Vice President-Corporate Planning & Budgeting of the Service Corporation 1995-1998 Thomas M. Hagan................ 58 Director and Vice President 1970-Present Vice President of AEP 1974-Present Secretary of AEP 1994-PresentAPCo, I&M, OPCo, SWEPCo and TCC 2002-Present Executive Vice President-Chief Financial OfficerPresident-Shared Services of the Service Corporation 1991-Present2002-Present Senior Vice President-FinancePresident-Governmental Affairs of the Service Corporation 1974-1990 James J. Markowsky 51 Director 1993-Present Vice President 1995-Present Executive Vice President-Power Generation of the Service Corporation 1996-Present Executive Vice President-Engineering and Construction of the Service Corporation 1993-19962000-2002 Senior Vice President and Chief EngineerPresident-External Affairs of the Service Corporation 1988-1993 (a) Positions are with APCo unless otherwise indicated. OPCO The names of the executive officers of OPCo, the positions they hold with OPCo, their ages as of March 15, 1996, and a brief account of their business experience during the past five years appear below. The directors and executive officers of OPCo are elected annually to serve a one-year term.
NAME AGE POSITION (a) PERIOD E. Linn Draper, Jr. 54 Director 1992-Present Chairman of the Board and Chief Executive Officer 1993-Present Vice President 1992-1993 Chairman of the Board, President and Chief Executive Officer of AEP and the Service Corporation 1993-Present President of AEP 1992-1993 President and Chief Operating Officer of the Service Corporation 1992-1993 Chairman of the Board, President and Chief Executive Officer of Gulf States Utilities Company 1987-1992 Peter J. DeMaria 61 Director 1978-Present Vice President 1991-Present Controller 1995-Present Treasurer 1978-1995 Controller of AEP 1995-Present Treasurer of AEP 1978-1995 Executive Vice President-Administration and Chief Accounting Officer of the Service Corporation 1984-Present Treasurer of the Service Corporation 1989-1990 William J. Lhota 56 Director 1989-Present President and Chief Operating Officer 1996-Present Vice President 1989-1995CSW 1996-2000 Holly K. Koeppel............... 44 Executive Vice President of the Service Corporation 1993-Present2002-Present Vice President-New Ventures 2000-2002 Regional Vice President of Asia-Pacific Operations for Consolidated Natural Gas International 1996-2000
31
NAME AGE POSITION (A)(B) PERIOD - ---- --- --------------- ------ Robert P. Powers............... 49 Director and Vice President of APCo, I&M, OPCo, SWEPCo and TCC 2001-Present Director of I&M 2001-Present Vice President of I&M 1998-Present Executive Vice President-OperationsPresident- Generation 2003-Present Executive Vice President-Nuclear Generation and Technical Services of the Service Corporation 1989-1993 Gerald P. Maloney 63 Director 1973-Present2001-2003 Senior Vice President 1970-Present Vice President of AEP 1974-Present Secretary of AEP 1994-Present Executive Vice President-Chief Financial OfficerPresident-Nuclear Operations of the Service Corporation 1991-Present2000-2001 Senior Vice President-Finance of the Service Corporation 1974-1990 James J. Markowsky 51 Director 1989-Present Vice President 1995-Present Executive Vice President-PowerPresident-Nuclear Generation of the Service Corporation 1996-Present1998-2000 Vice President of Pacific Gas & Electric and Plant Manager of its Diablo Canyon Nuclear Generating Station 1996-1998 Susan Tomasky.................. 49 Director and Vice President of APCo, I&M, OPCo, SWEPCo and TCC 2000-Present Executive Vice President-EngineeringPresident-Policy, Finance and ConstructionStrategic Planning of the Service Corporation 1993-19962001-Present Executive Vice President-Legal, Policy and Corporate Communications and General Counsel of the Service Corporation 2000-2001 Senior Vice President and Chief EngineerGeneral Counsel of the Service Corporation 1988-1993 (a) Positions are with OPCo unless otherwise indicated. PART II Item 5.MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AEP. AEP Common Stock is traded principally on the New York Stock Exchange. The following table sets forth for the calendar periods indicated the high and low sales prices for the Common Stock as reported on the New York Stock Exchange Compsite Tape and the amount of cash dividends paid per share of Common Stock. At December 31, 1995, AEP had approximately 170,980 shareholders of record. AEGCO, APCO, CSPCO, I&M, KEPCO AND OPCO. The information required by this item is not applicable as the common stock of all these companies is held solely by AEP. PER SHARE MARKET PRICE QUARTER ENDED HIGH LOW DIVIDEND(1) March 1994 $37-3/8 $29-7/8 $.60 June 1994 32-7/8 27-1/4 .60 September 1994 31-3/4 28 .60 December 1994 33-5/8 30-1/2 .60 March 1995 35-3/4 31-1/4 .60 June 1995 35-3/8 31-1/2 .60 September 1995 36-1/2 33-5/8 .60 December 1995 40-5/8 35-7/8 .60 (1)See Note 51998-2000 Hogan & Hartson (law firm) 1997-1998 General Counsel of the Notes to the Consolidated Financial Statements of AEP for information regarding restrictions on payment of dividends.FERC 1993-1997
- --------------- (a) Dr. Draper is a director of BCP Management, Inc., which is the general partner of Borden Chemicals and Plastics L.P. (b) Dr. Draper, Messrs. Fayne, Hagan, Powers and Shockley and Ms. Tomasky are directors of AEGCo, CSPCo, KPCo, PSO and TNC. Dr. Draper and Mr. Shockley are also directors of AEP. PART II - -------------------------------------------------------------------------------- Item 6. SELECTED FINANCIAL DATA AEGCO. Omitted pursuant to Instruction J(2)(a).5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - -------------------------------------------------------------------------------- AEP. The information required by this item is incorporated herein by reference to the material under Common Stock and Dividend Information in the 2002 Annual Report. AEGCO, APCO, CSPCO, I&M, KPCO, OPCO, PSO, SWEPCO, TCC AND TNC. The common stock of these companies is held solely by AEP. The amounts of cash dividends on common stock paid by these companies to AEP during 2002 and 2001 are incorporated by reference to the material under Statement of Retained Earningsin the 2002 Annual Reports. Item 6. SELECTED CONSOLIDATED FINANCIAL DATA in the- -------------------------------------------------------------------------------- AEGCO, CSPCO, KPCO, PSO AND TNC. Omitted pursuant to Instruction I(2)(a). AEP, 1995 Annual Report (for the fiscal year ended December 31, 1995). APCO.APCO, I&M, OPCO, SWEPCO AND TCC. The information required by this item is incorporated herein by reference to the material under SELECTED CONSOLIDATED FINANCIAL DATASelected Consolidated Financial Data in the APCo 19952002 Annual Report (for the fiscal year ended December 31, 1995). CSPCO.Reports. 32 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -------------------------------------------------------------------------------- AEGCO, CSPCO, KPCO, PSO AND TNC. Omitted pursuant to Instruction J(2)I(2)(a). Management's narrative analysis of the results of operations and other information required by Instruction I(2)(a) is incorporated herein by reference to the material under Management's Narrative Analysis of Results of Operations in the 2002 Annual Reports. AEP, APCO, I&M.&M, OPCO, SWEPCO AND TCC. The information required by this item is incorporated herein by reference to the material under SELECTED CONSOLIDATED FINANCIAL DATAManagement's Discussion and Analysis of Results of Operations and Management's Discussion and Analysis of Financial Condition, Contingencies and Other Matters in the 2002 Annual Reports. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- AEGCO, AEP, APCO, CSPCO, I&M, 1995 Annual Report (for the fiscal year ended December 31, 1995). KEPCO. Omitted pursuant to Instruction J(2)(a). OPCO.KPCO, OPCO, PSO, SWEPCO, TCC AND TNC. The information required by this item is incorporated herein by reference to the material under SELECTED CONSOLIDATED FINANCIAL DATAManagement's Discussion and Analysis of Financial Condition, Contingencies and Other Matters in the OPCo 19952002 Annual Report (for the fiscal year ended December 31, 1995).Reports. Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND8. FINANCIAL CONDITION AEGCO. Omitted pursuant to Instruction J(2)(a). Management's narrative analysis of the results of operations and other information required by Instruction J(2)(a) is incorporated herein by reference to the material under MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS in the AEGCo 1995 Annual Report (for the fiscal year ended December 31, 1995). AEP. The information required by this item is incorporated herein by reference to the material under MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION in the AEP 1995 Annual Report (for the fiscal year ended December 31, 1995). APCO. The information required by this item is incorporated herein by reference to the material under MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION in the APCo 1995 Annual Report (for the fiscal year ended December 31, 1995). CSPCO. Omitted pursuant to Instruction J(2)(a). Management's narrative analysis of the results of operations and other information required by Instruction J(2)(a) is incorporated herein by reference to the material under MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS in the CSPCo 1995 Annual Report (for the fiscal year ended December 31, 1995). I&M. The information required by this item is incorporated herein by reference to the material under MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION in the I&M 1995 Annual Report (for the fiscal year ended December 31, 1995). KEPCO. Omitted pursuant to Instruction J(2)(a). Management's narrative analysis of the results of operations and other information required by Instruction J(2)(a) is incorporated herein by reference to the material under MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS in the KEPCo 1995 Annual Report (for the fiscal year ended December 31, 1995). OPCO. The information required by this item is incorporated herein by reference to the material under MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION in the OPCo 1995 Annual Report (for the fiscal year ended December 31, 1995). Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AEGCO.- -------------------------------------------------------------------------------- AEGCO, AEP, APCO, CSPCO, I&M, KPCO, OPCO, PSO, SWEPCO, TCC AND TNC. The information required by this item is incorporated herein by reference to the financial statements and supplementary datafinancial statement schedules described under Item 14 herein. AEP. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 14 herein. APCO. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 14 herein. CSPCO. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 14 herein. I&M. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 14 herein. KEPCO. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 14 herein. OPCO. The information required by this item is incorporated herein by reference to the financial statements and supplementary data described under Item 1415 herein. Item 9.CHANGES9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - -------------------------------------------------------------------------------- AEGCO, AEP, APCO, CSPCO, I&M, KEPCOKPCO, OPCO, PSO, SWEPCO, TCC AND OPCO.TNC. None. PART III - -------------------------------------------------------------------------------- Item 10.DIRECTORS10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS AEGCO.- -------------------------------------------------------------------------------- AEGCO, CSPCO, KPCO, PSO AND TNC. Omitted pursuant to Instruction J(2)I(2)(c). AEP. The information required by this item is incorporated herein by reference to the material under NOMINEES FOR DIRECTORNominees for Director and SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERSSection 16(a) Beneficial Ownership Reporting Compliance of the definitive proxy statement of AEP dated March 9, 1996, for the 19962003 annual meeting of shareholders.shareholders, to be filed within 120 days after December 31, 2002. Reference also is made to the information under the caption EXECUTIVE OFFICERS OF THE REGISTRANTSExecutive Officers of the Registrants in Part I of this report. APCO.APCO AND OPCO. The information required by this item is incorporated herein by reference to the material under ELECTION OF DIRECTORSElection of Directors of the definitive information statement of APCoeach company for the 19962003 annual meeting of stockholders, to be filed within 120 days after December 31, 1995.2002. Reference also is made to the information under the caption EXECUTIVE OFFICERS OF THE REGISTRANTSExecutive Officers of the Registrants in Part I of this report. CSPCO. Omitted pursuantSWEPCO AND TCC. The information required by this item is incorporated herein by reference to Instruction J(2)(c).the material under Election of Directors of the definitive information statement of APCo for the 2003 annual meeting of stockholders, to be filed within 120 days after December 31, 2002. Reference also is made to the information under the caption Executive Officers of the Registrants in Part I of this report. I&M. The names of the directors and executive officers of I&M, the positions they hold with I&M, their ages as of March 15, 1996,12, 2003, and a brief account of their business experience during the past five years appear below. The directorsbelow and executive officersunder the caption Executive Officers of the Registrants in Part I&M are elected annually to serve a one-year term. of this report. 33
NAME AGE POSITION (A)(B)(C) PERIOD - ---- --- ------------ ------ E. Linn Draper, Jr. 54K. G. Boyd..................... 51 Director 1992-Present Chairman of the Board and Chief Executive Officer 1993-Present1997-Present Vice President 1992-1993 Chairman(Appointed) -- Fort Wayne Region Distribution Operations 2000-Present Indiana Region Manager 1997-2000 John E. Ehler.................. 46 Director 2001-Present Manager of the Board, PresidentDistribution Systems-Fort Wayne District 2000-Present Region Operations Manager 1997-2000 David L. Lahrman............... 51 Director and Chief Executive Officer of AEP andManager, Region Support 2001-Present Fort Wayne District Manager 1997-2001 Marc E. Lewis.................. 48 Director 2001-Present Assistant General Counsel of the Service Corporation 1993-Present President of AEP 1992-1993 President and Chief Operating Officer2001-Present Senior Counsel of the Service Corporation 1992-1993 Chairman of the Board, President and Chief Executive Officer of Gulf States Utilities Company 1987-1992 Peter J. DeMaria 61 Director 1992-Present Vice President 1991-Present Controller 1995-Present Treasurer 1978-1995 Controller of AEP 1995-Present Treasurer of AEP 1978-1995 Executive Vice President-Administration and Chief Accounting Officer2000-2001 Senior Attorney of the Service Corporation 1984-Present Treasurer of the Service Corporation 1989-1990 William N. D'Onofrio 481994-2000 Susanne M. Moorman............. 53 Director 1984-Present Vice President 1984-1995 Director-Regions of the Service Corporation 1996-Present William J. Lhota 56 Director 1989-Present President and Chief Operating Officer 1996-Present Vice President 1989-1995 Executive Vice President of the Service Corporation 1993-Present Executive Vice President-Operations of the Service Corporation 1989-1993 Gerald P. Maloney 63 Director 1978-Present Vice President 1970-Present Vice President of AEP 1974-Present Secretary of AEP 1994-Present Executive Vice President-Chief Financial Officer of the Service Corporation 1991-Present Senior Vice President-Finance of the Service Corporation 1974-1990 James J. Markowsky 51 Director 1995-Present Vice President 1993-Present Executive Vice President-Power Generation of the Service Corporation 1996-Present Executive Vice President-Engineering & Construction of the Service Corporation 1993-1996 Senior Vice President and Chief Engineer of the Service Corporation 1988-1993 A. H. Potter 48 Director 1994-Present Transmission and Distribution Director 1987-Present D. M. Trenary 59 Director 1994-Present Indiana RegionGeneral Manager, 1994-Present DivisionCommunity Services 2000-Present Manager, 1989-1994 W. E. Walters 48 Director 1991-Present Michiana Region Manager 1994-Present Executive Assistant to President 1987-1994 C.Customer Services Operations 1997-2000 John R. Boyle, III 48Sampson................ 50 Director and Vice President 1996-Present1999-Present Indiana State President and Chief Operating Officer of KEPCo1990-1995 G. A. Clark 44 Director 1995-Present Governmental Affairs2000-Present Indiana & Michigan State President 1999-2000 Site Vice President, Cook Nuclear Plant 1998-1999 Plant Manager, 1996-Present General Counsel 1994-1995 General Attorney 1991-1993Cook Nuclear Plant 1996-1998 D. B. Synowiec 52Synowiec................. 59 Director 1995-Present Plant Manager, 1990-Present J. H. Vipperman 55 Director and Vice President 1996-Present Executive Vice President- Energy Delivery of the Service Corporation 1996-Present President and Chief Operating Officer of APCo 1990-1995Rockport Plant 1990-Present
- --------------- (a) Positions are with I&M unless otherwise indicated. (b) Dr. Draper is a director of VECTRA Technologies, Inc. and Mr. Lhota is a director of Huntington Bancshares Incorporated. (c) Drs. Draper and Markowsky and Messrs. DeMaria, Lhota and Maloney are directors of AEGCo, APCo, CSPCo, KEPCo and OPCo. Dr. Draper and Messrs. DeMaria and Maloney are also directors of AEP. Mr. Vipperman is a director of APCo, CSPCo, KEPCo and OPCo. KEPCo. Omitted pursuant to Instruction J(2)(c). OPCo. The information required by this item is incorporated herein by reference to the material under the heading Election of Directors of the definitive information statement of OPCo for the 1996 annual meeting of shareholders, to be filed within 120 days after December 31, 1995. Reference also is made to the information under the caption EXECUTIVE OFFICERS OF THE REGISTRANTS in Part I of this report. Item 11. EXECUTIVE COMPENSATION AEGCO. Omitted pursuant to Instruction J(2)(c). AEP. The information required by this item is incorporated herein by reference to the material under COMPENSATION OF DIRECTORS, EXECUTIVE COMPENSATION - -------------------------------------------------------------------------------- AEGCO, CSPCO, KPCO, PSO AND TNC. Omitted pursuant to Instruction I(2)(c). AEP. The information required by this item is incorporated herein by reference to the material under Directors Compensation and Stock Ownership Guidelines, Executive Compensation and the performance graph of the definitive proxy statement of AEP, dated March 9, 1996, for the 1996 annual meeting of shareholders. APCO. The information required by this item is incorporated herein by reference to the material under EXECUTIVE COMPENSATION of the definitive information statement of APCo for the 1996 annual meeting of stockholders, to be filed within 120 days after December 31, 1995. CSPCO. Omitted pursuant to Instruction J(2)(c). KEPCO. Omitted pursuant to Instruction J(2)(c). OPCO. The information required by this item is incorporated herein by reference to the material under EXECUTIVE COMPENSATION of the definitive information statement of OPCo for the 1996 annual meeting of shareholders, to be filed within 120 days after December 31, 1995. I&M. Certain executive officers of I&M are employees of the Service Corporation. The salaries of these executive officers are paid by the Service Corporation and a portion of their salaries has been allocated and charged to I&M. The following table shows for 1995, 1994 and 1993 the compensation earned from all AEP System companies by the chief executive officer and four other most highly compensated executive officers (as defined by regulations of the SEC) of I&M at December 31, 1995. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION All Other Salary Bonus PAYOUTS Compensation NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) LTIP PAYOUTS($)(1) ($)(2) E. LINN DRAPER, JR. - chairman of the board, 1995 685,000 236,325 334,851 30,790 president and chief executive officer of the 1994 620,000 209,436 137,362 29,385 Company and the Service Corporation; chairman 1993 538,333 148,742 18,180 and chief executive officer of other subsidiaries PETER J. DEMARIA - Controller and director of the 1995 330,000 113,850 143,829 20,050 Company; executive vice president-administration 1994 305,000 103,029 59,032 18,750 and chief accounting officer and director of the 1993 280,000 77,364 17,811 Service Corporation; vice president, controller and director of other subsidiaries G. P. MALONEY - Vice president, secretary and 1995 330,000 113,850 141,582 20,060 director of the Company; executive vice president 1994 300,000 101,340 58,094 19,745 - chief financial officer and director of the 1993 269,000 74,325 18,000 Service Corporation; vice president and director of other subsidiaries WILLIAM J. LHOTA - Executive vice president and 1995 300,000 103,500 132,592 19,140 director of the Service Corporation; president, 1994 280,000 94,584 54,409 19,185 chief operating officer and director of other 1993 249,000 68,799 17,160 subsidiaries JAMES J. MARKOWSKY - Executive vice president 1995 285,000 98,325 126,599 17,515 - power generation and director of the Service 1994 267,000 90,193 51,930 14,755 Corporation; vice president and director of 1993 247,000 65,259 11,165 other subsidiaries (1)Amounts in the "Bonus" column reflect payments under the Management Incentive Compensation Plan for performance measured for each of the years ended December 31, 1993, 1994 and 1995. Payments are made in March of the subsequent year. Amounts for 1995 are estimates but should not change significantly. Amounts in the "Long-Term Compensation" column reflect performance share units earned under the Performance Share Incentive Plan (which became effective January 1, 1994) for the one-year and two-year transition performance periods ending December 31, 1994 and 1995, respectively. For 1995, their value was calculated by multiplying the $40.50 closing price of AEP's Common Stock as reported on the New York Stock Exchange on December 29, 1995, the last trading day of fiscal year 1995, by the number of units earned. See below under "Long-Term Incentive Plans - Awards in 1995" and pages 13 and 14 for additional information. (2)For 1995, includes (i) employer matching contributions under the AEP System Employees Savings Plan: $4,500 for each of the named executive officers; (ii) employer matching contributions under the AEP System Supplemental Savings Plan (which became effective January 1, 1994), a non-qualified plan designed to supplement the AEP Savings Plan: Dr. Draper, $16,050; Mr. DeMaria, $5,400; Mr. Maloney, $5,400; Mr. Lhota, $4,500; and Dr. Markowsky, $4,050; and (iii) subsidiary companies director fees: Dr. Draper, $10,240; Mr. DeMaria, $10,150; Mr. Maloney, $10,160; Mr. Lhota, $10,140; and Dr. Markowsky, $8,965. LONG-TERM INCENTIVE PLANS - AWARDS IN 1995 Each of the awards set forth below constitutes a grant of performance share units, which represent units equivalent to shares of Common Stock, pursuant to the Company's Performance Share Incentive Plan. Since it is not possible to predict future dividends and the price of AEP Common Stock, credits of performance share units in amounts equal to the dividends that would have been paid if the performance share units were granted in the form of shares of Common Stock are not included in the table. The ability to earn performance share units is tied to achieving specified levels of total shareholder return ("TSR") relative to the S&P Electric Utility Index. Notwithstanding AEP's TSR ranking, no performance share units are earned unless AEP shareholders realize a positive TSR over the relevant three-year performance period. The Human Resources Committee may, at its discretion, reduce the number of performance share units otherwise earned. In accordance with the performance goals established for the periods set forth below, the threshold, target and maximum awards are equal to 25%, 100% and 200%, respectively, of the performance share units held. No payment will be made for performance below the threshold. Payments of earned awards are deferred in the form of restricted stock units (equivalent to shares of AEP Common Stock) until the officer has met the equivalent stock ownership target discussed in the Human Resources Committee Report. Once officers meet and maintain their respective targets, they may elect either to continue to defer or to receive further earned awards in cash and/or Common Stock.
