Exhibit 10(b)
 
RATE SCHEDULE NO.  25

RESTATED AND AMENDED OPERATING AGREEMENT

AMONG

PUBLIC SERVICE COMPANY OF OKLAHOMA,
SOUTHWESTERN ELECTRIC POWER COMPANY

AND

AMERICAN ELECTRIC POWER SERVICE CORPORATION

AS AGENT

 
 

Tariff Submitter: Public Service Company of Oklahoma
FERC Program Name:  FERC FPA Electric Tariff
Tariff Title:  PSO Rate Schedules and Service Agreements Tariffs
Tariff Proposed Effective Date:  03/01/2014
Tariff Record Title:  Restated and Amended Operating Agreement
Option Code: A
Record Content Description:  Rate Schedule No. 25

 
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RESTATED AND AMENDED OPERATING AGREEMENT
           
TABLE OF CONTENTS
           
ARTICLE I DEFINITIONS
 
6
             
1.1
 
Agreement
 
6
 
1.2
 
Capacity Commitment
 
6
 
1.3
 
Capacity Commitment Charge
 
6
 
1.4
 
Generating Unit
 
6
 
1.5
 
Industry Standards
 
6
 
1.6
 
Load
 
6
 
1.7
 
Operating Committee
 
6
 
1.8
 
Party or Parties
 
7
 
1.9
 
Pool Energy
 
7
 
1.1
 
Service Schedules
 
7
 
1.11
 
Seller's Incremental Energy Cost
7
 
1.12
 
System Emergency
 
7
 
1.13
 
System
 
7
 
1.14
 
Variable Cost
 
7
           
ARTICLE II TERM OF AGREEMENT
 
7
             
2.1
 
Term
 
7
           
ARTICLE III OBJECTIVES
 
8
 
3.1
 
Purpose
 
8
           
ARTICLE IV SCOPE AND RELATIONSHIP TO  OTHER  AGREEMENTS AND
   
 SERVICES
   
8
             
4.1
 
Scope
 
8
 
4.2
 
Transmission
 
9
           
ARTICLE V AGENT
   
9
             
5.1
 
Agent's Functions
 
9
 
5.2
 
Appointment of Agent
 
10
 
5.3
 
Delegation of Duties
 
10
           
ARTICLE VI COMPOSITION AND DUTIES OF THE OPERATING COMMITTEE
10
             
6.1
 
Operating Committee
 
10
 
6.2
 
Meeting Dates
 
11
 
6.3
 
Duties
 
11
           
ARTICLE VII COORDINATED PLANNING AND OPERATIONS
12
             
7.1
 
Coordinated System Planning
 
12
 
7.2
 
Coordinated System Dispatch
 
13
 
7.3
 
Capacity Sales
 
13
 
7.4
 
Energy Sales
 
14
 
7.5
 
Emergency Response
 
14

 
 
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ARTICLE VIII ASSIGNMENT OF COSTS AND BENEFITS  OF COORDINATED
15
 
OPERATIONS
                 
8.1
 
Service Schedules
 
15
           
ARTICLE IX BILLING PROCEDURES
 
15
             
9.1
 
Records
 
15
 
9.2
 
Monthly Statements
 
15
 
9.3
 
Billings and Payments
 
16
 
9.4
 
Taxes
 
16
 
9.5
 
Billing Errors
 
16
 
9.6
 
Billing Omissions
 
17
 
9.7
 
Billing Disputes
 
17
           
ARTICLE X FORCE MAJEURE
 
17
             
10.1
 
Events Excusing Performance
 
17
           
ARTICLE XI DELIVERY POINTS
 
18
             
11.1
 
Delivery Points
 
18
           
ARTICLE XII GENERAL
   
18
           
12.1
 
Adherence to Reliability Criteria
18
 
12.2
 
No Third Party Beneficiaries
 
19
 
12.3
 
Waivers
 
19
 
12.4
 
Successors and Assigns
 
19
 
12.5
 
Liability and Indemnification
 
20
 
12.6
 
Headings
 
20
 
12.7
 
Notice
 
20
 
12.8
 
Effect on Other Agreements
 
21
 
12.9
 
Interpretation
 
21
           
ARTICLE XIII REGULATORY APPROVAL
 
22
             
13.1
 
Regulatory Authorization
 
22
 
13.2
 
Changes
 
22
           
SCHEDULE A POOL ENERGY
 
24
             
14.1
 
Duration
 
24
 
14.2
 
Purpose
 
24
 
14.3
 
Receipts and Payments
 
24
           
SCHEDULE B DISTRIBUTION OF BENEFITS AND COSTS OF OFF-SYSTEM
25
 
SALES AND PURCHASES
                 
15.1
 
Duration
 
25
 
15.2
 
Purpose
 
25
 
15.3
 
Direct Assignment
 
25
 
15.4
 
System Participation
 
26
 
15.5
 
Other Distributions
 
26
           
SCHEDULE C CAPACITY COMMITMENT CHARGE
 
27

 
 
