Agreement provides transition to a competitive market; encourages economic development, asset investment

COLUMBUS, Ohio, Sept. 7, 2011 – AEP Ohio, a unit of American Electric Power (NYSE: AEP) has reached a settlement agreement with a majority of parties involved in several cases pending before the Public Utilities Commission of Ohio (PUCO), including the company’s Electric Security Plan (ESP) proposal. The agreement gives AEP the authority to merge its two operating companies, Columbus Southern Power (CSP) and Ohio Power (OPCo), into one company. It also calls for the company to corporately separate its Ohio generation assets and complete the transition to a competitive generation market by mid-2015. Additionally, the agreement supports economic development opportunities and asset investment in Ohio.

          “After a decade of legislative and regulatory changes to Ohio’s market for electricity, this agreement allows an appropriate transition to a fully competitive electricity generation environment for AEP in the state,” said Nicholas Akins, AEP president. “With the clarity this agreement provides, AEP is adopting a new Ohio business model that transforms the company into two entities -- a regulated energy delivery system and a separate generation business. It also advances key state policies while sustaining investment in Ohio.”

          The agreement was signed by more than 20 organizations representing a broad range of customers, competitive retail electricity suppliers, environmental groups, communities and other key stakeholders. It supports rate stability, provides a transition to electric generation rates determined by auction, facilitates customer choice for electricity suppliers, promotes investment and job growth, and accelerates Ohio’s shale gas development.

          “This plan ensures a fair and level playing field for competition in Ohio,” said Joseph Hamrock, president and chief operating officer - AEP Ohio. “It provides a balanced transition to market while encouraging economic development and infrastructure investment. It also helps resolve some of the lingering uncertainty around investment in electric generation in Ohio.”

          To further develop customer choice for electricity providers in AEP Ohio’s service territory and facilitate a transition to market, the company will provide a percentage of its generation capacity to competitive retail suppliers at a discounted price for a three-year period. During 2012, approximately 20 percent will be made available to serve all customers. In 2013, approximately 30 percent will be available, while in 2014 through May 2015, approximately 40 percent will be made available. The company’s standard service offer price beginning in June 2015 will be determined through auctions involving multiple suppliers of generation service. 

          In addition, AEP Ohio will develop the AEP Ohio Growth Fund to support economic development efforts and contribute $5 million annually to the fund through May 2016. The company’s Partnership with Ohio Fund, its shareholder-funded initiative for the benefit of low-income customers, will continue. AEP Ohio will contribute $3 million annually through the term of the agreement.

          Other components of the agreement include a voluntary option for customers who wish to purchase a percentage of their energy usage from renewable resources, as well as the opportunity for the company to build new generation assets dedicated solely to Ohio customers and invest in new distribution assets to maintain and improve reliability.

          AEP Ohio also has committed to facilitate the development of shale gas in Ohio by entering into competitively priced long-term shale-gas contracts for the company’s natural-gas generating units in Ohio with producers who commit to investment and employment growth in the state.

          Starting Jan. 1, 2012, a typical CSP customer using 1,000 kilowatt hours (kWh) per month will pay $117.96 per month, a decrease in their total electric bill of $4.54. A typical Ohio Power customer using 1,000 kWh per month will pay $115.65 per month, an increase in their total electric bill of $4.41. AEP Ohio’s rates are expected to remain among the lowest in the state. 

          The Company will host a conference call at 4:30 pm EDT today for investors and analysts where management will discuss the Stipulation and take questions. The conference call number is 800-230-1096 and the passcode is 216455.

          AEP Ohio provides electricity to nearly 1.5 million customers of major AEP subsidiaries Columbus Southern Power Company and Ohio Power Company in Ohio, and Wheeling Power Company in the northern panhandle of West Virginia. AEP Ohio is based in Gahanna, Ohio, and is a unit of American Electric Power. News and information about AEP Ohio can be found at www.aepohio.com.

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

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