ESTIMATED FUTURE PAYOUTS OF PERFORMANCE PERFORMANCE SHARE UNITS UNDER NUMBER OF PERIOD UNTIL NON-STOCK PRICE-BASED PLAN Performance Maturation Threshold Target Maximum NAME SHARE UNITS OR PAYOUT (#) (#) (#) E. L. Draper, Jr. 8,302 1995-1997 2,075 8,302 16,604 P. J. DeMaria 3,499 1995-1997 875 3,499 6,998 G. P. Maloney 3,499 1995-1997 875 3,499 6,998 W. J. Lhota 3,181 1995-1997 795 3,181 6,362 J. J. Markowsky 3,022 1995-1997 755 3,022 6,044
RETIREMENT BENEFITS The American Electric Power System Retirement Plan provides pensions for all employees of AEP System companies (except for employees coveredthe 2003 annual meeting of shareholders to be filed within 120 days after December 31, 2002. APCO AND OPCO. The information required by certain collective bargaining agreements), includingthis item is incorporated herein by reference to the executive officersmaterial under Executive Compensation of the Company. The Retirement Plan is a noncontributory defined benefit plan. The following table shows the approximate annual annuities under the Retirement Plan that would be payable to employees in certain higher salary classifications, assuming retirement at age 65 after various periodsdefinitive information statement of service. PENSION PLAN TABLE
HIGHEST AVERAGE YEARS OF ACCREDITED SERVICE ANNUAL EARNINGS 15 20 25 30 35 40 45 $ 300,000 $ 69,930 $ 93,240 $116,550 $139,860 $163,170 $183,120 $203,070 400,000 93,930 125,240 156,550 187,860 219,170 245,770 272,370 500,000 117,930 157,240 196,550 235,860 275,170 308,420 341,670 700,000 165,930 221,240 276,550 331,860 387,170 433,720 480,270 900,000 213,930 285,240 356,550 427,860 499,170 559,020 618,870 1,100,000 261,930 349,240 436,550 523,860 611,170 684,320 757,470
The amounts shown in the table are the straight life annuities payable under the Retirement Plan without reductioneach company for the joint and survivor annuity. Retirement benefits listed in2003 annual meeting of stockholders, to be filed within 120 days after December 31, 2002. I&M, SWEPCO AND TCC. The information required by this item is incorporated herein by reference to the table are not subject to any deduction for Social Security or other offset amounts. The retirement annuity is reduced 3% per year inmaterial under Executive Compensationof the casedefinitive information statement of retirement between ages 60 and 62 and further reduced 6% per year in the case of retirement between ages 55 and 60. If an employee retires after age 62, there is no reduction in the retirement annuity. The Company maintains a supplemental retirement plan which providesAPCo for the payment2003 annual meeting of benefits that are not payable under the Retirement Plan due primarilystockholders, to limitations imposed by Federal tax law on benefits paid by qualified plans. The table includes supplemental retirement benefits. Compensation upon which retirement benefits are based, for the executive officers named in the Summary Compensation Table above, consists of the average of the 36 consecutive months of the officer's highest aggregate salary and Management Incentive Compensation Plan awards, shown in the "Salary" and "Bonus" columns, respectively, of the Summary Compensation Table, out of the officer's most recent 10 years of service. As ofbe filed within 120 days after December 31, 1995, the number of full years of service applicable for retirement benefit calculation purposes for such officers were as follows: Dr. Draper, three years; Mr. DeMaria, 36 years; Mr. Maloney, 40 years; Mr. Lhota, 31 years; and Dr. Markowsky, 24 years. Dr. Draper's employment agreement described below provides him with a supplemental retirement annuity that credits him with 24 years of service in addition to his years of service credited under the Retirement Plan less his actual pension entitlement under the Retirement Plan and any pension entitlement from the Gulf States Utilities Company Trusteed Retirement Plan, a plan sponsored by his prior employer. The Company will pay supplemental retirement benefits to 19 AEP System employees (including Messrs. DeMaria, Maloney and Lhota and Dr. Markowsky) whose pensions may be adversely affected by amendments to the Retirement Plan made as a result of the Tax Reform Act of 1986. Such payments, if any, will be equal to any reduction occurring because of such amendments. Assuming retirement in 1996 of the executive officers named in the Summary Compensation Table, only Mr. Maloney would be affected and his annual supplemental benefit would be $972. The Company made available a voluntary deferred-compensation program in 1982 and 1986, which permitted certain members of AEP System management to defer receipt of a portion of their salaries. Under this program, a participant was able to defer up to 10% or 15% annually (depending on the terms of the program offered), over a four-year period, of his or her salary, and receive supplemental retirement or survivor benefit payments over a 15-year period. The amount of supplemental retirement payments received is dependent upon the amount deferred, age at the time the deferral election was made, and number of years until the participant retires. The following table sets forth, for the executive officers named in the Summary Compensation Table, the amounts of annual deferrals and, assuming retirement at age 65, annual supplemental retirement payments under the 1982 and 1986 programs.
1982 PROGRAM 1986 PROGRAM Annual Amount of Annual Amount of Annual Supplemental Annual Supplemental Amount Retirement Amount Retirement Deferred Payment Deferred Payment NAME (4-YEAR PERIOD) (15-YEAR PERIOD) (4-YEAR PERIOD) (15-YEAR PERIOD) P. J. DeMaria $10,000 $52,000 $13,000 $53,300 G. P. Maloney 15,000 67,500 16,000 56,400
EMPLOYMENT AGREEMENT Dr. Draper has a contract with the Company and AEP Service Corporation which provides for his employment for an initial term from no later than March 15, 1992 until March 15, 1997. Dr. Draper commenced his employment with the Company and AEP Service Corporation on March 1, 1992. The Company or AEP Service Corporation may terminate the contract at any time and, if this is done for reasons other than cause and other than as a result of Dr. Draper's death or permanent disability, AEP Service Corporation must pay Dr. Draper's then base salary through March 15, 1997, less any amounts received by Dr. Draper from other employment. Directors of I&M receive a fee of $100 for each meeting of the Board of Directors attended in addition to their salaries. The AEP System is an integrated electric utility system and, as a result, the member companies of the AEP System have contractual, financial and other business relationships with the other member companies, such as participation in the AEP System savings and retirement plans and tax returns, sales of electricity, transportation and handling of fuel, sales or rentals of property and interest or dividend payments on the securities held by the companies' respective parents. 2002. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AEGCO.AND RELATED STOCKHOLDER MATTERS - -------------------------------------------------------------------------------- AEGCO, CSPCO, KPCO, PSO AND TNC. Omitted pursuant to Instruction J(2)I(2)(c). AEP. The information required by this item is incorporated herein by reference to the material under Share Ownership of Directors and Executive Officers of the definitive proxy statement of AEP dated March 9, 1996, for the 19962003 annual meeting of shareholders. APCO.shareholders to be filed within 120 days after December 31, 2002. APCO AND OPCO. The information required by this item is incorporated herein by reference to the material under Share Ownership of Directors and Executive Officers in the definitive information statementstate- 34 ment of APCoeach company for the 19952003 annual meeting of stockholders, to be filed within 120 days after December 31, 1995. CSPCO. Omitted pursuant to Instruction J(2)(c).2002. I&M. All 1,400,000 outstanding shares of Common Stock, no par value, of I&M are directly and beneficially held by AEP. Holders of the Cumulative Preferred Stock of I&M generally have no voting rights, except with respect to certain corporate actions and in the event of certain defaults in the payment of dividends on such shares. SWEPCO AND TCC. The information required by this item is incorporated herein by reference to the material under Share Ownership of Directors and Executive Officers in the definitive information statement of APCo for the 2003 annual meeting of stockholders, to be filed within 120 days after December 31, 2002. The table below shows the number of shares of AEP Common Stock and stock- basedstock-based units that were beneficially owned, directly or indirectly, as of January 1, 1996,2003, by each director and nominee of I&M and each of the executive officers of I&M named in the summary compensation table, and by all directors and executive officers of I&M as a group. It is based on information provided to I&M by such persons. No such person owns any shares of any series of the Cumulative Preferred Stock of I&M. Unless otherwise noted, each person has sole voting power and investment power over the number of shares of AEP Common Stock and stock-based units set forth opposite his or her name. Fractions of shares and units have been rounded to the nearest whole number.
STOCK NAME SHARES UNITS(a)(A) UNITS (B) TOTAL - ---- ---------- --------- --------- Coulter R. Boyle, III 3,470(b) 629 4,099 Gregory A. Clark 833(b) 327 1,160 Peter J. DeMaria 7,356(b)(c)(d)(e)(f) 5,391 12,747 William N. D'Onofrio 4,154(b)(e) 492 4,646Karl G. Boyd................................................ 10,675 607 11,282 E. Linn Draper, Jr. 6,119(b)........................................ 472,034(c) 117,803 589,837 John E. Ehler............................................... 11 -- 11 Henry W. Fayne.............................................. 139,787(d) 12,362 152,149 Thomas M. Hagan............................................. 54,392 140 54,532 David L. Lahrman............................................ 430 -- 430 Marc E. Lewis............................................... 3,290 -- 3,290 Susanne M. Moorman.......................................... 908 -- 908 Robert P. Powers............................................ 65,862 1,293 67,155 John R. Sampson............................................. 10,643 173 10,816 Thomas V. Shockley, III..................................... 211,067(d)(e) 11,984 18,103 William J. Lhota 13,064(b)(d)(e) 4,944 18,008 Gerald P. Maloney 5,227(b)(d)(e) 5,306 10,533 James J. Markowsky 6,631(b)(f) 4,714 11,345 Albert H. Potter 3,084(b)(e) - 3,084-- 211,067 David B. Synowiec 2,214(b) 398 2,612 Dale M. Trenary 64(b) 412 476 Joseph H. Vipperman 5,092(b)(e) 3,365 8,457 William E. Walters 4,738(b) 278 5,016Synowiec........................................... 7,645 182 7,827 Susan Tomasky............................................... 134,449(d) 6,126 140,575 All Directors and Executive Officers 147,277(d)(g) 38,240 185,517Officers........................ 1,196,424(d)(f) 138,686 1,335,110
- --------------- (a)This column includes amounts deferred in stock units and held under the Management Incentive Compensation Plan and Performance Share Incentive Plan. (b)Includes shares and share equivalents held in the following plansAEP Retirement Savings Plan in the amounts listed below:
AEP EMPLOYEE STOCK AEP PERFORMANCE AEP EMPLOYEESRETIREMENT SAVINGS OWNERSHIP PLAN (SHARES) SHARE INCENTIVE PLAN (SHARES)NAME PLAN (SHARE EQUIVALENTS) ---- ------------------------ Mr. Boyd.......................... 675 Dr. Draper........................ 4,659 Mr. Ehler......................... 11 Mr. Fayne......................... 5,804 Mr. Hagan......................... 2,515 Mr. Lahrman....................... 430 Mr. Lewis......................... 1,207
AEP RETIREMENT SAVINGS NAME PLAN (SHARE EQUIVALENTS) ---- ------------------------ Ms. Moorman....................... 908 Mr. Boyle 47 316 3,107Powers........................ 596 Mr. Clark 8 - 825Sampson....................... 643 Mr. DeMaria 83 944 2,705Shockley...................... 7,104 Mr. D'Onofrio 59 - 3,595 Dr. Draper - 2,196 1,958 Mr. Lhota 60 812 10,824 Mr. Maloney 85 867 2,775 Dr. Markowsky 66 830 5,718 Mr. Potter 41 - 3,029 Mr. Synowiec 53 - 2,161 Mr. Trenary 41 - 23 Mr. Vipperman 80 564 4,391 Mr. Walters 45 - 4,693Synowiec...................... 4,312 Ms. Tomasky....................... 1,116 All Directors and Executive Officers 668 6,529 45,804Officers........................ 29,980
With respect to the shares and share equivalents held in these plans,the AEP Retirement Savings Plan, such persons have sole voting power, but the investment/disposition power is subject to the terms of suchthe Plan. Also, includes the following numbers of shares attributable to options exercisable within 60 days: Mr. Boyd, 10,000; Dr. Draper, 466,666; 35 Mr. Hagan, 41,666; Mr. Lewis, 2,083; Mr. Powers, 65,266; Mr. Sampson, 10,000; Mr. Shockley, 166,666; Mr. Synowiec, 3,333; and Mr. Fayne and Ms. Tomasky, 133,333. (b) This column includes amounts deferred in stock units and held under AEP's officer benefit plans. (c)Mr. DeMaria owns 100 Includes 661 shares of Cumulative Preferred Shares 9.50% Series, $100 par value, of Columbus Southern Power Company.held by Dr. Draper in joint tenancy with a family member. (d)Does not include, for Messrs. DeMaria, LhotaFayne, and Maloney,Shockley and Ms. Tomasky, 85,231 shares in the American Electric Power System Educational Trust Fund over which Messrs. DeMaria, LhotaFayne and MaloneyShockley and Ms. Tomasky share voting and investment power as trustees (they disclaim beneficial ownership). The amount of shares shown for all directors and executive officers as a group includes these shares. (e)Includes the following numbers of shares held in joint tenancy with a family member: Mr. DeMaria, 1,232; Mr. D'Onofrio, 500; Dr. Draper, 1,965; Mr. Lhota, 1,368; Mr. Maloney, 1,500; Mr. Potter, 14; and Mr. Vipperman, 57. (f)Includes the following numbers of496 shares held by family members of Mr. Shockley over which he disclaimed beneficial ownership is disclaimed: Mr. DeMaria, 2,392; and Dr. Markowsky, 17. (g)ownership. (f) Represents less than 1% of the total number of shares outstanding. KEPCO. OmittedEQUITY COMPENSATION PLAN INFORMATION The following table summarizes the ability of AEP to issue common stock pursuant to Instruction J(2)(c). OPCO.equity compensation plans as of December 31, 2002:
NUMBER OF SECURITIES NUMBER OF REMAINING AVAILABLE SECURITIES TO BE FOR FUTURE ISSUANCE ISSUED UPON WEIGHTED AVERAGE UNDER EQUITY EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS OUTSTANDING OPTIONS OUTSTANDING (EXCLUDING SECURITIES WARRANTS AND OPTIONS, WARRANTS REFLECTED IN RIGHTS AND RIGHTS COLUMN (a)) PLAN CATEGORY (a) (b) (c) - ------------- ------------------- ------------------- --------------------- Equity compensation plans approved by security holders(1)................................... 8,779,217 $33.5767 6,901,693(2) Equity compensation plans not approved by security holders............................. 0 N/A 0 Total........................................ 8,779,217 $33.5767 6,901,693
- ------------------------------------ (1) Consists of shares to be issued upon exercise of outstanding options granted under the American Electric Power System 2000 Long-Term Incentive Plan, the CSW 1992 Long-Term Incentive Plan (CSW Plan) and the AEP Deferred Compensation and Stock Plan for Non-Employee Directors. The information required by this item is incorporated herein by referenceCSW Plan was in effect prior to the materialconsummation of the AEP-CSW merger. All unexercised options granted under Share Ownershipthe CSW Plan were converted into 0.6 options to purchase AEP common shares, vested on the merger date and will expire ten years after their grant date. No additional options will be issued under the CSW Plan. (2) Excludes shares available for further issuance under the AEP Deferred Compensation and Stock Plan for Non-Employee Directors, which does not have a limit on the number of Directors and Executive Officers inshares which may be issued. The amount of shares is capped, however, by the definitive information statement of OPCo forannual retainer amount paid to the 1996 annual meeting of shareholders, to be filed within 120 days after December 31, 1995.Non-Employee Directors. 36 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AEP. The- -------------------------------------------------------------------------------- AEP, AEGCO, APCO, CSPCO, I&M, KPCO, OPCO, PSO, SWEPCO, TCC AND TNC: None. PART IV - -------------------------------------------------------------------------------- Item 14. CONTROLS AND PROCEDURES - -------------------------------------------------------------------------------- AEP maintains disclosure controls and procedures designed to ensure that the information AEP must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. AEP's principal executive officer and principal financial officer have reviewed and evaluated AEP's disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of a date within 90 days prior to the filing date of this report (the Evaluation Date). Such officers have concluded that, as of the Evaluation Date, AEP's disclosure controls and procedures are effective in accumulating and communicating to management on a timely basis information required by this item is incorporated herein by reference to be disclosed in AEP's periodic filings under the material under Transactions With Management ofExchange Act. Since the definitive proxy statement of AEP, dated March 9, 1996, for the 1996 annual meeting of shareholders. APCO, I&M AND OPCO. None. AEGCO, CSPCO, AND KEPCO. Omitted pursuant to Instruction J(2)(c). PART IVEvaluation Date, there have not been any significant changes in AEP's internal controls, or in other factors that could significantly affect these controls. Item 14.EXHIBITS,15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------------- (a)The following documents are filed as a part of this report: 1.FINANCIAL1. FINANCIAL STATEMENTS: The following financial statements have been incorporated herein by reference pursuant to Item 8.