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16.1
 
Duration
 
27
 
16.2
 
Purpose
 
27
 
16.3
 
Basis for Capacity Commitment
 
27
 
16.4
 
Provisions for Capacity Commitment Charge
27
 
16.5
 
Provision for Energy Charge
 
28
           
SCHEDULE D CAPACITY COMMITMENT UNITS
 
29
             
17.1
 
Duration
 
29
 
17.2
 
Purpose
 
29
 
17.3
 
Commitment Units
 
29

 
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RESTATED AND AMENDED OPERATING AGREEMENT

THIS AGREEMENT is made and entered into as of the 1st day of March, 2014 by and
among Public Service Company of Oklahoma (“PSO”), Southwestern Electric Power
Company (“SWEPCO”),  and American Electric Power Service Corporation (“AEPSC”)
as Agent to PSO and SWEPCO, and supersedes the Restated and Amended Operating
Agreement issued on February 2, 2009.
 
RECITALS:
 
WHEREAS, PSO and SWEPCO (collectively the “Operating Companies” or individually
"Operating Company") are the owners and operators of interconnected electric
generation, transmission, and distribution facilities with which they are
engaged in the business of generating, transmitting, and selling electric power
to the general public and to other electric utilities; and
 
WHEREAS, the Operating Companies achieve and believe that they can continue to
achieve economic benefits for their customers through coordinated planning,
operation and maintenance of their electric supply facilities; and
 
WHEREAS, the achievement of the foregoing will be facilitated by the performance
of certain services by an agent;
 
WHEREAS, AEPSC is the service company affiliate of the Operating Companies and
as such performs a variety of services on their behalf in accordance with
applicable rules and regulations of the Federal Energy Regulatory Commission
(“Commission”); and
 
WHEREAS, AEPSC is qualified and willing to act as Agent for the Operating
Companies;
 
NOW, THEREFORE, the Parties hereto mutually agree as follows:
 
 
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ARTICLE I
DEFINITIONS
 
For the purposes of this Agreement and of Service Schedules A through D which
are attached hereto and made a part hereof, the following definitions shall
apply:
 
1.1 Agreement means this Restated and Amended Operating Agreement, including all
Service Schedules and attachments hereto.
 
1.2 Capacity Commitment means generating capacity committed by an Operating
Company to provide capability to enable another Operating Company to attain its
reserve requirement.
 
1.3 Capacity Commitment Charge means the charge made by an Operating Company
supplying a Capacity Commitment to the Operating Company receiving the Capacity
Commitment.
 
1.4 Generating Unit means an electric generator, together with its prime mover
and all auxiliary and appurtenant devices and equipment designed to be operated
as a unit for the production of energy, capacity and any other wholesale
products or services capable of being produced there from.  The above is to
include equipment necessary for connection to the transmission system.
 
1.5 Industry Standards means all applicable regional and national electric
reliability council and regional transmission organization principles, guides,
criteria, standards and practices.
 
1.6 Load means the energy required by an Operating Company’s retail or wholesale
power customer on whose behalf the Operating Company, by statute, franchise,
regulatory requirement, or firm power supply contract, has undertaken an
obligation to supply electricity to reliably meet the electric needs of such
customer.
 
1.7 Operating Committee means the administrative body established pursuant to
Article VI for the purposes specified within this Agreement.
 
 
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1.8 Party or Parties means one or more of the following, individually or
collectively, as the context warrants: PSO, SWEPCO, and Agent.
 
1.9 Pool Energy means the energy supplied and sold by one Operating Company to
another Operating Company to enable the purchasing Operating Company to meet a
portion of its Load that such other Operating Company cannot or does not plan to
serve with its resources.
 
1.10 Service Schedules means the Service Schedules attached to this Agreement
and those that later may be agreed to by the Parties and accepted for filing by
the Commission, as they may be amended from time to time.
 
