News | January 27, 2005

AEP Encouraged By PUCO Approval Of Ohio Rate Stabilization Plan; Plan Will Keep AEP's Rates Among The Lowest In Ohio

COLUMBUS, Ohio, Jan. 27, 2005 - American Electric Power (NYSE: AEP) is encouraged by the Public Utilities Commission of Ohio (PUCO) approval of the company's rate stabilization plan for its Ohio Power and Columbus Southern Power operating companies.
The rate plan, filed with the PUCO in February 2004, was proposed to address rates following the end of Ohio's electric customer choice market development period, which ends Dec. 31, 2005.

"Although we are still reviewing the fine print, the PUCO appears to have balanced their objectives of providing stability and reliability for our Ohio electricity customers with providing a workable rate structure that will benefit our customers, shareholders and the environment," said Michael G. Morris, AEP chairman, president and chief executive officer.

"With the approved gradual rate increases, our customers will be protected from market rate shock and volatility and will maintain some of the lowest electricity rates in the state. Our shareholders will receive a fair return on their investment in our operations over the next three years. And, we will be able to move forward with significant investments in environmental retrofits at our generating plants to give Ohioans cleaner air while maintaining their access to the low-cost, coal-fired generation that helps fuel Ohio's economy," Morris said.

Under the plan approved yesterday by the PUCO, generation rates for customers will increase each year in 2006, 2007 and 2008, by 3 percent per year for Columbus Southern Power customers and by 7 percent per year for Ohio Power customers. As stated by the PUCO, residential ratepayers will see an average monthly increase to the generation rate of less than $2 for Columbus Southern Power customers and less than $3 for Ohio Power customers.

"We understand that no one is ever happy with price increases, but this plan provides customers with a clear understanding of what their rates will be for the next three years. We believe these rates will continue to be competitive, but customers also will still have the option to shop and switch to a competitive supplier if they choose," said Kevin Walker, president and chief operating officer, AEP Ohio.

According to the plan, AEP will be permitted to seek additional generation increases, after a Commission proceeding, for increases in environmental costs, security costs, taxes, new generation-related regulatory requirements or customer-load switches that impact the company's ability to recover anticipated generation revenues. These additional increases would be capped at an average of no more than 4 percent per year for each company.

The PUCO did not authorize AEP's proposal to defer regional transmission organization administrative charges and construction-work-in-progress and in-plant carrying charges. The PUCO did authorize Provider of Last Resort (POLR) charges recognizing AEP's POLR responsibilities during the rate stabilization period.

The current 5 percent residential discount on generation rates in both the Columbus Southern Power and Ohio Power territories will end Dec. 31, 2005, pursuant to Senate Bill 3. AEP's distribution rates in effect Dec. 31, 2005, will remain frozen through 2008. AEP will have the opportunity to adjust those charges, after a Commission proceeding, to reflect increases in environmental costs, security costs, taxes or major storm damage restoration costs.

The PUCO directed AEP to allot $14 million over the three-year period for assistance for low-income customers and economic development. AEP Ohio will work with the PUCO staff and Ohio Department of Development to determine how to allocate those funds.

Base rates for electricity have not increased since 1994 for Columbus Southern Power customers and since 1995 for Ohio Power customers. Together, the companies serve approximately 1.4 million customers in Ohio.

American Electric Power owns more than 36,000 megawatts of generating capacity in the United States and is the nation´s largest electricity generator. AEP is also one of the largest electric utilities in the United States, with more than 5 million customers linked to AEP's 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.

Source: AEP