PAGE ---- AEGCo: Independent Auditors' Report; Statements of Income for the years ended December 31, 2002, 2001, and 2000; Statements of Retained Earnings for the years ended December 31, 2002, 2001, and 2000; Balance Sheets as of December 31, 2002 and 2001; Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000; Statements of Capitalization as of December 31, 2002 and 2001; Combined Notes to Financial Statements; Independent Auditors' Report. AEP and Subsidiary Companies: Consolidated Statements of Operations for the years ended December 31, 2002, 2001, and 2000; Consolidated Balance Sheets as of December 31, 2002 and 2001; Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000; Consolidated Statements of Common Shareholders' Equity and Comprehensive Income for the years ended December 31, 2002, 2001, and 2000; Schedule of Consolidated Cumulative Preferred Stocks of Subsidiaries at December 31, 2002 and 2001; Schedule of Consolidated Long-term Debt of Subsidiaries at December 31, 2002 and 2001; Combined Notes to Consolidated Financial Statements; Independent Auditors' Report. APCo, CSPCo, I&M, PSO, SWEPCo and TCC: Consolidated Statements of Income for the years ended December 31, 2002, 2001, and 2000; Consolidated Statements of Comprehensive Income for the years ended December 31, 2002, 2001, and 2000; Consolidated Statements of Retained Earnings for the years ended December 31, 2002, 2001, and 2000; Consolidated Balance Sheets as of December 31, 2002 and 2001; Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000; Consolidated Statements of Capitalization as of December 31, 2002 and 2001; Schedule of Long-term Debt as of December 31, 2002 and 2001; Combined Notes to Consolidated Financial Statements; Independent Auditors' Report.
37 KPCo, OPCo and TNC: Statements of Income (or Statements of Operations) for the years ended December 31, 2002, 2001, and 2000; Statements of Comprehensive Income for the years ended December 31, 1995, 19942002, 2001, and 1993;2000; Statements of Retained Earnings for the years ended December 31, 1995, 19942002, 2001, and 1993;2000; Balance Sheets as of December 31, 2002 and 2001; Statements of Cash Flows for the years ended December 31, 1995, 19942002, 2001, and 1993; Balance Sheets2000; Statements of Capitalization as of December 31, 19952002 and 1994; Notes to Financial Statements. AEP and its subsidiaries consolidated: Consolidated Statements2001; Schedule of Income for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Consolidated Balance SheetsLong-term Debt as of December 31, 19952002 and 1994;2001; Combined Notes to Consolidated Financial Statements; Schedule of Consolidated Cumulative Preferred Stocks of Subsidiaries at December 31, 1995 and 1994; Schedule of Consolidated Long-term Debt of Subsidiaries at December 31, 1995 and 1994; Independent Auditors' Report. APCo: Independent Auditors' Report; Consolidated Statements of Income for the years ended December 31, 1995, 1995 and 1994; Consolidated Balance Sheets as of December 31, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Notes to Consolidated Financial Statements. CSPCo: Independent Auditors' Report; Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993; Consolidated Balance Sheets as of December 31, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Notes to Consolidated Financial Statements. I&M: Independent Auditors' Report; Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993; Consolidated Balance Sheets as of December 31, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Notes to Consolidated Financial Statements. KEPCo: Independent Auditors' Report; Statements of Income for the years ended December 31, 1995, 1994 and 1993; Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Balance Sheets as of December 31, 1995 and 1994; Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Notes to Financial Statements. OPCo: Independent Auditors' Report; Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993; Consolidated Balance Sheets as of December 31, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993; Notes to Consolidated Financial Statements. 2.FINANCIAL2. FINANCIAL STATEMENT SCHEDULES: Financial Statement Schedules are listed in the Index to S-1 Financial Statement Schedules (Certain schedules have been omitted because the required information is contained in the notes to financial statements or because such schedules are not required or are not applicable.) S-1applicable). Independent Auditors' Report S-2 3.EXHIBITS:3. EXHIBITS: Exhibits for AEGCo, AEP, APCo, CSPCo, I&M, KEPCoKPCo, OPCo, PSO, E-1 SWEPCo, TCC and OPCoTNC are listed in the Exhibit Index and are incorporated herein by reference E-1 (b) No Reports on Form 8-K were filed during the quarter ended December 31, 1995.Forms 8-K:
COMPANY REPORTING DATE OF REPORT ITEM REPORTED - ----------------- ----------------- ---------------------------------------------- APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC and TNC.................. November 18, 2002 Item 5. Other Events I&M.................................. November 22, 2002 Item 5. Other Events Item 7. Financial Statements and Exhibits I&M.................................. November 25, 2002 Item 5. Other Events Item 7. Financial Statements and Exhibits PSO.................................. November 26, 2002 Item 5. Other Events Item 7. Financial Statements and Exhibits
Reports on Forms 8-K/A:
COMPANY REPORTING DATE OF REPORT ITEM REPORTED - ----------------- ----------------- ---------------------------------------------- PSO, SWEPCo, TCC and TNC............. November 26, 2002 Item 7. Financial Statements and Exhibits
(c) Exhibits: See Exhibit Index beginning on page E-1. 38 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. AMERICAN ELECTRIC POWER COMPANY, INC. By: /s/ SUSAN TOMASKY ------------------------------------- (SUSAN TOMASKY, VICE PRESIDENT, SECRETARY AND CHIEF FINANCIAL OFFICER) Date: March 20, 2003 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- (I) PRINCIPAL EXECUTIVE OFFICER: *E. LINN DRAPER, JR. Chairman of the Board, March 20, 2003 President, Chief Executive Officer And Director (II) PRINCIPAL FINANCIAL OFFICER: /s/ SUSAN TOMASKY Vice President, Secretary and March 20, 2003 - ------------------------------------------------ Chief Financial Officer (SUSAN TOMASKY) (III) PRINCIPAL ACCOUNTING OFFICER: /s/ JOSEPH M. BUONAIUTO Controller and March 20, 2003 - ------------------------------------------------ Chief Accounting Officer (JOSEPH M. BUONAIUTO) (IV) A MAJORITY OF THE DIRECTORS: *E. R. BROOKS *DONALD M. CARLTON *JOHN P. DESBARRES *ROBERT W. FRI *WILLIAM R. HOWELL *LESTER A. HUDSON, JR. *LEONARD J. KUJAWA *RICHARD L. SANDOR *THOMAS V. SHOCKLEY, III *DONALD G. SMITH *LINDA GILLESPIE STUNTZ *KATHRYN D. SULLIVAN March 20, 2003 *By: /s/ SUSAN TOMASKY ------------------------------------------ (SUSAN TOMASKY, ATTORNEY-IN-FACT)
39 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. AEP GENERATING COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY,AEP TEXAS CENTRAL COMPANY AEP TEXAS NORTH COMPANY APPALACHIAN POWER COMPANY COLUMBUS SOUTHERN POWER COMPANY KENTUCKY POWER COMPANY OHIO POWER COMPANY PUBLIC SERVICE COMPANY OF OKLAHOMA SOUTHWESTERN ELECTRIC POWER COMPANY By: /s/ SUSAN TOMASKY ------------------------------------- (SUSAN TOMASKY, VICE PRESIDENT) Date: March 25, 199620, 2003 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE --------- ----- ---- (i) Principal Executive Officer:PRINCIPAL EXECUTIVE OFFICER: *E. LINN DRAPER, JR. Chairman of the Board, March 20, 2003 President, Chief Executive Officer andAnd Director (II)(ii) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY/s/ SUSAN TOMASKY Vice President, Secretary, March 25, 1996 (G. P. MALONEY)20, 2003 - ------------------------------------------------ Chief Financial Officer and Director (III)(SUSAN TOMASKY) (iii) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, (P. J. DEMARIA)/s/ JOSEPH M. BUONAIUTO Controller and March 25, 1996 and Director (IV)20, 2003 - ------------------------------------------------ Chief Accounting Officer (JOSEPH M. BUONAIUTO) (iv) A MAJORITY OF THE DIRECTORS: *HENRY W. FAYNE *JOHN R. JONES,*THOMAS M. HAGAN *A. A. PENA *ROBERT P. POWERS *THOMAS V. SHOCKLEY, III *WM. J. LHOTA *JAMES J. MARKOWSKYMarch 20, 2003 *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY,/s/ SUSAN TOMASKY ------------------------------------------ (SUSAN TOMASKY, ATTORNEY-IN-FACT)
40 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. AMERICAN ELECTRIC POWER COMPANY, INC. BY: /S/ G. P. MALONEY (G. P. MALONEY, VICE PRESIDENT) Date: March 25, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE (i) Principal Executive Officer: *E. LINN DRAPER, JR. Chairman of the Board, President, Chief Executive Officer and Director (II) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY Vice President, March 25, 1996 (G. P. MALONEY) Secretary and Director (III) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMAA Controller and Director March 25, 1996 (P. J. DEMARIA) (IV) A MAJORITY OF THE DIRECTORS: *ROBERT M. DUNCAN *ROBERT W. FRI *ARTHUR G. HANSEN *LESTER A. HUDSON, JR. *ANGUS E. PEYTON *TOY F. REID *DONALD G. SMITH *LINDA GILLESPIE STUNTZ *MORRIS TANENBAUM *ANN HAYMOND ZWINGER *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY, ATTORNEY-IN-FACT)
SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. APPALACHIANINDIANA MICHIGAN POWER COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY,By: /s/ SUSAN TOMASKY ------------------------------------- (SUSAN TOMASKY, VICE PRESIDENT) Date: March 25, 199620, 2003 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE --------- ----- ---- (i) Principal Executive Officer:PRINCIPAL EXECUTIVE OFFICER: *E. LINN DRAPER, JR. Chairman of the Board, March 20, 2003 President, Chief Executive Officer and Director (II)(ii) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY/s/ SUSAN TOMASKY Vice President, Secretary, March 25, 1996 (G. P. MALONEY)20, 2003 - ------------------------------------------------ Chief Financial Officer (SUSAN TOMASKY) and Director (III)(iii) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, March 25, 1996 (P. J. DEMARIA)/s/ JOSEPH M. BUONAIUTO Controller and Director (IV)March 20, 2003 - ------------------------------------------------ Chief Accounting Officer (JOSEPH M. BUONAIUTO) (iv) A MAJORITY OF THE DIRECTORS: *K. G. BOYD *JOHN E. EHLER *HENRY W. FAYNE *WM. J. LHOTA *JAMES J. MARKOWSKY *J. H. VIPPERMAN *By: /S/ G.*THOMAS M. HAGAN *DAVID L. LAHRMAN *MARC E. LEWIS *SUSANNE M. MOORMAN *ROBERT P. MALONEY March 25, 1996 (G. P. MALONEY, ATTORNEY-IN-FACT)
SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. COLUMBUS SOUTHERN POWER COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY, VICE PRESIDENT) Date: March 25, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE (i) Principal Executive Officer: *E. LINN DRAPER, JR. Chairman of the Board, Chief Executive Officer and Director (II) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY Vice President March 25, 1996 (G. P. MALONEY) and Director (III) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, ControllerMarch 25, 1996 (P. J. DEMARIA) Controller and Director (IV) A MAJORITY OF THE DIRECTORS: *HENRY FAYNE *WM. J. LHOTA *JAMES J. MARKOWSKY *J. H. VIPPERMAN *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY, ATTORNEY-IN-FACT)
SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. INDIANA MICHIGAN POWER COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY, VICE PRESIDENT) Date: March 25, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE (i) Principal Executive Officer: *E. LINN DRAPER, JR. Chairman of the Board, Chief Executive Officer and Director (II) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY Vice President March 25, 1996 (G. P. MALONEY) and Director (III) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, March 25, 1996 (P. J. DEMARIA) Controller and Director (IV) A MAJORITY OF THE DIRECTORS: *C.POWERS *JOHN R. BOYLE,SAMPSON *THOMAS V. SHOCKLEY, III *G. A. CLARK *W. N. D'ONOFRIO *WM. J. LHOTA *JAMES J. MARKOWSKY *A. H. POTTER *D. B. SYNOWIEC *D. M. TRENARY *J. H. VIPPERMAN *W. E. WALTERSMarch 20, 2003 *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY,/s/ SUSAN TOMASKY ------------------------------------------ (SUSAN TOMASKY, ATTORNEY-IN-FACT)
41 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. KENTUCKY POWER COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY, VICE PRESIDENT) Date:CERTIFICATIONS I, E. Linn Draper, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of: American Electric Power Company, Inc. AEP Generating Company AEP Texas Central Company AEP Texas North Company Appalachian Power Company Columbus Southern Power Company Indiana Michigan Power Company Kentucky Power Company Ohio Power Company Public Service Company of Oklahoma Southwestern Electric Power Company 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: March 25, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE (i) Principal Executive Officer: *E. LINN DRAPER, JR. Chairman of the Board, Chief Executive Officer and Director (II) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY Vice President March 25, 1996 (G. P. MALONEY) and Director (III) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, March 25, 1996 (P. J. DEMARIA) Controller and Director (IV) A MAJORITY OF THE DIRECTORS: *WM. J. LHOTA *JAMES J. MARKOWSKY *J. H. VIPPERMAN *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY, ATTORNEY-IN-FACT)
20, 2003 By: /s/ E. LINN DRAPER, JR. -------------------------------------- E. Linn Draper, Jr. Chief Executive Officer 42 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF. OHIO POWER COMPANY BY: /S/ G. P. MALONEY (G. P. MALONEY, VICE PRESIDENT) Date:I, Susan Tomasky, certify that: 1. I have reviewed this annual report on Form 10-K of: American Electric Power Company, Inc. AEP Generating Company AEP Texas Central Company AEP Texas North Company Appalachian Power Company Columbus Southern Power Company Indiana Michigan Power Company Kentucky Power Company Ohio Power Company Public Service Company of Oklahoma Southwestern Electric Power Company 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: March 25, 1996 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE (i) Principal Executive Officer: *E. LINN DRAPER, JR. Chairman of the Board, Chief Executive Officer and Director (II) PRINCIPAL FINANCIAL OFFICER: /S/ G. P. MALONEY Vice President March 25, 1996 (G. P. MALONEY) and Director (III) PRINCIPAL ACCOUNTING OFFICER: /S/ P. J. DEMARIA Vice President, March 25, 1996 (P. J. DEMARIA) Controller and Director (IV) A MAJORITY OF THE DIRECTORS: *HENRY FAYNE *WM. J. LHOTA *JAMES J. MARKOWSKY *J. H. VIPPERMAN *By: /S/ G. P. MALONEY March 25, 1996 (G. P. MALONEY, ATTORNEY-IN-FACT)
20, 2003 By: /s/ SUSAN TOMASKY -------------------------------------- Susan Tomasky Chief Financial Officer 43 INDEX TO FINANCIAL STATEMENT SCHEDULES PAGE INDEPENDENT AUDITORS' REPORT S-2 The following financial statement schedules for the years ended December 31, 1995, 1994 and 1993 are included in this report on the pages indicated. AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES Schedule II- Valuation and Qualifying Accounts and Reserves S-3 APPALACHIAN POWER COMPANY AND SUBSIDIARIES Schedule II- Valuation and Qualifying Accounts and Reserves S-3 COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Schedule II- Valuation and Qualifying Accounts and Reserves S-3 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Schedule II- Valuation and Qualifying Accounts and Reserves S-4 KENTUCKY POWER COMPANY Schedule II- Valuation and Qualifying Accounts and Reserves S-4 OHIO POWER COMPANY AND SUBSIDIARIES Schedule II- Valuation and Qualifying Accounts and Reserves
PAGE ---- INDEPENDENT AUDITORS' REPORT................................ S-2 The following financial statement schedules are included in this report on the pages indicated AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-3 AEP TEXAS CENTRAL COMPANY AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-3 AEP TEXAS NORTH COMPANY Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-3 APPALACHIAN POWER COMPANY AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-4 COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-4 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-4 KENTUCKY POWER COMPANY Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-5 OHIO POWER COMPANY Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-5 PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-5 SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Schedule II -- Valuation and Qualifying Accounts and Reserves.............................................. S-6
S-1 INDEPENDENT AUDITORS' REPORT AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARIES: We have audited the consolidated financial statements of American Electric Power Company, Inc. and its subsidiaries and the financial statements of certain of its subsidiaries, listed in Item 1415 herein, as of December 31, 19952002 and 1994,2001, and for each of the three years in the period ended December 31, 1995,2002, and have issued our reports thereon dated February 27, 1996;21, 2003; such financial statements and reports are included in your respective 1995the 2002 Annual ReportReports and are incorporated herein by reference. Our audits also included the financial statement schedules of American Electric Power Company, Inc. and its subsidiaries and of certain of its subsidiaries, listed in Item 14.15. These financial statement schedules are the responsibility of the respective Company'scompany's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the corresponding basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTEDeloitte & TOUCHETouche LLP Columbus, Ohio February 27, 199621, 2003 S-2
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES SCHEDULE II -AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 1995 $4,056 $12,9072002........... $69,416 $ 5,927(a) $17,460(b) $5,43097,772 $11,766 $59,723 $119,231 ======= ======== ======= ======= ======== Year Ended December 31, 1994 $4,048 $20,265 $(3,556)(a) $16,701(b) $4,0562001(c)........ $31,905 $109,635 $20,763 $92,887 $ 69,416 ======= ======== ======= ======= ======== Year Ended December 31, 1993 $7,287 $14,2372000(c)........ $27,091 $ 4,163(a) $21,639(b) $4,04851,457 $11,729 $58,372 $ 31,905 ======= ======== ======= ======= ========
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off.