1.11 Seller's Incremental Energy Cost means the Variable Cost that a selling
Operating Company incurs in order to supply energy.
 
1.12 System Emergency means a condition which, if not promptly corrected,
threatens to cause imminent harm to persons or property, including the equipment
of a Party or a third party, or threatens the reliability of electric service
provided by an Operating Company to its customers.
 
1.13 System means the coordinated Generating Units and Load of the Operating
Companies.
 
1.14 Variable Cost means a cost or expense incurred that would not have
otherwise been incurred to provide energy.
 
ARTICLE II
TERM OF AGREEMENT
 
2.1 Term
 

 
Subject to Commission approval or acceptance for filing, this Agreement shall
take effect on March 1, 2014 or the date of the start of the Southwest Power
Pool Integrated Marketplace, as reasonably determined by the Agent, or such
other date permitted by the Commission, and shall
 
 
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continue in full force and effect until terminated: (a) by mutual agreement; or
(b) upon twelve (12) months' written notice by one Party to each of the other
Parties.

 
ARTICLE III
OBJECTIVES
 
3.1 Purpose
 

 
The purpose of this Agreement is to provide a contractual basis for coordinating
the planning, operation, and maintenance of the power supply resources of the
Operating Companies to achieve economies and efficiencies consistent with the
provision of reliable electric service and an equitable sharing of the benefits
and costs of such coordinated arrangements. This Agreement is based on the
premise that each Operating Company will maintain sufficient long-term power
supply resources to meet its Load requirements.
 
ARTICLE IV
SCOPE AND RELATIONSHIP TO
OTHER  AGREEMENTS AND SERVICES
 
4.1 Scope
 

 
The transactions governed by this Agreement are subject to, and may be limited
from time to time by, applicable state and federal laws, and the regulations,
rules, and orders of applicable regulatory agencies regarding the purchase and
sale of energy and/or capacity among affiliates. This Agreement is not intended
to preclude the Parties from entering into other arrangements between or among
themselves or with third parties.  This Agreement is intended to operate in
addition to, not in lieu of, power market transactions and settlements that
occur between each Operating Company or the Operating Companies collectively and
any applicable regional transmission organizations.
 
 
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4.2 Transmission
 

 
This Agreement is intended to apply to the coordination of the power supply
resources of, and loads served by, the Operating Companies. It is not intended
to apply to the coordination of transmission facilities owned or operated by the
Operating Companies.
 
ARTICLE V
AGENT
 
5.1 Agent's Functions
 

 
Subject to the direction of the Operating Committee, Agent agrees to:
 
(a)  
evaluate and make recommendations concerning the adequacy of power supply
resources to meet the load requirements of the Operating Companies or to make
off-System sales, including generation additions, retirements, acquisitions and
dispositions;
 

(b)  
coordinate the operation and maintenance of the Operating Companies' respective
power supply resources;
 

(c)  
administer the participation of each Operating Company in the power markets of
the applicable regional transmission organization, including the settlement and
dispatch of each Operating Company’s power supply resources in accordance with
the rules of the applicable regional transmission organization;
 

(d)  
conduct off-System purchases and sales on behalf of the Operating Companies;
 

(e)  
prepare and deliver to the Parties a monthly settlement statement relating to
transactions pursuant to this Agreement and make available as requested
supporting details for any Party to inspect for a period of time not to exceed
three (3) years from the date expenses were incurred or revenues received;
 

 
 
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(f)
acquire and coordinate transmission and ancillary services from affiliated and
non-affiliated transmission providers for use with respect to transactions
between or among Operating Companies under this Agreement, off-System purchases
and off-System sales;
 
(g)
reassign transmission services obtained for wholesale merchant purposes on
behalf of any Operating Company;  and
  (h) perform such other activities and duties as may be assigned from time to
time by the Operating Committee.

 
5.2 Appointment of Agent
 

 
As of the effective date of this Agreement as specified in Section 2.1, the
Operating Companies delegate to AEPSC as the Agent, and AEPSC, as the Agent,
hereby accepts responsibility and authority for the duties listed in Section 5.1
and elsewhere in this Agreement, and shall perform each of those duties under
the direction of the Operating Committee.
 
5.3 Delegation of Duties
 

 
With the prior written consent of the other Parties, AEPSC may assign all or a
part of its responsibilities under this Agreement to another entity.
 