APPALACHIAN POWER COMPANY AND SUBSIDIARIES SCHEDULE II -(c) 2001 and 2000 amounts have been adjusted to reflect the treatment of SEEBOARD and CitiPower as discontinued operations in AEP's Consolidated Statements of Operations. AEP TEXAS CENTRAL COMPANY AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 19952002........... $ 830186 $ 3,442162 $ 963 (a)1 $ 2,982(b) $2,2533 $ 346 ====== ====== ====== ====== ====== Year Ended December 31, 1994 $1,3442001........... $1,675 $ 2,297186 $ 596 (a)-- $1,675 $ 3,407(b) $ 830186 ====== ====== ====== ====== ====== Year Ended December 31, 19932000........... $ 724-- $1,675 $ 3,392-- $ 627-- $1,675 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. AEP TEXAS NORTH COMPANY SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 2002........... $ 3,399(b) $1,344196 $4,846 $ 17 $ 18 $5,041 ====== ====== ====== ====== ====== Year Ended December 31, 2001........... $ 288 $ 13 $ 35 $ 140 $ 196 ====== ====== ====== ====== ====== Year Ended December 31, 2000........... $ 186 $1,499 $ 46 $1,443 $ 288 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. S-3 APPALACHIAN POWER COMPANY AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 2002........... $1,877 $3,937 $12,367 $4,742 $13,439 ====== ====== ======= ====== ======= Year Ended December 31, 2001........... $2,588 $2,644 $ 1,017 $4,372 $ 1,877 ====== ====== ======= ====== ======= Year Ended December 31, 2000........... $2,609 $6,592 $ 1,526 $8,139 $ 2,588 ====== ====== ======= ====== =======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 1995 $1,7682002........... $ 4,873745 $ 3,531(a)(100) $ 9,111(b) $1,061-- $ 11 $ 634 ====== ====== ====== ====== ====== Year Ended December 31, 19942001........... $ 991659 $ 6,181331 $ 2,778(a)-- $ 8,182(b) $1,768245 $ 745 ====== ====== ====== ====== ====== Year Ended December 31, 1993 $1,3322000........... $3,045 $2,082 $1,405 $5,873 $ 4,167 $ 2,106(a) $ 6,614(b) $ 991659 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 19952002........... $ 121741 $ 1,506(161) $ 632(a)-- $ 1,925(b)2 $ 334578 ====== ====== ====== ====== ====== Year Ended December 31, 19942001........... $ 504759 $ 77465 $ 707(a)3 $ 1,864(b)86 $ 121741 ====== ====== ====== ====== ====== Year Ended December 31, 19932000........... $1,848 $ 562(235) $ 1,380907 $1,761 $ 624(a) $ 2,062(b) $ 504759 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off.
KENTUCKY POWER COMPANY SCHEDULE II -S-4 KENTUCKY POWER COMPANY SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 19952002........... $ 260264 $ 925(68) $ 234(a)-- $ 1,160(b)4 $ 259192 ====== ====== ====== ====== ====== Year Ended December 31, 19942001........... $ 208282 $ 600-- $ 84(a)(24) $ 632(b)(6) $ 260264 ====== ====== ====== ====== ====== Year Ended December 31, 19932000........... $ 248637 $ 390187 $ 179(a)9 $ 609(b)551 $ 208282 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. OHIO POWER COMPANY AND SUBSIDIARIES SCHEDULE II --- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) (in thousands) Deducted from Assets:DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 1995 $1,0192002........... $1,379 $ 1,952(457) $ 472(a)-- $ 2,019(b) $1,42413 $ 909 ====== ====== ====== ====== ====== Year Ended December 31, 19942001........... $1,054 $ 960 $10,087 $(7,785)(a)554 $ 2,243(b) $1,019-- $ 229 $1,379 ====== ====== ====== ====== ====== Year Ended December 31, 1993 $4,3532000........... $2,223 $ 4,812472 $ 549(a) $ 8,754(b) $960778 $2,419 $1,054 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARY SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(a) DEDUCTIONS(b) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 2002........... $ 44 $ 7 $ 33 $ -- $ 84 ====== ====== ====== ====== ====== Year Ended December 31, 2001........... $ 467 $ 44 $ -- $ 467 $ 44 ====== ====== ====== ====== ====== Year Ended December 31, 2000........... $ -- $ 467 $ -- $ -- $ 467 ====== ====== ====== ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. S-5 SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- ------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------------------------------------------------- ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(A) DEDUCTIONS(B) PERIOD - ------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) DEDUCTED FROM ASSETS: Accumulated Provision for Uncollectible Accounts: Year Ended December 31, 2002........... $ 89 $2,036 $ 4 $ 1 $2,128 ====== ====== ======= ====== ====== Year Ended December 31, 2001........... $ 911 $ 89 $ -- $ 911 $ 89 ====== ====== ======= ====== ====== Year Ended December 31, 2000........... $4,428 $ 911 $(4,428) $ -- $ 911 ====== ====== ======= ====== ======
- --------------- (a) Recoveries on accounts previously written off. (b) Uncollectible accounts written off. S-6 EXHIBIT INDEX Certain of the following exhibits, designated with an asterisk(*asterisk (*), are filed herewith. The exhibits not so designated have heretofore been filed with the Commission and, pursuant to 17 C.F.R.
229.10(d) and
240.12b-32, are incorporated herein by reference to the documents indicated in brackets following the descriptions of such exhibits. Exhibits, designated with a dagger ((+), are management contracts or compensatory plans or arrangements required to be filed as an exhibitExhibit to this formForm pursuant to Item 14(c) of this report.
EXHIBIT NUMBER DESCRIPTION AEGCO 3(a) - --------------- ----------- AEGCO 3(a) -- Copy of Articles of Incorporation of AEGCo [Registration Statement on Form 10 for the Common Shares of AEGCo, File No. 0-18135, Exhibit 3(a)]. 3(b) -- Copy of the Code of Regulations of AEGCo (amended as of June 15, 2000) [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 2000, File No. 0-18135, Exhibit 3(b)]. 10(a) -- Copy of Capital Funds Agreement dated as of December 30, 1988 between AEGCo and AEP [Registration Statement No. 33-32752, Exhibit 28(a)]. 10(b)(1) -- Copy of Unit Power Agreement dated as of March 31, 1982 between AEGCo and I&M, as amended [Registration Statement No. 33-32752, Exhibits 28(b)(1)(A) and 28(b)(1)(B)]. 10(b)(2) -- Copy of Unit Power Agreement, dated as of August 1, 1984, among AEGCo, I&M and KPCo [Registration Statement No. 33-32752, Exhibit 28(b)(2)]. 10(c) -- Copy of Lease Agreements, dated as of December 1, 1989, between AEGCo and Wilmington Trust Company, as amended [Registration Statement No. 33-32752, Exhibits 28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C), 28(c)(5)(C) and 28(c)(6)(C); Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1993, File No. 0-18135, Exhibits 10(c)(1)(B), 10(c)(2)(B), 10(c)(3)(B), 10(c)(4)(B), 10(c)(5)(B) and 10(c)(6)(B)]. *13 -- Copy of those portions of the AEGCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. AEP++ 3(a) -- Copy of Restated Certificate of Incorporation of AEP, dated October 29, 1997 [Quarterly Report on Form 10-Q of AEP for the quarter ended September 30, 1997, File No. 1-3525, Exhibit 3(a)]. 3(b) -- Copy of Certificate of Amendment of the Restated Certificate of Incorporation of AEP, dated January 13, 1999 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1998, File No. 1-3525, Exhibit 3(b)]. 3(c) -- Composite copy of the Restated Certificate of Incorporation of AEP, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1998, File No. 1-3525, Exhibit 3(c)]. 3(d) -- Copy of By-Laws of AEP, as amended through January 28, 1998 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 3(b)]. 4(a) -- Indenture (for unsecured debt securities), dated as of May 1, 2001, between AEP and The Bank of New York, as Trustee [Registration Statement No. 333-86050, Exhibits 4(a), 4(b) and 4(c)]. *4(b) -- Third Supplemental Indenture, dated as of June 11, 2002, between AEP and The Bank of New York, as Trustee, for 5.75% Senior Notes, Series C, due August 16, 2007.