ARTICLE VI
COMPOSITION AND DUTIES OF THE OPERATING COMMITTEE
 
6.1 Operating Committee
 

 
By written notice to the other Parties, each Party shall name one representative
(“Representative”) to act for it in matters pertaining to this Agreement and its
implementation.  A Party may change its Representative at any time by written
notice to the other Parties.  The Representatives of the respective Parties
shall comprise the Operating Committee.  The Agent’s
 
 
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Representative shall act as the chairman of the Operating Committee
(“Chairman”).  All decisions of the Operating Committee shall be by a simple
majority vote of the Representatives.  With respect to all duties and decisions,
the Operating Committee will take such action as reasonably necessary to permit
each of the Operating Companies to fulfill its reliability obligations.

 
6.2 Meeting Dates
 

 
The Operating Committee shall hold meetings at such times, means, and places as
the Representatives shall determine from time to time.  Minutes of each
Operating Committee meeting shall be prepared and maintained.
 
6.3 Duties
 

 
The Operating Committee shall have the following duties, unless such duties are
otherwise assigned by a vote of the Operating Committee to the Agent, in which
case the Agent shall perform such duties:
 
(a)  
reviewing and determining the proportional sharing of costs and benefits under
this Agreement among the Operating Companies;
 

(b)  
administering and interpreting this Agreement and making any amendments hereto,
subject to any necessary regulatory approvals, including such amendments that
are proposed in response to a change in regulatory requirements applicable to
one or more of the Operating Companies or changes concerning an applicable
regional transmission organization;
 

(c)  
reviewing and, if necessary, amending the duties and responsibilities of the
Agent; and

 
 
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    (d) ensuring coordination for other matters not specifically provided for
herein that the Operating Committee considers necessary to the reliable and
economic use of each Operating Company’s power supply resources.

 
In the event that an action of the Operating Committee results in a change to
the settlement process(es) among the Operating Companies, such modified
settlement will normally occur on a prospective basis only, however, this may
include past billing periods back to the beginning of the first full billing
month preceding the date of action of the Operating Committee.  Such
modifications will be subject to the terms of Article IX as applicable.
 
ARTICLE VII
COORDINATED PLANNING AND OPERATIONS
 
7.1 Coordinated System Planning
 

 
Each Operating Company, with support from the Agent, will be individually
responsible for its own capacity planning.  Each Operating Company will be
responsible for maintaining an adequate level of generation resources to meet
its own Load requirements for capacity and energy, including any required
reserve margins, and shall bear all of the resulting costs.
 
The Agent, under the direction of the Operating Committee will, on an annual
basis, or more frequently if circumstances dictate, assess the adequacy of the
power supply resources of the Operating Companies from the perspective of each
Operating Company and the Operating Companies collectively, taking into account
reserve requirements, capacity requirements of the applicable regional
transmission organization, state integrated resource plans, as applicable, each
Operating Company's load forecast, changing regulatory structures and
requirements and all other criteria applicable by law, regulation or agreement
to each Operating Company.  The Agent will subsequently make recommendations to
the Operating Committee regarding the need for additional power supply
resources.  Based on Agent's recommendations, the Operating
 
 
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Committee will decide whether or not to construct, purchase or otherwise acquire
power supply resources for the benefit of one or more Operating Company.  If the
Operating Committee decides to add such resources, the costs associated with
such power supply resources will be allocated to the Operating Companies in
proportion to their need for such power supply resources.

 
Similarly, the Agent, under the direction of the Operating Committee, will, on
an annual basis, or more frequently if circumstances dictate, assess whether an
Operating Company has power supply resources above its own capacity requirements
(short-term or long-term) that could be made available to the other Operating
Company. Notwithstanding any of the foregoing, the actual addition or
disposition of power supply resources will be conditioned on compliance with all
applicable state and other regulatory requirements; in no event will the
Operating Committee or Agent acquire, assign, reassign, or dispose of power
supply resources for an Operating Company in contravention of such requirements.
 
7.2 Coordinated System Dispatch
 

 
It is the intent of the Operating Companies to dispatch their power supply
resources on a coordinated basis and in accordance with the rules of the
applicable regional transmission organization.  The revenues and costs of
off-System transactions and of serving an Operating Company’s Load will be
shared by the Operating Companies pursuant to Schedule B.
 
7.3 Capacity Sales
 

 
Whenever any Operating Company has surplus capacity and the other Operating
Company has insufficient capacity, the Agent shall evaluate the feasibility of a
capacity transaction between the Operating Companies. Such evaluation shall take
into account the
 
 
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availability of transmission capacity, state resource procurement policies, and
alternative opportunities for sales and purchases. Where feasible, the Agent may
recommend and the Operating Committee may direct an Operating Company with
surplus capacity to make a Capacity Commitment to an Operating Company with
insufficient capacity.  The Operating Company with insufficient capacity shall
make payments to the Operating Company with surplus capacity for each such month
that a Capacity Commitment applies in the amount of the Capacity Commitment
Charge in accordance with Schedule C.  Capacity sales may also be set out in
separate agreements or Service Schedules, which shall be subject to any
necessary Commission acceptance or approval.

 
7.4 Energy Sales
 

 
An Operating Company will make energy available from its power supply resources
to the other Operating Company for the purposes and to the extent provided by
this Agreement.  The Agent shall coordinate and direct off-System sales of
energy by the Operating Companies.
 
7.5 Emergency Response
 

 
In the event of a System Emergency, no adverse distinction shall be made between
the customers of either Operating Company.  Each Operating Company shall make
its power supply resources available in response to a System Emergency.
Notwithstanding the foregoing, it is understood that transmission constraints or
other factors may limit the ability of one Operating Company to respond to a
System Emergency.
 
 
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ARTICLE VIII
ASSIGNMENT OF COSTS AND BENEFITS
OF COORDINATED OPERATIONS
 
8.1 Service Schedules
 

 
The costs and revenues associated with coordinated operations as described in
Article VII shall be distributed in the manner provided in the Service Schedules
utilizing the billing procedures described in Article IX.  It is understood and
agreed that all such Service Schedules are intended to establish an equitable
sharing of costs and/or benefits among the Parties, and that circumstances may,
from time to time, require a reassessment of the relative benefits and burdens
of this Agreement, or the methods used to apportion costs and benefits under the
Service Schedules.  Upon a recommendation of the Operating Committee, any of the
Service Schedules may be amended as of any date agreed to by the Operating
Committee by majority vote, subject to receipt of any necessary regulatory
authorizations.
 
ARTICLE IX
BILLING PROCEDURES
 
9.1 Records
 

 

The Agent shall maintain such records as may be necessary to determine the
assignment of costs and benefits of coordinated operations pursuant to this
Agreement. Such records shall be made available to the Parties upon request for
a period not to exceed three (3) years.
 
9.2 Monthly Statements
 

 
As promptly as practicable after the end of each calendar month, the Agent shall
prepare a statement setting forth the monthly summary of costs and revenues
allocated or assigned to the Parties in sufficient detail as may be needed for
settlements under the provisions of this
 
 
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Agreement. As required, the Agent may provide such statements on an estimated
basis and then adjust those statements for actual results.

 
9.3 Billings and Payments
 

 
The Agent shall be responsible for all billing between the Operating Companies
and other entities with which they engage in off-System purchases and off-System
sales pursuant to this Agreement.  Payments among the Operating Companies, if
any, shall be made by remittance of the net amount billed or by making
appropriate accounting entries on the books of the Parties.  The entire amount
shall be paid when due.
 
9.4 Taxes
 

 
Should any federal, state, or local tax, surcharge or similar assessment, in
addition to those that may now exist, be levied upon the electric capacity,
energy, or services to be provided in connection with this Agreement, or upon
the provider of service as measured by the electric capacity, energy, or
services, or the revenue therefrom, such additional amount shall be included in
the net billing described in Section 9.3.
 
9.5 Billing Errors
 

 
If a Party discovers a billing error pertaining to a prior billing for reasons
including, but not limited to, missing or erroneous data or calculations,
including those caused by meter, computer or human error, a correction
adjustment will be calculated.  The correction adjustment shall not be applied
to any period earlier than the beginning of the second full billing month
preceding the discovery of the error, nor will interest accrue on such
adjustment. The correction adjustment will be applied as soon as practicable to
the next subsequent regular monthly bill.
 
 
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Any overpaid amount attributed to such billing errors shall be returned by the
owing Party upon determination of the correct amount with no interest.