E-1
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- *4(c) -- Forward Purchase Contract Agreement, dated as of June 11, 2002, between AEP and The Bank of New York, as Forward Purchase Contract Agent. 10(a) -- Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, OPCo and I&M and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. *10(b) -- Restated and Amended Operating Agreement, dated as of January 1, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. 10(c) -- Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. *10(d) -- Transmission Coordination Agreement, dated October 29, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. 10(e) -- Lease Agreements, dated as of December 1, 1989, between AEGCo or I&M and Wilmington Trust Company, as amended [Registration Statement No. 33-32752, Exhibits 28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C), 28(c)(5)(C) and 28(c)(6)(C); Registration Statement No. 33-32753, Exhibits 28(a)(1)(C), 28(a)(2)(C), 28(a)(3)(C), 28(a)(4)(C), 28(a)(5)(C) and 28(a)(6)(C); and Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1993, File No. 0-18135, Exhibits 10(c)(1)(B), 10(c)(2)(B), 10(c)(3)(B), 10(c)(4)(B), 10(c)(5)(B) and 10(c)(6)(B); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B), 10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)]. 10(f) -- Lease Agreement dated January 20, 1995 between OPCo and JMG Funding, Limited Partnership, and amendment thereto (confidential treatment requested) [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 10(l)(2)]. 10(g) -- Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(l)]. 10(h)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, By and Among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(h)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of AEP dated December 15, 1999, File No. 1-3525, Exhibit 10]. +10(i)(1) -- AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(e)]. +10(i)(2) -- Amendment to AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1986, File No. 1-3525, Exhibit 10(d)(2)]. +10(j) -- AEP Accident Coverage Insurance Plan for directors [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(g)]. +10(k)(1) -- AEP Deferred Compensation and Stock Plan for Non-Employee Directors, as amended June 1, 2000 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(i)(1)]. 3(b) - Copy of the Code of Regulations of AEGCo [Registration Statement on Form 10 for the Common Shares of AEGCo, File No. 0-18135, Exhibit 3(b)
E-2
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- +10(k)(2) -- AEP Stock Unit Accumulation Plan for Non-Employee Directors, as amended January 1, 2002[Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(i)(2)]. +10(l)(1)(A) -- AEP System Excess Benefit Plan, Amended and Restated as of January 1, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(j)(1)(A)]. +10(l)(1)(B) -- Guaranty by AEP of the Service Corporation Excess Benefits Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(h)(1)(B)]. *+10(l)(1)(C) -- First Amendment to AEP System Excess Benefit Plan, dated as of March 5, 2003. +10(l)(2) -- AEP System Supplemental Retirement Savings Plan, Amended and Restated as of June 1, 2001 (Non-Qualified) [Registration Statement No. 333-66048, Exhibit 4]. +10(l)(3) -- Service Corporation Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. +10(m)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(3)]. +10(m)(2) -- Memorandum of agreement between Susan Tomasky and the Service Corporation dated January 3, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(s)]. *+10(m)(3)(A) -- Letter Agreement dated June 23, 2000 between AEPSC and Holly K. Koeppel. *+10(m)(3)(B) -- Letter Agreement dated April 19, 2001 between AEPR and Holly K. Koeppel. *+10(m)(4) -- Employment Agreement dated July 29, 1998 between AEPSC and Robert P. Powers. +10(n) -- AEP System Senior Officer Annual Incentive Compensation Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(i)(1)]. +10(o)(1) -- AEP System Survivor Benefit Plan, effective January 27, 1998 [Quarterly Report on Form 10-Q of AEP for the quarter ended September 30, 1998, File No. 1-3525, Exhibit 10]. *+10(o)(2) -- First Amendment to AEP System Survivor Benefit Plan, as amended and restated effective January 31, 2000. +10(p) -- AEP Senior Executive Severance Plan for Merger with Central and South West Corporation, effective March 1, 1999 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1998, File No. 1-3525, Exhibit 10(o)]. *+10(q)(1) -- AEP System Incentive Compensation Deferral Plan dated January 1, 2001. *+10(q)(2) -- First Amendment to AEP System Incentive Compensation Deferral Plan dated December 6, 2002. *+10(r) -- AEP System Nuclear Performance Long Term Incentive Compensation Plan dated August 1, 1998. *+10(s) -- Nuclear Key Contributor Retention Plan dated May 1, 2000. +10(t) -- AEP Change In Control Agreement [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(o)]. +10(u) -- AEP System 2000 Long-Term Incentive Plan [Proxy Statement of AEP, March 10, 2000]. +10(v)(1) -- Central and South West System Special Executive Retirement Plan as amended and restated effective July 1, 1997 [Annual Report on Form 10-K of CSW for the fiscal year ended December 31, 1998, File No. 1-1443, Exhibit 18]. +10(v)(2) -- Certified CSW Board Resolution of April 18, 1991 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(r)(2)]. +10(v)(3) -- CSW 1992 Long-Term Incentive Plan [Proxy Statement of CSW, March 13, 1992]. 10(a) - Copy of Capital Funds Agreement dated as of December 30, 1988 between AEGCo and AEP [Registration Statement No. 33-32752, Exhibit 28(a)]. 10(b)(1) - Copy of Unit Power Agreement dated as of March 31, 1982 between AEGCo and I&M, as amended [Registration Statement No. 33-32752, Exhibits 28(b)(1)(A) and 28(b)(1)(B)]. 10(b)(2) - Copy of Unit Power Agreement, dated as of August 1, 1984, among AEGCo, I&M and KEPCo [Registration Statement No. 33-32752, Exhibit 28(b)(2)]. 10(b)(3) - Copy of Agreement, dated as of October 1, 1984, among AEGCo, I&M, APCo and Virginia Electric and Power Company [Registration Statement No. 33-32752, Exhibit 28(b)(3)]. 10(c) - Copy of Lease Agreements, dated as of December 1, 1989, between AEGCo and Wilmington Trust Company, as amended [Registration Statement No. 33-32752, Exhibits 28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C), 28(c)(5)(C) and 28(c)(6)(C); Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1993, File No. 0-18135, Exhibits 10(c)(1)(B), 10(c)(2)(B), 10(c)(3)(B), 10(c)(4)(B), 10(c)(5)(B) and 10(c)(6)(B)]. *13 - Copy of those portions of the AEGCo 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. *24 - Power of Attorney. *27 - Financial Data Schedules. AEP 3(a) - Copy of Restated Certificate of Incorporation of AEP, dated April 26, 1978 [Registration Statement No. 2-62778, Exhibit 2(a)]. 3(b)(1) - Copy of Certificate of Amendment of the Restated Certificate of Incorporation of AEP, dated April 23, 1980 [Registration Statement No. 33-1052,
E-3
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- +10(v)(4) -- Central and South West Corporation Executive Deferred Savings Plan as amended and restated effective as of January 1, 1997 [Annual Report on Form 10-K of CSW for the fiscal year ended December 31, 1998, File No. 1-1443, Exhibit 24]. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the AEP 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. *21 -- List of subsidiaries of AEP. *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. APCO++ 3(a) -- Copy of Restated Articles of Incorporation of APCo, and amendments thereto to November 4, 1993 [Registration Statement No. 33-50163, Exhibit 4(a); Registration Statement No. 33-53805, Exhibits 4(b) and 4(c)]. 3(b) -- Copy of Articles of Amendment to the Restated Articles of Incorporation of APCo, dated June 6, 1994 [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 3(b)]. 3(c) -- Copy of Articles of Amendment to the Restated Articles of Incorporation of APCo, dated March 6, 1997 [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1996, File No. 1-3457, Exhibit 3(c)]. 3(d) -- Composite copy of the Restated Articles of Incorporation of APCo (amended as of March 7, 1997) [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1996, File No. 1-3457, Exhibit 3(d)]. 3(e) -- Copy of By-Laws of APCo (amended as of October 24, 2001) [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 2001, File No. 1-3457, Exhibit 3(e)]. 4(a) -- Copy of Mortgage and Deed of Trust, dated as of December 1, 1940, between APCo and Bankers Trust Company and R. Gregory Page, as Trustees, as amended and supplemented [Registration Statement No. 2-7289, Exhibit 7(b); Registration Statement No. 2-19884, Exhibit 2(1); Registration Statement No. 2-24453, Exhibit 2(n); Registration Statement No. 2-60015, Exhibits 2(b)(2), 2(b)(3), 2(b)(4), 2(b)(5), 2(b)(6), 2(b)(7), 2(b)(8), 2(b)(9), 2(b)(10), 2(b)(12), 2(b)(14), 2(b)(15), 2(b)(16), 2(b)(17), 2(b)(18), 2(b)(19), 2(b)(20), 2(b)(21), 2(b)(22), 2(b)(23), 2(b)(24), 2(b)(25), 2(b)(26), 2(b)(27) and 2(b)(28); Registration Statement No. 2-64102, Exhibit 2(b)(29); Registration Statement No. 2-66457, Exhibits (2)(b)(30) and 2(b)(31); Registration Statement No. 2-69217, Exhibit 2(b)(32); Registration Statement No. 2-86237, Exhibit 4(b); Registration Statement No. 33-11723, Exhibit 4(b); Registration Statement No. 33-17003, Exhibit 4(a)(ii), Registration Statement No. 33-30964, Exhibit 4(b); Registration Statement No. 33-40720, Exhibit 4(b); Registration Statement No. 33-45219, Exhibit 4(b); Registration Statement No. 33-46128, Exhibits 4(b) and 4(c); Registration Statement No. 33-53410, Exhibit 4(b); Registration Statement No. 33-59834, Exhibit 4(b); Registration Statement No. 33-50229, Exhibits 4(b) and 4(c); Registration Statement No. 33-58431, Exhibits 4(b), 4(c), 4(d) and 4(e); Registration Statement No. 333-01049, Exhibits 4(b) and 4(c); Registration Statement No. 333-20305, Exhibits 4(b) and 4(c); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1996, File No. 1-3457, Exhibit 4(b); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1998, File No. 1-3457, Exhibit 4(b)]. 3(b)(2) - Copy of Certificate
E-4
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 4(b) -- Indenture (for unsecured debt securities), dated as of January 1, 1998, between APCo and The Bank of New York, As Trustee [Registration Statement No. 333-45927, Exhibit 4(a); Registration Statement No. 333-49071, Exhibit 4(b); Registration Statement No. 333-84061, Exhibits 4(b) and 4(c); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1999, File No. 1-3457, Exhibit 4(c); Registration Statement No. 333-81402, Exhibits 4(b), 4(c) and 4(d); Registration Statement No. 333-100451, Exhibit 4(b)]. *4(c) -- Copy of Company Order and Officer's Certificate, dated November 6, 2002, establishing terms of 4.3148% Senior Notes, Series F, due 2007. 10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) -- Copy of Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2-67728, Exhibit 5(a)(3)(B); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(b) -- Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, OPCo and I&M and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(c) -- Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) -- Copy of Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(l)]. 10(e)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, By and Among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(e)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of APCo dated December 15, 1999, File No. 1-3457, Exhibit 10]. +10(f)(1) -- AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(e)]. +10(f)(2) -- Amendment of the Restated Certificate of Incorporation of AEP, dated April 28, 1982 [Registration Statement No. 33-1052, Exhibit 4(c)]. 3(b)(3) - Copy of Certificate of Amendment of the Restated Certificate of Incorporation of AEP, dated April 25, 1984 [Registration Statement No. 33-1052, Exhibit 4(d)]. 3(b)(4) - Copy of Certificate of Change of the Restated Certificate of Incorporation of AEP, dated July 5, 1984 [Registration Statement No. 33-1052, Exhibit 4(e)]. 3(b)(5) - Copy of Certificate of Amendment of the Restated Certificate of Incorporation of AEP, dated April 27, 1988 [Registration Statement No. 33-1052, Exhibit 4(f)]. 3(c) - Composite copy of the Restated Certificate of Incorporation of AEP, as amended [Registration Statement No. 33-1052, Exhibit 4(g)]. 3(d) - Copy of By-Laws of AEP, as amended through July 26, 1989 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1989, File No. 1-3525, Exhibit 3(d)]. 10(a) - Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KEPCo, OPCo and I&M and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10- K of AEP for the fiscal year ended December 31, 1990, File No. 1- 3525, Exhibit 10(a)(3)]. 10(b) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. AEP (continued) EXHIBIT NUMBER DESCRIPTION 10(c)(1)-AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(e)]. 10(c)(2)-Amendment to AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1986, File No. 1-3525, Exhibit 10(d)(2)]. 10(d)-AEP Deferred Compensation Agreement for directors, as amended, effective October 24, 1984 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1984, File No. 1-3525, Exhibit 10(e)]. 10(e)-AEP Accident Coverage Insurance Plan for directors [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(g)]. 10(f)-AEP Retirement Plan for directors [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1986, File No. 1-3525, Exhibit 10(g)]. *10(g)(1)(A)-AEP Excess Benefit Plan, as amended through January 4, 1996. 10(g)(1)(B)-Guaranty by AEP of the Service Corporation Excess Benefits Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(h)(1)(B)]. 10(g)(2)-AEP System Supplemental Savings Plan (Non-Qualified) [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(2)]. 10(g)(3)-Service Corporation Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. 10(h)(1)-Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(3)]. *10(i)(1)-AEP Management Incentive Compensation Plan. 10(i)(2)-American Electric Power System Performance Share Incentive Plan, as Amended and Restated through October 1, 1995 [Quarterly Report on Form 10-Q of AEP for the quarterly period ended September 30, 1995, File No. 1-3525, Exhibit 10]. 10(j) - Copy of Lease Agreements, dated as of December 1, 1989, between AEGCo or I&M and Wilmington Trust Company, as amended [Registration Statement No. 33-32752, Exhibits 28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C), 28(c)(5)(C) and 28(c)(6)(C); Registration Statement No. 33-32753, Exhibits 28(a)(1)(C), 28(a)(2)(C), 28(a)(3)(C), 28(a)(4)(C), 28(a)(5)(C) and 28(a)(6)(C); and Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1993, File No. 0-18135, Exhibits 10(c)(1)(B), 10(c)(2)(B), 10(c)(3)(B), 10(c)(4)(B), 10(c)(5)(B) and 10(c)(6)(B); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B), 10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)]. 10(k)(1) - Copy of Agreement for Lease, dated as of September 17, 1992, between JMG Funding, Limited Partnership and OPCo [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1992, File No. 1-6543, Exhibit 10(l)]. 10(k)(2) - Lease Agreement between Ohio Power Company and JMG Funding, Limited, dated January 20, 1995 [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 10(l)(2)]. 10(l) - Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KEPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 10(d)]. *13 - Copy of those portions of the AEP 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. *21 - List of subsidiaries of AEP. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules. APCO
E-5
EXHIBIT NUMBER DESCRIPTION 3(a) - Copy of Restated Articles of Incorporation of APCo, and amendments thereto to November 4, 1993 [Registration Statement No. 33-50163, Exhibit 4(a); Registration Statement No. 33-53805, Exhibits 4(b) and 4(c)]. 3(b) - Copy of Articles of Amendment to the Restated Articles of Incorporation of APCo, dated June 6, 1994 [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 3(b)]. 3(c) - Composite copy of the Restated Articles of Incorporation of APCo, as amended [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 3(c)]. *3(d) - Copy of By-Laws of APCo (amended as of January 1, 1996). 4(a) - Copy of Mortgage and Deed of Trust, dated as of December 1, 1940, between APCo and Bankers Trust Company and R. Gregory Page, as Trustees, as amended and supplemented [Registration Statement No. 2-7289, Exhibit 7(b); Registration Statement No. 2-19884, Exhibit 2(1); Registration Statement No. 2-24453, Exhibit 2(n); Registration Statement No. 2-60015, Exhibits 2(b)(2), 2(b)(3), 2(b)(4), 2(b)(5), 2(b)(6), 2(b)(7), 2(b)(8), 2(b)(9), 2(b)(10), 2(b)(12), 2(b)(14), 2(b)(15), 2(b)(16), 2(b)(17), 2(b)(18), 2(b)(19), 2(b)(20), 2(b)(21), 2(b)(22), 2(b)(23), 2(b)(24), 2(b)(25), 2(b)(26), 2(b)(27) and 2(b)(28); Registration Statement No. 2-64102, Exhibit 2(b)(29); Registration Statement No. 2-66457, Exhibits (2)(b)(30) and 2(b)(31); Registration Statement No. 2- 69217, Exhibit 2(b)(32); Registration Statement No. 2-86237, Exhibit 4(b); Registration Statement No. 33-11723, Exhibit 4(b); Registration Statement No. 33-17003, Exhibit 4(a)(ii), Registration Statement No. 33-30964, Exhibit 4(b); Registration Statement No. 33-40720, Exhibit 4(b); Registration Statement No. 33-45219, Exhibit 4(b); Registration Statement No. 33-46128, Exhibits 4(b) and 4(c); Registration Statement No. 33-53410, Exhibit 4(b); Registration Statement No. 33-59834, Exhibit 4(b); Registration Statement No. 33-50229, Exhibits 4(b) and 4(c); Registration Statement No. 33-58431, Exhibits 4(b), 4(c), 4(d) and 4(e); Registration Statement No. 333-01049, Exhibits 4(b) and 4(c); Form 8-K, dated March 18, 1996, File No. 1-3457, Exhibit 4]. 10(a)(1) - Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) - Copy of Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2- 67728, Exhibit 5(a)(3)(B); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) - --------------- ----------- +10(g) -- AEP System Senior Officer Annual Incentive Compensation Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(i)(1)]. +10(h)(1)(A) -- AEP System Excess Benefit Plan, Amended and Restated as of January 1, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(j)(1)(A)]. *+10(h)(1)(B) -- First Amendment to AEP System Excess Benefit Plan, dated as of March 5, 2003. +10(h)(2) -- AEP System Supplemental Retirement Savings Plan, Amended and Restated as of January 1, 2001 (Non-Qualified) [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(j)(2)]. +10(h)(3) -- Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. +10(i)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(3)]. +10(i)(2) -- Memorandum of agreement between Susan Tomasky and the Service Corporation dated January 3, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(s)]. *+10(i)(3) -- Employment Agreement dated July 29, 1998 between AEPSC and Robert P. Powers. +10(j)(1) -- AEP System Survivor Benefit Plan, effective January 27, 1998 [Quarterly Report on Form 10-Q of AEP for the quarter ended September 30, 1998, File No. 1-3525, Exhibit 10]. *+10(j)(2) -- First Amendment to AEP System Survivor Benefit Plan, as amended and restated effective January 31, 2000. +10(k) -- AEP Senior Executive Severance Plan for Merger with Central and South West Corporation, effective March 1, 1999[Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1998, File No. 1-3525, Exhibit 10(o)]. +10(l) -- AEP Change In Control Agreement [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(o)]. +10(m) -- AEP System 2000 Long-Term Incentive Plan [Proxy Statement of AEP, March 10, 2000]. +10(n)(1) -- Central and South West System Special Executive Retirement Plan as amended and restated effective July 1, 1997 [Annual Report on Form 10-K of CSW for the fiscal year ended December 31, 1998, File No. 1-1443, Exhibit 18]. +10(n)(2) -- Certified CSW Board Resolution of April 18, 1991 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(r)(2)]. +10(n)(3) -- CSW 1992 Long-Term Incentive Plan [Proxy Statement of CSW, March 13, 1992]. *+10(o)(1) -- AEP System Incentive Compensation Deferral Plan dated January 1, 2001. *+10(o)(2) -- First Amendment to AEP System Incentive Compensation Deferral Plan dated December 6, 2002. *+10(p) -- AEP System Nuclear Performance Long Term Incentive Compensation Plan dated August 1, 1998. *+10(q) -- Nuclear Key Contributor Retention Plan dated May 1, 2000. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the APCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of APCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21]. *23 -- Consent of Deloitte & Touche LLP
E-6
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. CSPCO++ 3(a) -- Copy of Amended Articles of Incorporation of CSPCo, as amended to March 6, 1992 [Registration Statement No. 33-53377, Exhibit 4(a)]. 3(b) -- Copy of Certificate of Amendment to Amended Articles of Incorporation of CSPCo, dated May 19, 1994 [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1994, File No. 1-2680, Exhibit 3(b)]. 3(c) -- Composite copy of Amended Articles of Incorporation of CSPCo, as amended [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1994, File No. 1-2680, Exhibit 3(c)]. 3(d) -- Copy of Code of Regulations and By-Laws of CSPCo [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1987, File No. 1-2680, Exhibit 3(d)]. 4(a) -- Copy of Indenture of Mortgage and Deed of Trust, dated September 1, 1940, between CSPCo and City Bank Farmers Trust Company (now Citibank, N.A.), as trustee, as supplemented and amended [Registration Statement No. 2-59411, Exhibits 2(B) and 2(C); Registration Statement No. 2-80535, Exhibit 4(b); Registration Statement No. 2-87091, Exhibit 4(b); Registration Statement No. 2-93208, Exhibit 4(b); Registration Statement No. 2-97652, Exhibit 4(b); Registration Statement No. 33-7081, Exhibit 4(b); Registration Statement No. 33-12389, Exhibit 4(b); Registration Statement No. 33-19227, Exhibits 4(b), 4(e), 4(f), 4(g) and 4(h); Registration Statement No. 33-35651, Exhibit 4(b); Registration Statement No. 33-46859, Exhibits 4(b) and 4(c); Registration Statement No. 33-50316, Exhibits 4(b) and 4(c); Registration Statement No. 33-60336, Exhibits 4(b), 4(c) and 4(d); Registration Statement No. 33-50447, Exhibits 4(b) and 4(c); Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1993, File No. 1-2680, Exhibit 4(b)]. 4(b) -- Copy of Indenture (for unsecured debt securities), dated as of September 1, 1997, between CSPCo and Bankers Trust Company, as Trustee [Registration Statement No. 333-54025, Exhibits 4(a), 4(b), 4(c) and 4(d); Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1998, File No. 1-2680, Exhibits 4(c) and 4(d)]. 10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) -- Copy of Inter-Company Power Agreement, dated July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2-67728, Exhibit 5(a)(3)(B); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(b) - Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KEPCo, OPCo and I&M and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(c) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) - Copy of AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KEPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 10(d)]. 10(e)(1)-AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(e)]. 10(e)(2)-Amendment to AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1986, File No. 1-3525, Exhibit 10(d)(2)]. APCO (continued) EXHIBIT NUMBER DESCRIPTION 10(f)(1)-Management Incentive Compensation Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 10(i)(1)]. 10(f)(2)-American Electric Power System Performance Share Incentive Plan [Quarterly Report on Form 10-Q of APCo for the quarterly period ended September 30, 1995, File No. 1-3457, Exhibit 10]. 10(g)(1)-Excess Benefits Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 10(g)(1)(A)]. 10(g)(2)-AEP System Supplemental Savings Plan (Non-Qualified) [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(2)]. 10(g)(3)-Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. 10(h)(1)-Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(3)]. *12 - Statement re: Computation of Ratios. *13 - Copy of those portions of the APCo 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. 21 - List of subsidiaries of APCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 21]. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules. CSPCO 3(a) - Copy of Amended Articles of Incorporation of CSPCo, as amended to March 6, 1992 [Registration Statement No. 33-53377, Exhibit 4(a)]. 3(b) - Copy of Certificate of Amendment to Amended Articles of Incorporation of CSPCo, dated May 19, 1994 [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1994, File No. 1-2680, Exhibit 3(b)]. 3(c) - Composite copy of Amended Articles of Incorporation of CSPCo, as amended [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1994, File No. 1-2680, Exhibit 3(c)]. 3(d) - Copy of Code of Regulations and By-Laws of CSPCo [Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1987,
E-7
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 10(b) -- Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, OPCo and I&M and the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(c) -- Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo, and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) -- Copy of Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(l)]. 10(e)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, By and Among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(e)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of CSPCo dated December 15, 1999, File No. 1-2680, Exhibit 10]. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the CSPCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of CSPCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21] *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. I&M++ 3(a) -- Copy of the Amended Articles of Acceptance of I&M and amendments thereto [Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 3(a)]. 3(b) -- Copy of Articles of Amendment to the Amended Articles of Acceptance of I&M, dated March 6, 1997 [Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1996, File No. 1-3570, Exhibit 3(b)]. 3(c) -- Composite Copy of the Amended Articles of Acceptance of I&M (amended as of March 7, 1997) [Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1996, File No. 1-3570, Exhibit 3(c)]. 3(d) -- Copy of the By-Laws of I&M (amended as of November 28, 2001) [Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 2001, File No. 1-3570, Exhibit 3(d)]. 4(a) - Copy of Indenture of Mortgage and Deed of Trust, dated September 1, 1940, between CSPCo and City Bank Farmers Trust Company (now Citibank, N.A.), as trustee, as supplemented and amended [Registration Statement No. 2-59411, Exhibits 2(B) and 2(C); Registration Statement No. 2-80535, Exhibit 4(b); Registration Statement No. 2-87091, Exhibit 4(b); Registration Statement No. 2- 93208, Exhibit 4(b); Registration Statement No. 2-97652, Exhibit 4(b); Registration Statement No. 33-7081, Exhibit 4(b); Registration Statement No. 33-12389, Exhibit 4(b); Registration Statement No. 33-19227, Exhibits 4(b), 4(e), 4(f), 4(g) and 4(h); Registration Statement No. 33-35651, Exhibit 4(b); Registration Statement No. 33-46859, Exhibits 4(b) and 4(c); Registration Statement No. 33-50316, Exhibits 4(b) and 4(c); Registration Statement No. 33-60336, Exhibits 4(b), 4(c) and 4(d); Registration Statement No. 33-50447, Exhibits 4(b) and 4(c); Annual Report on Form 10-K of CSPCo for the fiscal year ended December 31, 1993, File No. 1-2680, Exhibit 4(b)]. 10(a)(1) - Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) - Copy of Inter-Company Power Agreement, dated July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2- 67728, Exhibit 5(a)(3)(B); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)].
E-8 CSPCO (continued) EXHIBIT NUMBER DESCRIPTION 10(a)(3) - Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(b) - Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KEPCo, OPCo and I&M and the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10- K of AEP for the fiscal year ended December 31, 1990, File No. 1- 3525, Exhibit 10(a)(3)]. 10(c) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo, OPCo, and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) - Copy of Interim Allowance Agreement [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 10(d)]. *12 - Statement re: Computation of Ratios. *13 - Copy of those portions of the CSPCo 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules. I&M 3(a) - Copy of the Amended Articles of Acceptance of I&M and amendments thereto [Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 3(a)]. 3(b) - Composite Copy of the Amended Articles of Acceptance of I&M, as amended [Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 3(b)]. *3(c) - Copy of the By-Laws of I&M (amended as of January 1, 1996). 4(a) - Copy of Mortgage and Deed of Trust, dated as of June 1, 1939, between I&M and Irving Trust Company (now The Bank of New York) and various individuals, as Trustees, as amended and supplemented [Registration Statement No. 2-7597, Exhibit 7(a); Registration Statement No. 2-60665, Exhibits 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6), 2(c)(7), 2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12), 2(c)(13), 2(c)(14), 2(c)(15), (2)(c)(16), and 2(c)(17); Registration Statement No. 2-63234, Exhibit 2(b)(18); Registration Statement No. 2-65389, Exhibit 2(a)(19); Registration Statement No. 2-67728, Exhibit 2(b)(20); Registration Statement No. 2-85016, Exhibit 4(b); Registration Statement No. 33-5728, Exhibit 4(c); Registration Statement No. 33-9280, Exhibit 4(b); Registration Statement No. 33-11230, Exhibit 4(b); Registration Statement No. 33-19620, Exhibits 4(a)(ii), 4(a)(iii), 4(a)(iv) and 4(a)(v); Registration Statement No. 33-46851, Exhibits 4(b)(i), 4(b)(ii) and 4(b)(iii); Registration Statement No. 33-54480, Exhibits 4(b)(i) and 4(b)(ii); Registration Statement No. 33-60886, Exhibit 4(b)(i); Registration Statement No. 33-50521, Exhibits 4(b)(i), 4(b)(ii) and 4(b)(iii); Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 4(b); Annual Report on Form 10-K of I&M for fiscal year ended December 31, 1994, File No. 1-3570, Exhibit 4(b)]. 10(a)(1) - Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) - Copy of Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2- 67728, Exhibit 5(a)(3)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) - Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. I&M (continued) EXHIBIT NUMBER DESCRIPTION 10(b) - Copy of Interconnection Agreement, dated July 6, 1951, between APCo, CSPCo, KEPCo,
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 4(a) -- Copy of Mortgage and Deed of Trust, dated as of June 1, 1939, between I&M and Irving Trust Company (now The Bank of New York) and various individuals, as Trustees, as amended and supplemented [Registration Statement No. 2-7597, Exhibit 7(a); Registration Statement No. 2-60665, Exhibits 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6), 2(c)(7), 2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12), 2(c)(13), 2(c)(14), 2(c)(15), (2)(c)(16), and 2(c)(17); Registration Statement No. 2-63234, Exhibit 2(b)(18); Registration Statement No. 2-65389, Exhibit 2(a)(19); Registration Statement No. 2-67728, Exhibit 2(b)(20); Registration Statement No. 2-85016, Exhibit 4(b); Registration Statement No. 33-5728, Exhibit 4(c); Registration Statement No. 33-9280, Exhibit 4(b); Registration Statement No. 33-11230, Exhibit 4(b); Registration Statement No. 33-19620, Exhibits 4(a)(ii), 4(a)(iii), 4(a)(iv) and 4(a)(v); Registration Statement No. 33-46851, Exhibits 4(b)(i), 4(b)(ii) and 4(b)(iii); Registration Statement No. 33-54480, Exhibits 4(b)(I) and 4(b)(ii); Registration Statement No. 33-60886, Exhibit 4(b)(I); Registration Statement No. 33-50521, Exhibits 4(b)(I), 4(b)(ii) and 4(b)(iii); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 4(b); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1994, File No. 1-3570, Exhibit 4(b); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1996, File No. 1-3570, Exhibit 4(b)]. 4(b) -- Copy of Indenture (for unsecured debt securities), dated as of October 1, 1998, between I&M and The Bank of New York, as Trustee [Registration Statement No. 333-88523, Exhibits 4(a), 4(b) and 4(c); Registration Statement No. 333-58656, Exhibits 4(b) and 4(c); Annual Report of Form 10-K of I&M for fiscal year ended December 31, 2001, File No. 1-3570, Exhibit 4(c)]. *4(c) -- Copy of Company Order and Officer's Certificate, dated November 22, 2002 establishing certain terms of the 6% Senior Notes, Series D, due 2032. 4(d) -- Copy of Company Order and Officers' Certificate, dated December 12, 2001, establishing certain terms of the 6.125% Notes, Series C, due 2006. [Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 2001, File No. 1-3570, Exhibit 4(c)]. 10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) -- Copy of Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2-67728, Exhibit 5(a)(3)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(a)(4) -- Copy of Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2-67728, Exhibit 5(a)(3)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(b) -- Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, I&M, and OPCo and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(c) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo,
E-9
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 10(c) -- Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) -- Copy of Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 1, 1996, File No. 1-3525, Exhibit 10(l)]. 10(e) -- Copy of Nuclear Material Lease Agreement, dated as of December 1, 1990, between I&M and DCC Fuel Corporation [Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 10(d)]. 10(f) -- Copy of Lease Agreements, dated as of December 1, 1989, between I&M and Wilmington Trust Company, as amended [Registration Statement No. 33-32753, Exhibits 28(a)(1)(C), 28(a)(2)(C), 28(a)(3)(C), 28(a)(4)(C), 28(a)(5)(C) and 28(a)(6)(C); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B), 10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)]. 10(g)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, By and Among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(g)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of I&M dated December 15, 1999, File No. 1-3570, Exhibit 10]. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the I&M 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of I&M [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21]. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. KPCO++ 3(a) -- Copy of Restated Articles of Incorporation of KPCo [Annual Report on Form 10-K of KPCo for the fiscal year ended December 31, 1991, File No. 1-6858, Exhibit 3(a)]. 3(b) -- Copy of By-Laws of KPCo (amended as of June 15, 2000) [Annual Report on Form 10-K of KPCo for the fiscal year ended December 31, 2000, File No. 1-6858, Exhibit 3(b)]. 4(a) -- Copy of Mortgage and Deed of Trust, dated May 1, 1949, between KPCo and Bankers Trust Company (now Deutsche Bank Trust Company Americas, as supplemented and amended [Registration Statement No. 2-65820, Exhibits 2(b)(1), 2(b)(2), 2(b)(3), 2(b)(4), 2(b)(5), and 2(b)(6); Registration Statement No. 33-39394, Exhibits 4(b) and 4(c); Registration Statement No. 33-53226, Exhibits 4(b) and 4(c); Registration Statement No. 33-61808, Exhibits 4(b) and 4(c), Registration Statement No. 33-53007, Exhibits 4(b), 4(c) and 4(d)]. 4(b) -- Copy of Indenture (for unsecured debt securities), dated as of September 1, 1997, between KPCo and Bankers Trust Company, as Trustee [Registration Statement No. 333-75785, Exhibits 4(a), 4(b), 4(c) and 4(d); Registration Statement No. 333-87216, Exhibits 4E) and 4(f). *4(c) -- Copy of Company Order and Officer's Certificate, dated June 28, 2002 establishing certain terms of the 5.50% Senior Notes, Series A, due 2007.
E-10
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- *4(d) -- Copy of Company Order and Officer's Certificate, dated November 6, 2002 establishing certain terms of the 4.3148% Senior Notes, Series B, due 2007. *4(e) -- Copy of Company Order and Officer's Certificate, dated December 12, 2002 establishing certain terms of the 4.368% Senior Notes, Series C, due 2007. 10(a) -- Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, I&M and OPCo and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a);Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(b) -- Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(c) -- Copy of Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(l)]. 10(d)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, By and Among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(d)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of KPCo dated December 15, 1999, File No. 1-6858, Exhibit 10]. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the KPCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. *23 -- Consent of Deloitte & Touche LLP *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. OPCO++ 3(a) -- Copy of Amended Articles of Incorporation of OPCo, and amendments thereto to December 31, 1993 [Registration Statement No. 33-50139, Exhibit 4(a); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 3(b)]. 3(b) -- Copy of Certificate of Amendment to Amended Articles of Incorporation of OPCo, dated May 3, 1994 [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 3(b)]. 3(c) -- Copy of Certificate of Amendment to Amended Articles of Incorporation of OPCo, dated March 6, 1997 [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1996, File No. 1-6543, Exhibit 3(c)]. 3(d) -- Copy of Certificate of Amendment to Amended Articles of Incorporation of OPCo, dated June 3, 2002 [Quarterly Report on Form 10-Q of OPCo for the quarter ended June 30, 2002, File No. 1-6543, Exhibit 3(d)]. 3(e) -- Composite copy of the Amended Articles of Incorporation of OPCo (amended as of June 3, 2002) [[Quarterly Report on Form 10-Q of OPCo for the quarter ended June 30, 2002, File No. 1-6543, Exhibit 3(e)]. 10(d) - Copy of Interim Allowance Agreement [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994,
E-11
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 3(f) -- Copy of Code of Regulations of OPCo [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1990, File No. 1-6543, Exhibit 3(d)]. 4(a) -- Copy of Mortgage and Deed of Trust, dated as of October 1, 1938, between OPCo and Manufacturers Hanover Trust Company (now Chemical Bank), as Trustee, as amended and supplemented [Registration Statement No. 2-3828, Exhibit B-4; Registration Statement No. 2-60721, Exhibits 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6), 2(c)(7), 2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12), 2(c)(13), 2(c)(14), 2(c)(15), 2(c)(16), 2(c)(17), 2(c)(18), 2(c)(19), 2(c)(20), 2(c)(21), 2(c)(22), 2(c)(23), 2(c)(24), 2(c)(25), 2(c)(26), 2(c)(27), 2(c)(28), 2(c)(29), 2(c)(30), and 2(c)(31); Registration Statement No. 2-83591, Exhibit 4(b); Registration Statement No. 33-21208, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv); Registration Statement No. 33-31069, Exhibit 4(a)(ii); Registration Statement No. 33-44995, Exhibit 4(a)(ii); Registration Statement No. 33-59006, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv); Registration Statement No. 33-50373, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 4(b)]. 4(b) -- Copy of Indenture (for unsecured debt securities), dated as of September 1, 1997, between OPCo and Bankers Trust Company (now Deutsche Bank Trust Company Americas), as Trustee [Registration Statement No. 333-49595, Exhibits 4(a), 4(b) and 4(c); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1998, File No. 1-6543, Exhibits 4(c) and 4(d); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1999, File No. 1-6543, Exhibits 4(c) and 4(d); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 2000, File No. 1-6543, Exhibit 4(c)]. 10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) -- Copy of Inter-Company Power Agreement, dated July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2-67728, Exhibit 5(a)(3)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(b) -- Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KPCo, I&M and OPCo and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File 1-3525, Exhibit 10(a)(3)]. 10(c) -- Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KPCo, OPCo and with the Service Corporation as agent [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) -- Copy of Modification No. 1 to the AEP System Interim Allowance Agreement, dated July 28, 1994, among APCo, CSPCo, I&M, KPCo, OPCo and the Service Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(l)]. 10(e) - Copy of Nuclear Material Lease Agreement, dated as of December 1, 1990, between I&M and DCC Fuel Corporation [Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibit 10(d)
E-12
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- 10(e) -- Copy of Amendment No. 1, dated October 1, 1973, to Station Agreement dated January 1, 1968, among OPCo, Buckeye and Cardinal Operating Company, and amendments thereto [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 10(f)]. 10(f) -- Lease Agreement dated January 20, 1995 between OPCo and JMG Funding, Limited Partnership, and amendment thereto (confidential treatment requested) [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 10(l)(2)]. 10(g)(1) -- Agreement and Plan of Merger, dated as of December 21, 1997, by and among American Electric Power Company, Inc., Augusta Acquisition Corporation and Central and South West Corporation [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1997, File No. 1-3525, Exhibit 10(f)]. 10(g)(2) -- Amendment No. 1, dated as of December 31, 1999, to the Agreement and Plan of Merger [Current Report on Form 8-K of OPCo dated December 15, 1999, File No. 1-6543, Exhibit 10]. +10(h) -- AEP System Senior Officer Annual Incentive Compensation Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1996, File No. 1-3525, Exhibit 10(i)(1)]. +10(i)(1)(A) -- AEP System Excess Benefit Plan, Amended and Restated as of January 1, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(j)(1)(A)]. *+10(i)(1)(B) -- First Amendment to AEP System Excess Benefit Plan, dated as of March 5, 2003. +10(i)(2) -- AEP System Supplemental Retirement Savings Plan, Amended and Restated as of January 1, 2001 (Non-Qualified) [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(j)(2)]. +10(i)(3) -- Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. +10(j)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(3)]. +10(j)(2) -- Memorandum of agreement between Susan Tomasky and the Service Corporation dated January 3, 2001 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2000, File No. 1-3525, Exhibit 10(s)]. *+10(j)(3) -- Employment Agreement dated July 29, 1998 between AEPSC and Robert P. Powers. +10(k)(1) -- AEP System Survivor Benefit Plan, effective January 27, 1998 [Quarterly Report on Form 10-Q of AEP for the quarter ended September 30, 1998, File No. 1-3525, Exhibit 10]. *+10(k)(2) -- First Amendment to AEP System Survivor Benefit Plan, as amended and restated effective January 31, 2000. +10(l) -- AEP Senior Executive Severance Plan for Merger with Central and South West Corporation, effective March 1, 1999[Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1998, File No. 1-3525, Exhibit 10(o)]. +10(m) -- AEP Change In Control Agreement [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(o)]. +10(n) -- AEP System 2000 Long-Term Incentive Plan [Proxy Statement of AEP, March 10, 2000]. +10(o)(1) -- Central and South West System Special Executive Retirement Plan as amended and restated effective July 1, 1997 [Annual Report on Form 10-K of CSW for the fiscal year ended December 31, 1998, File No. 1-1443, Exhibit 18]. +10(o)(2) -- Certified CSW Board Resolution of April 18, 1991 [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2001, File No. 1-3525, Exhibit 10(r)(2)]. +10(o)(3) -- CSW 1992 Long-Term Incentive Plan [Proxy Statement of CSW, March 13, 1992]. *+10(p)(1) -- AEP System Incentive Compensation Deferral Plan dated January 1, 2001.
E-13
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- *+10(p)(2) -- First Amendment to AEP System Incentive Compensation Deferral Plan dated December 6, 2002. *+10(q) -- AEP System Nuclear Performance Long Term Incentive Compensation Plan dated August 1, 1998. *+10(r) -- Nuclear Key Contributor Retention Plan dated May 1, 2000. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the OPCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of OPCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21]. *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. PSO++ 3(a) -- Restated Certificate of Incorporation of PSO [Annual Report on Form U5S of Central and South West Corporation for the fiscal year ended December 31, 1996, File No. 1-1443, Exhibit B-3.1]. 3(b) -- By-Laws of PSO (amended as of June 28, 2000) [Annual Report on Form 10-K of PSO for the fiscal year ended December 31, 2000, File No. 0-343, Exhibit 3(b)]. 4(a) -- Indenture, dated July 1, 1945, between and Liberty Bank and Trust Company of Tulsa, National Association, as Trustee, as amended and supplemented [Registration Statement No. 2-60712, Exhibit 5.03; Registration Statement No. 2-64432, Exhibit 2.02; Registration Statement No. 2-65871, Exhibit 2.02; Form U-1 No. 70-6822, Exhibit 2; Form U-1 No. 70-7234, Exhibit 3; Registration Statement No. 33-48650, Exhibit 4(b); Registration Statement No. 33-49143, Exhibit 4(c); Registration Statement No. 33-49575, Exhibit 4(b); Annual Report on Form 10-K of PSO for the fiscal year ended December 31, 1993, File No. 0-343, Exhibit 4(b); Current Report on Form 8-K of PSO dated March 4, 1996, No. 0-343, Exhibit 4.01; Current Report on Form 8-K of PSO dated March 4, 1996, No. 0-343, Exhibit 4.02; Current Report on Form 8-K of PSO dated March 4, 1996, No. 0-343, Exhibit 4.03]. 4(b) -- PSO-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of PSO: (1) Indenture, dated as of May 1, 1997, between PSO and The Bank of New York, as Trustee [Quarterly Report on Form 10-Q of PSO dated March 31, 1997, File No. 0-343, Exhibits 4.6 and 4.7]. (2) Amended and Restated Trust Agreement of PSO Capital I, dated as of May 1, 1997, among PSO, as Depositor, The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustee [Quarterly Report on Form 10-Q of PSO dated March 31, 1997, File No. 0-343, Exhibit 4.8]. 10(f) - Copy of Lease Agreements, dated as of December 1, 1989, between I&M and Wilmington Trust Company, as amended [Registration Statement No. 33-32753, Exhibits 28(a)(1)(C), 28(a)(2)(C), 28(a)(3)(C), 28(a)(4)(C), 28(a)(5)(C) and 28(a)(6)(C); Annual Report on Form 10-K of I&M for the fiscal year ended December 31, 1993, File No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B), 10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)
E-14
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- (3) Guarantee Agreement, dated as of May 1, 1997, delivered by PSO for the benefit of the holders of PSO Capital I's Preferred Securities [Quarterly Report on Form 10-Q of PSO dated March 31, 1997, File No. 0-343, Exhibits 4.9]. (4) Agreement as to Expenses and Liabilities, dated as of May 1, 1997, between PSO and PSO Capital I [Quarterly Report on Form 10-Q of PSO dated March 31, 1997, File No. 0-343, Exhibits 4.10]. 4(c) -- Indenture (for unsecured debt securities), dated as of November 1, 2000, between PSO and The Bank of New York, as Trustee [Registration Statement No. 333-100623, Exhibits 4(a) and 4(b)]. *4(d) -- Second Supplemental Indenture, dated as of November 26, 2002 establishing certain terms of the 6% Senior Notes, Series B, due 2032. *10(a) -- Copy of Restated and Amended Operating Agreement, dated as of January 1, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *10(b) -- Transmission Coordination Agreement, dated October 29, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the PSO 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of PSO [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21] *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. SWEPCO++ 3(a) -- Restated Certificate of Incorporation, as amended through May 6, 1997, including Certificate of Amendment of Restated Certificate of Incorporation [Quarterly Report on Form 10-Q of SWEPCo for the quarter ended March 31, 1997, File No. 1-3146, Exhibit 3.4]. 3(b) -- By-Laws of SWEPCo (amended as of April 27, 2000) [Quarterly Report on Form 10-Q of SWEPCo for the quarter ended March 31, 2000, File No. 1-3146, Exhibit 3.3]. 4(a) -- Indenture, dated February 1, 1940, between SWEPCo and Continental Bank, National Association and M. J. Kruger, as Trustees, as amended and supplemented [Registration Statement No. 2-60712, Exhibit 5.04; Registration Statement No. 2-61943, Exhibit 2.02; Registration Statement No. 2-66033, Exhibit 2.02; Registration Statement No. 2-71126, Exhibit 2.02; Registration Statement No. 2-77165, Exhibit 2.02; Form U-1 No. 70-7121, Exhibit 4; Form U-1 No. 70-7233, Exhibit 3; Form U-1 No. 70-7676, Exhibit 3; Form U-1 No. 70-7934, Exhibit 10; Form U-1 No. 72-8041, Exhibit 10(b); Form U-1 No. 70-8041, Exhibit 10(c); Form U-1 No. 70-8239, Exhibit 10(a)]. 4(b) -- SWEPCO-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of SWEPCo: (1) Indenture, dated as of May 1, 1997, between SWEPCo and the Bank of New York, as Trustee [Quarterly Report on Form 10-Q of SWEPCo dated March 31, 1997, File No. 1-3146, Exhibits 4.11 and 4.12]. (2) Amended and Restated Trust Agreement of SWEPCo Capital I, dated as of May 1, 1997, among SWEPCo, as Depositor, the Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustee [Quarterly Report on Form 10-Q of SWEPCo dated March 31, 1997, File No. 1-3146, Exhibit 4.13]. *12 - Statement re: Computation of Ratios *13 - Copy of those portions of the I&M 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. 21 - List of subsidiaries of I&M [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995,
E-15
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- (3) Guarantee Agreement, dated as of May 1, 1997, delivered by SWEPCo for the benefit of the holders of SWEPCo Capital I's Preferred Securities [Quarterly Report on Form 10-Q of SWEPCo dated March 31, 1997, File No. 1-3146, Exhibit 4.14]. (4) Agreement as to Expenses and Liabilities, dated as of May 1, 1997 between SWEPCo and SWEPCo Capital I [Quarterly Report on Form 10-Q of SWEPCo dated March 31, 1997, File No. 1-3146, Exhibits 4.15]. 4(c) -- Indenture (for unsecured debt securities), dated as of February 4, 2000, between SWEPCo and The Bank of New York, as Trustee [Registration Statement No. 333-87834, Exhibits 4(a) and 4(b); Form 8-K of SWEPCo filed on June 26, 2002, File No. 1-3146, Exhibit 4(b)]. *10(a) -- Copy of Restated and Amended Operating Agreement, dated as of January 1, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *10(b) -- Transmission Coordination Agreement, dated October 29, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the SWEPCo 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of SWEPCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21] *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. TCC++ 3(a) -- Restated Articles of Incorporation Without Amendment, Articles of Correction to Restated Articles of Incorporation Without Amendment, Articles of Amendment to Restated Articles of Incorporation, Statements of Registered Office and/or Agent, and Articles of Amendment to the Articles of Incorporation [Quarterly Report on Form 10-Q of TCC for the quarter ended March 31, 1997, File No. 0-346, Exhibit 3.1]. *3(b) -- Articles of Amendment to Restated Articles of Incorporation of TCC dated December 18, 2002. 3(c) -- By-Laws of TCC (amended as of April 19, 2000) [Annual Report on Form 10-K of TCC for the fiscal year ended December 31, 2000, File No. 0-346, Exhibit 3(b)]. 4(a) -- Indenture of Mortgage or Deed of Trust, dated November 1, 1943, between TCC and The First National Bank of Chicago and R. D. Manella, as Trustees, as amended and supplemented [Registration Statement No. 2-60712, Exhibit 5.01; Registration Statement No. 2-62271, Exhibit 2.02; Form U-1 No. 70-7003, Exhibit 17; Registration Statement No. 2-98944, Exhibit 4 (b); Form U-1 No. 70-7236, Exhibit 4; Form U-1 No. 70-7249, Exhibit 4; Form U-1 No. 70-7520, Exhibit 2; Form U-1 No. 70-7721, Exhibit 3; Form U-1 No. 70-7725, Exhibit 10; Form U-1 No. 70-8053, Exhibit 10 (a); Form U-1 No. 70-8053, Exhibit 10 (b); Form U-1 No. 70-8053, Exhibit 10 (c); Form U-1 No. 70-8053, Exhibit 10 (d); Form U-1 No. 70-8053, Exhibit 10 (e); Form U-1 No. 70-8053, Exhibit 10 (f)]. 4(b) -- TCC-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of TCC: (1) Indenture, dated as of May 1, 1997, between TCC and the Bank of New York, as Trustee [Quarterly Report on Form 10-Q of TCC dated March 31, 1997, File No. 0-346, Exhibits 4.1 and 4.2]. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules. KEPCO 3(a) - Copy of Restated Articles of Incorporation of KEPCo [Annual Report on Form 10-K of KEPCo for the fiscal year ended December 31, 1991, File No. 1-6858, Exhibit 3(a)]. *3(b) - Copy of By-Laws of KEPCo (amended as of January 1, 1996). 4(a) - Copy of Mortgage and Deed of Trust, dated May 1, 1949, between KEPCo and Bankers Trust Company, as supplemented and amended [Registration Statement No. 2-65820, Exhibits 2(b)(1), 2(b)(2), 2(b)(3), 2(b)(4), 2(b)(5), and 2(b)(6); Registration Statement No. 33-39394, Exhibits 4(b) and 4(c); Registration Statement No. 33-53226, Exhibits 4(b) and 4(c); Registration Statement No. 33- 61808, Exhibits 4(b) and 4(c), Registration Statement No. 33- 53007, Exhibits 4(b), 4(c) and 4(d)]. 10(a) - Copy of Interconnection Agreement, dated July 6, 1951, among APCo, CSPCo, KEPCo, I&M and OPCo and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File No. 1-3525, Exhibit 10(a)(3)]. 10(b) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service Corporation as agent, as amended [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); and Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(c) - Copy of Interim Allowance Agreement [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 10(d)]. *12
E-16
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- (2) Amended and Restated Trust Agreement of TCC Capital I, dated as of May 1, 1997, among TCC, as Depositor, the Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustee [Quarterly Report on Form 10-Q of TCC dated March 31, 1997, File No. 0-346, Exhibit 4.3]. (3) Guarantee Agreement, dated as of May 1, 1997, delivered by TCC for the benefit of the holders of TCC Capital I's Preferred Securities [Quarterly Report on Form 10-Q of TCC dated March 31, 1997, File No. 0-346, Exhibit 4.4]. (4) Agreement as to Expenses and Liabilities dated as of May 1, 1997, between TCC and TCC Capital I [Quarterly Report on Form 10-Q of TCC dated March 31, 1997, File No. 0-346, Exhibit 4.5]. 4(c) -- Indenture (for unsecured debt securities), dated as of November 15, 1999, between TCC and The Bank of New York, as Trustee, as amended and supplemented [Annual Report on Form 10-K of TCC for the fiscal year ended December 31, 2000, File No. 0-346, Exhibits 4(c), 4(d) and 4(e)]. *10(a) -- Copy of Restated and Amended Operating Agreement, dated as of January 1, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *10(b) -- Transmission Coordination Agreement, dated October 29, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *12 -- Statement re: Computation of Ratios. *13 -- Copy of those portions of the TCC 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. 21 -- List of subsidiaries of TCC [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 2002, File No. 1-3525, Exhibit 21] *23 -- Consent of Deloitte & Touche LLP. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. TNC++ 3(a) -- Restated Articles of Incorporation, as amended, and Articles of Amendment to the Articles of Incorporation [Annual Report on Form 10-K of TNC for the fiscal year ended December 31, 1996, File No. 0-340, Exhibit 3.5]. *3(b) -- Articles of Amendment to Restated Articles of Incorporation of TNC dated December 17, 2002. 3(c) -- By-Laws of TNC (amended as of May 1, 2000) [Quarterly Report on Form 10-Q of TNC for the quarter ended March 31, 2000, File No. 0-340, Exhibit 3.4]. 4(a) -- Indenture, dated August 1, 1943, between TNC and Harris Trust and Savings Bank and J. Bartolini, as Trustees, as amended and supplemented [Registration Statement No. 2-60712, Exhibit 5.05; Registration Statement No. 2-63931, Exhibit 2.02; Registration Statement No. 2-74408, Exhibit 4.02; Form U-1 No. 70-6820, Exhibit 12; Form U-1 No. 70-6925, Exhibit 13; Registration Statement No. 2-98843, Exhibit 4(b); Form U-1 No. 70-7237, Exhibit 4; Form U-1 No. 70-7719, Exhibit 3; Form U-1 No. 70-7936, Exhibit 10; Form U-1 No. 70-8057, Exhibit 10; Form U-1 No. 70-8265, Exhibit 10; Form U-1 No. 70-8057, Exhibit 10(b); Form U-1 No. 70-8057, Exhibit 10(c)]. *10(a) -- Copy of Restated and Amended Operating Agreement, dated as of January 1, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *10(b) -- Transmission Coordination Agreement, dated October 29, 1998, among PSO, TCC, TNC, SWEPCo and AEPSC. *12 -- Statement re: Computation of Ratios. *13 - Copy those portions of the KEPCo 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules.
E-17 OPCO EXHIBIT NUMBER DESCRIPTION 3(a) - Copy of Amended Articles of Incorporation of OPCo, and amendments thereto to December 31, 1993 [Registration Statement No. 33-50139, Exhibit 4(a); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 3(b)]. 3(b) - Certificate of Amendment to Amended Articles of Incorporation of OPCo, dated May 3, 1994 [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 3(b)]. 3(c) - Composite copy of the Amended Articles of Incorporation of OPCo, as amended [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 3(c)]. 3(d) - Copy of Code of Regulations of OPCo [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1990, File No. 1-6543, Exhibit 3(d)]. 4(a) - Copy of Mortgage and Deed of Trust, dated as of October 1, 1938, between OPCo and Manufacturers Hanover Trust Company (now Chemical Bank), as Trustee, as amended and supplemented [Registration Statement No. 2-3828, Exhibit B-4; Registration Statement No. 2- 60721, Exhibits 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6), 2(c)(7), 2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12), 2(c)(13), 2(c)(14), 2(c)(15), 2(c)(16), 2(c)(17), 2(c)(18), 2(c)(19), 2(c)(20), 2(c)(21), 2(c)(22), 2(c)(23), 2(c)(24), 2(c)(25), 2(c)(26), 2(c)(27), 2(c)(28), 2(c)(29), 2(c)(30), and 2(c)(31); Registration Statement No. 2-83591, Exhibit 4(b); Registration Statement No. 33-21208, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(vi); Registration Statement No. 33-31069, Exhibit 4(a)(ii); Registration Statement No. 33-44995, Exhibit 4(a)(ii); Registration Statement No. 33-59006, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv); Registration Statement No. 33-50373, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 4(b)]. 10(a)(1) - Copy of Power Agreement, dated October 15, 1952, between OVEC and United States of America, acting by and through the United States Atomic Energy Commission, and, subsequent to January 18, 1975, the Administrator of the Energy Research and Development Administration, as amended [Registration Statement No. 2-60015, Exhibit 5(a); Registration Statement No. 2-63234, Exhibit 5(a)(1)(B); Registration Statement No. 2-66301, Exhibit 5(a)(1)(C); Registration Statement No. 2-67728, Exhibit 5(a)(1)(D); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1989, File No. 1-3457, Exhibit 10(a)(1)(F); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(1)(B)]. 10(a)(2) - Copy of Inter-Company Power Agreement, dated July 10, 1953, among OVEC and the Sponsoring Companies, as amended [Registration Statement No. 2-60015, Exhibit 5(c); Registration Statement No. 2- 67728, Exhibit 5(a)(3)(B); Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1992, File No. 1-3457, Exhibit 10(a)(2)(B)]. 10(a)(3) - Copy of Power Agreement, dated July 10, 1953, between OVEC and Indiana-Kentucky Electric Corporation, as amended [Registration Statement No. 2-60015, Exhibit 5(e)]. 10(b) - Copy of Interconnection Agreement, dated July 6, 1951, between APCo, CSPCo, KEPCo, I&M and OPCo and with the Service Corporation, as amended [Registration Statement No. 2-52910, Exhibit 5(a); Registration Statement No. 2-61009, Exhibit 5(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1990, File 1-3525, Exhibit 10(a)(3)]. 10(c) - Copy of Transmission Agreement, dated April 1, 1984, among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service Corporation as agent [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(b); Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)]. 10(d) - Copy of Interim Allowance Agreement [Annual Report on Form 10-K of APCo for the fiscal year ended December 31, 1994, File No. 1-3457, Exhibit 10(d)]. 10(e) - Copy of Agreement, dated June 18, 1968, between OPCo and Kaiser Aluminum & Chemical Corporation (now known as Ravenswood Aluminum Corporation) and First Supplemental Agreement thereto [Registration Statement No. 2-31625, Exhibit 4(c); Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1986, File No. 1-6543, Exhibit 10(d)(2)]. 10(f) - Copy of Power Agreement, dated November 16, 1966, between OPCo and Ormet Generating Corporation and First Supplemental Agreement thereto [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 10(e)]. 10(g) - Copy of Amendment No. 1, dated October 1, 1973, to Station Agreement dated January 1, 1968, among OPCo, Buckeye and Cardinal Operating Company, and amendments thereto [Annual Report OPCO (continued) EXHIBIT NUMBER DESCRIPTION on Form 10-K of OPCo for the fiscal year ended December 31, 1993, File No. 1-6543, Exhibit 10(f)]. 10(h)(1)-AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1985, File No. 1-3525, Exhibit 10(e)]. 10(h)(2)-Amendment to AEP Deferred Compensation Agreement for certain executive officers [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1986, File No. 1-3525, Exhibit 10(d)(2)]. 10(i)(1)-Management Incentive Compensation Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 10(i)(1)]. 10(i)(2)-American Electric Power System Performance Share Incentive Plan, as Amended and Restated through January 1, 1995 [Quarterly Report on Form 10-Q of OPCo for the quarterly period ended September 30, 1995, File No. 1-6543]. 10(j)(1)-Excess Benefits Plan [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 10(g)(1)(A)]. 10(j)(2)-AEP System Supplemental Savings Plan (Non-Qualified) [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(2)]. 10(j)(3)-Umbrella Trust for Executives [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1993, File No. 1-3525, Exhibit 10(g)(3)]. 10(k)(1)-Employment Agreement between E. Linn Draper, Jr. and AEP and the Service Corporation [Annual Report on Form 10-K of AEGCo for the fiscal year ended December 31, 1991, File No. 0-18135, Exhibit 10(g)(2)]. 10(l)(1) - Agreement for Lease dated as of September 17, 1992 between JMG Funding, Limited Partnership and OPCo [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1992, File No. 1- 6543, Exhibit 10(l)]. 10(l)(2) - Lease Agreement dated January 20, 1995 between OPCo and JMG Funding, Limited Partnership, and amendment thereto (confidential treatment requested) [Annual Report on Form 10-K of OPCo for the fiscal year ended December 31, 1994, File No. 1-6543, Exhibit 10(l)(2)]. *12 - Statement re: Computation of Ratios. *13 - Copy of those portions of the OPCo 1995 Annual Report (for the fiscal year ended December 31, 1995) which are incorporated by reference in this filing. 21 - List of subsidiaries of OPCo [Annual Report on Form 10-K of AEP for the fiscal year ended December 31, 1995, File No. 1-3525, Exhibit 21]. *23 - Consent of Deloitte & Touche LLP. *24 - Power of Attorney. *27 - Financial Data Schedules.
EXHIBIT NUMBER DESCRIPTION - --------------- ----------- *13 -- Copy of those portions of the TNC 2002 Annual Report (for the fiscal year ended December 31, 2002) which are incorporated by reference in this filing. *24 -- Power of Attorney. *99(a) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. *99(b) -- Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
---------------------- ++ Certain instruments defining the rights of holders of long-term debt of the registrants included in the financial statements of registrants filed herewith have been omitted because the total amount of securities authorized thereunder does not exceed 10% of the total assets of registrants. The registrants hereby agree to furnish a copy of any such omitted instrument to the SEC upon request. EX-3 2 APCO 10-K EX. 3(D) Exhibit 3(d) APPALACHIAN POWER COMPANY BY-LAWS As Amended January 1, 1996 APPALACHIAN POWER COMPANY BY-LAWS Section 1. The annual meeting of the shareholders of the corporation for the election of directors and for the transaction of such other corporate business as may properly come before said meeting shall be held at the main office of the corporation, in the City of Roanoke, Virginia, or at such other place within or without the Commonwealth of Virginia as shall be specified in the notice, or waiver of notice, of such meeting, on the fourth Tuesday of April in each year, or on such other day as shall be specified in the notice, or waiver of notice, of such meeting. (As amended 1/26/67) Section 2. Special meetings of the shareholders of the corporation may be held upon the call of the Chairman of the Board or of the Board of Directors or Executive Committee, or of shareholders holding one-tenth of the then outstanding capital stock entitled to vote, at such time and at such place within or without the Commonwealth of Virginia as may be stated in the call and notice of any such special meeting. (As amended 1/31/80) Section 3. Notice of the time, place and purpose of every meeting of shareholders shall be mailed by the Secretary or the officer performing his duties at least ten days before the meeting to each shareholder of record entitled to vote, at his last known post office address, but meetings may be held without notice if all shareholders entitled to vote are present or if notice is waived before or after the meeting by those not present. No shareholders shall be entitled to notice of any meeting of shareholders with respect to any shares registered in his name after the date upon which notice of such meeting is required by law or by these by-laws to have been mailed or otherwise given to shareholders. Section 4. The holders of a majority of the stock of the corporation entitled to vote, present in person or by proxy, shall constitute a quorum, but less than a quorum shall have power to adjourn. At all meetings of shareholders, each shareholder entitled to vote may vote and otherwise act either in person or by proxy. Section 5. Meetings of shareholders shall be presided over by the Chairman of the Board, or, in his absence, by the President, or, in the absence of both, by a Vice President, or, if none of such officers is present, by a Chairman to be elected at the meeting. The Secretary of the corporation shall act as Secretary of such meeting if present. In his absence the Chairman may appoint a Secretary. (As amended 1/31/80) Section 6. The stock of the corporation shall be transferable or assignable on the books of the corporation by the holders in person or by attorney on the surrender of the certificate therefor duly endorsed. Certificates of stock shall be in such form and executed in such manner as may be prescribed by law and the Board of Directors. The Board of Directors may appoint one or more transfer agents and registrars for the stock. The Board of Directors are hereby authorized to fix in advance a date not less than ten nor more than fifty days preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record for the determination of the shareholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of capital stock, and in such case only shareholders of record on the date so fixed shall be entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, or allotment of rights, or exercise such rights, as the case may be, and notwithstanding any transfer of any stock on the books of the corporation after such record date fixed as aforesaid. (As amended 2/25/71) Section 7. The directors shall be elected at the annual meeting of shareholders or as soon thereafter as practicable and shall hold office for one year or until their successors are elected and qualify. It shall not be necessary to be a shareholder in order to be a director. The shareholders may remove any director at any time without cause assigned and fill the vacancy at a meeting called for the purpose of considering such action. Any vacancy in the Board of Directors not caused by such removal may be filled by the Board at any meeting. (As amended 1/29/81 ) Section 8. Meetings of the Board of Directors shall be held at the time fixed by resolution of the Board or upon call of the Chairman of the Board, the President or a Vice President and may be held at any place within or without the State of Virginia. The Secretary or officer performing his duties shall give reasonable notice (which need not exceed two days) of all meetings of directors, provided that a meeting may be held without notice immediately after the annual election, and notice need not be given of regular meetings held at times fixed by resolution of the Board. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice either before or after the meeting. Notice by mail or telegraph to the usual business or residence address of the director shall be sufficient. A majority of the Board of Directors in office shall constitute a quorum. Less than such a quorum shall have power to adjourn any meeting from time to time without notice. Section 9. The Board of Directors as soon as may be after their election in each year may appoint an Executive Committee to consist of the Chairman of the Board and such number of directors as the Board may from time to time determine. Such Committee shall have and may exercise during the intervals between meetings of the Board all the powers vested in the Board except the power to fill vacancies in the Board, the power to change the membership of or fill vacancies in said Committee and the power to change the by- laws. The Board shall have the power at any time to change the membership of such Committee and to fill vacancies in it. The Executive Committee may make rules for the conduct of its business and may appoint such committees and assistants as it may deem necessary. A majority of the members of said Committee shall constitute a quorum. The Chairman of the Board shall be the Chairman of the Executive Committee. During the intervals between the meetings of the Executive Committee the Chairman of said Committee shall possess and may exercise such of the powers vested in the Executive Committee as from time to time may be conferred upon him by resolution of the Board of Directors or the Executive Committee. (As amended 1/31/80) Section 10. The Board of Directors, as soon as may be convenient after the election of directors in each year, shall elect from among their number a Chairman of the Board and shall also elect a President, one or more Vice Presidents, a Secretary and a Treasurer and shall, from time to time, elect such other officers as they may deem proper. The same person may be elected to more than one office. (As amended 12/19/90) Section 11. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualify, but any officer may be removed from office at any time by the Board of Directors. Vacancies in the offices shall be filled by the Board of Directors. Section 12. The officers of the corporation shall have such duties as usually pertain to their offices except as modified by the Board of Directors, and shall also have such powers and duties as may from time to time be conferred upon them by the Board of Directors. Section 13. The Board of Directors are authorized to select such depositaries as they shall deem proper for the funds of the corporation. All checks and drafts against such deposited funds shall be signed by officers or persons to be specified by the Board of Directors. Section 14. The corporate seal of the corporation shall be in such form as the Board of Directors shall prescribe. Section 15. A director of this corporation shall not be disqualified by his office from dealing or contracting with the corporation either as a vendor, purchaser or otherwise, nor shall any transaction or contract of this corporation be void or voidable by reason of the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder or director, is in any way interested in such transaction on contract, provided that such transaction or contract is or shall be authorized, ratified or approved either (1) by a vote of a majority of a quorum of the Board of Directors or of the Executive Committee without counting in such majority or quorum any director so interested or member of a firm so interested or a shareholder or director of a corporation so interested, or (2) by vote at any shareholders' meeting of the holders of record of a majority of all the outstanding shares for stock of this corporation entitled to vote or by writing or writings signed by a majority of such holders; nor shall any director be liable to account to this corporation for any profits realized by him from or through any such transaction, or contract of this corporation authorized, ratified or approved as aforesaid by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder or director, was interested in such transaction or contract. Nothing herein contained shall create any liability in the events above described or prevent the authorization, ratification or approval of such contracts in any other manner provided by law; nor shall anything herein be considered as in any way affecting the rights of the corporation or of any person interested, on account of any fraud in connection with any such transaction. Section 16. (1) Definitions. In this Section 16: (a) "expenses" includes, without limitation, counsel fees; (b) "employee" shall include, without limitation, any employee, including any professionally licensed employee of the corporation. Such term shall also include, without limitation, any employee, including any professionally licensed employee of a subsidiary or affiliate of the corporation who is acting on behalf of the corporation; (c) "liability" means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to any employee benefit plan, or reasonable expenses incurred with respect to a proceeding; (d) "official capacity" means, (i) when used with respect to a director, the office of director in the corporation; or (ii) when used with respect to an individual other than a director, the office in the corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the corporation. "Official capacity" does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise whether at the request of the corporation or otherwise; (e) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding; (f) "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, including all appeals. (2) Indemnification. The corporation shall indemnify any person who was or is a party to any proceeding by reason of the fact that such person is or was a director, officer or employee of the corporation, or any subsidiary or affiliate of the corporation or is or was serving at the request of the corporation as a director, trustee, partner, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by such person in connection with such proceeding if (a) such person conducted him or herself in good faith; and (b) such person believed, in the case of conduct in his or her official capacity, that his or her conduct was in the best interests of the corporation, and in all other cases that his or her conduct was at least not opposed to its best interests; and (c) in the case of any criminal proceeding, such person had no reasonable cause to believe his or her conduct was unlawful; and (d) such person was not grossly negligent or guilty of willful misconduct. Indemnification required under this Section 16 in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. A person is considered to be serving an employee benefit plan at the corporation's request if such person's duties to the corporation also impose duties on, or otherwise involve services by, such person to the plan or to participants in or beneficiaries of the plan. A person's conduct with respect to an employee benefit plan for a purpose such person believed to be in the interests of the participants and beneficiaries of the plan is conduct that satisfies the requirements of this Section 16. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the standard of conduct described in this subsection (2) has not been met. (3) Limitations upon indemnification. Notwithstanding the provisions of subsection (2) of this Section 16, no indemnification shall be made in connection with: (a) any proceeding by or in the right of the corporation in which the person seeking indemnification was adjudged liable to the corporation; or (b) any proceeding charging any person with improper benefit to him or herself, whether or not involving action in such person's official capacity, in which such person was adjudged liable on the basis that personal benefit was improperly received by such person. (4) Determination and Authorization of Indemnification. In any case in which a director, officer or employee of the corporation requests indemnification, upon such person's request, the Board of Directors shall meet within sixty (60) days thereof to determine whether such person is eligible for indemnification in accordance with the applicable standards of conduct set forth in subsections (2) and (3) of this Section 16. Such determination shall be made as follows: (a) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding; (b) If a quorum cannot be obtained under paragraph (a) of this subsection (4), by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting of two or more directors not at the time parties to the proceeding; (c) By special legal counsel; (i) Selected by the Board of Directors or its committee in the manner prescribed in paragraphs (a) or (b) of this subsection (4); or (ii) If a quorum of the Board of Directors cannot be obtained under paragraph (a) of this subsection (4) and a committee cannot be designated under paragraph (b) of this subsection (4), selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate; or (d) By the shareholders, but shares owned by or voted under the control of directors, officers or employees who are at the time parties to the proceeding may not be voted on the determination; or (e) By the Chairman of the Board if the person seeking indemnification is neither a director nor an officer of the corporation. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under paragraph (c) of this subsection (4) to elect counsel. (5) Advancement of Expenses. To the fullest extent permitted by law, the corporation shall promptly advance expenses as they are incurred by any person who is a party to any proceeding, whether by or in the right of the corporation or otherwise, by reason of the fact that such person is or was a director, officer or employee of the corporation or of any subsidiary or affiliate of the corporation, or is or was serving at the request of the corporation as a director, trustee, partner, officer, or employee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, upon request of such person and receipt of an undertaking by or on behalf of such director, officer or employee to repay amounts advanced to the extent that it is ultimately determined that such person was not eligible for indemnification in accordance with the standards set forth in subsections (2) and (3) of this Section 16. (6) Contract Rights: Non-exclusivity of Indemnification: Contractual Indemnification. The foregoing provisions of this Section 16 shall be deemed to be a contract between the corporation and each director, officer or employee of the corporation, or its subsidiaries, or affiliates, and any modification or repeal of this Section 16 or such provisions of the Code of Virginia shall not diminish any rights or obligations existing prior to such modification or repeal with respect to any proceeding theretofore or thereafter brought; provided, however, that the right of indemnification provided in this Section 16 shall not be deemed exclusive of any other rights to which any director, officer or employee of the corporation may now be or hereafter become entitled apart from this Section 16, under any applicable law including the Code of Virginia. Irrespective of the provisions of this Section 16, the Board of Directors may, at any time from time to time, approve indemnification of directors, officers, employees or agents to the full extent permitted by the Code of Virginia at the time in effect, whether on account of past or future actions or transactions. Notwithstanding the foregoing, the corporation shall enter into such additional contracts providing for indemnification and advancement of expenses with directors, officers or employees of the corporation or its subsidiaries or affiliates as the Board of Directors shall authorize, provided that the terms of any such contract shall be consistent with the provisions of the Code of Virginia. (7) Miscellaneous Provisions. The indemnification provided by this Section 16 shall be limited with respect to directors, officers and controlling persons to the extent provided in any undertaking entered into by the corporation or its subsidiaries or affiliates, as required by the Securities and Exchange Commission pursuant to any rule or regulation of the Securities and Exchange Commission now or hereafter in effect. The corporation may purchase and maintain insurance on behalf of any person described in this Section 16 against any liability which may be asserted against such person whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Section 16. Every reference in this Section 16 to directors, officers or employees shall include former directors, officers and employees and their respective heirs, executors and administrators. If any provision of this Section 16 shall be found to be invalid or limited in application by reason of any law, regulation or proceeding, it shall not affect any other provision of the validity of the remaining provisions hereof. The provisions of this Section 16 shall be applicable to claims, actions, suits or proceedings made, commenced or pending after the adoption hereof, whether arising from acts or omissions to act occurring before or after the adoption hereof. (As amended 4/21/87) Section 17. These by-laws may at any time be amended or added to or any part thereof repealed by affirmative vote of a majority of a quorum of the Board of Directors given at a duly convened meeting of the Board of Directors, the notice of which includes notice of the proposed amendment, addition or repeal. Section 18. The Board of Directors shall be seven in number. The directors need not be shareholders. A majority of the directors shall constitute a quorum for the transaction of business. (As amended 1/1/96) H:\FINANCE\95-10K\BYLAWS.APCE-18 (LOGO) RECYCLE LOGO PRINTED ON RECYCLED PAPER