 
9.6 Billing Omissions
 

 
Within one (1) year from the date on which a bill should have been delivered, if
a Party’s records reveal that the bill was not delivered, then the Agent shall
deliver to the appropriate Party a bill within one (1) month of this
determination.  Any amounts collected or reimbursed due to such omissions shall
exclude interest.  The right to receive payment is waived with respect to any
amounts not billed within this period.
 
9.7 Billing Disputes
 

 
The Parties shall have the right to dispute the accuracy of any bill or payment
for a period not to exceed two months from the date on which the bill was
initially delivered.  Following this one-month period, the right to dispute a
bill is permanently waived for any and all reasons including but not limited to,
(a) errors, (b) omissions, (c) Agent’s actions, and (d) the Operating
Committee’s decisions, Agreement interpretations and direction in the
administration of the Agreement.  Any amounts collected or reimbursed due to
such disputes shall exclude interest.
 
ARTICLE X
FORCE MAJEURE
 
10.1 Events Excusing Performance
 

 
No Party shall be liable to another Party for or on account of any loss, damage,
injury, or expense resulting from or arising out of a delay or failure to
perform, either in whole or in part, any of the agreements, covenants, or
obligations made by or imposed upon the Parties by this Agreement, by reason of
or through strike, work stoppage of labor, failure of contractors or
 
 
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suppliers of materials (including fuel, consumables or other goods and
services), failure of equipment, environmental restrictions, riot, fire, flood,
ice, invasion, civil war, commotion, insurrection, military or usurped power,
order of any court or regulatory agency granted in any bona fide legal
proceedings or action, or of any civil or military authority either de facto or
de jure, explosion, Act of God or the public enemies, or any other cause
reasonably beyond its control and not attributable to its neglect.  A Party
experiencing such a delay or failure to perform shall use due diligence to
remove the cause or causes thereof; however, no Party shall be required to add
to, modify or upgrade any facilities, or to settle a strike or labor dispute
except when, according to its own best judgment, such action is advisable.

 
ARTICLE XI
DELIVERY POINTS
 
11.1 Delivery Points
 

 
All electric energy delivered under this Agreement shall be of the character
commonly known as three-phase sixty-cycle energy, and shall be delivered at the
interconnection points of the applicable Generating Units, at the nominal
unregulated voltage designated for such points, and at such other points and
voltages as may be determined and agreed upon by the Operating Companies.
 
ARTICLE XII
GENERAL
 
12.1 Adherence to Reliability Criteria
 

 
The Parties agree to conform to all applicable Industry Standards as they affect
the implementation of this Agreement.
 
 
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12.2 No Third Party Beneficiaries
 

 
This Agreement does not create rights of any character whatsoever in favor of
any person, corporation, association, entity or power supplier, other than the
Parties, and the obligations herein assumed by the Parties are solely for the
use and benefit of the Parties. Nothing in this Agreement shall be construed as
permitting or vesting, or attempting to permit or vest, in any person,
corporation, association, entity or power supplier, other than the Parties, any
rights hereunder or in any of the resources or facilities owned or controlled by
the Parties or the use thereof.
 
12.3 Waivers
 

 
Any waiver at any time by a Party of its rights with respect to a default under
this Agreement, or with respect to any other matter arising in connection with
this Agreement, shall not be deemed a waiver with respect to any subsequent
default or matter. Any delay, short of the statutory period of limitation, in
asserting or enforcing any right under this Agreement, shall not be deemed a
waiver of such right.
 
12.4 Successors and Assigns
 

 
This Agreement shall inure to the benefit of and be binding upon the Parties
only, and their respective successors and assigns, and shall not be assignable
by any Party without the written consent of the other Parties except to a
successor in the operation of its properties by reason of a reorganization to
comply with state or federal restructuring requirements, or a merger,
consolidation, sale or foreclosure whereby substantially all such properties are
acquired by or merged with those of such a successor.
 
 
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12.5 Liability and Indemnification
 

 
SUBJECT TO ANY APPLICABLE STATE OR FEDERAL LAW THAT MAY SPECIFICALLY RESTRICT
LIMITATIONS ON LIABILITY, EACH PARTY SHALL RELEASE, INDEMNIFY, AND HOLD HARMLESS
THE OTHER PARTIES, THEIR DIRECTORS, OFFICERS AND EMPLOYEES FROM AND AGAINST ANY
AND ALL LIABILITY FOR LOSS, DAMAGE OR EXPENSE ALLEGED TO ARISE FROM, OR BE
INCIDENTAL TO, INJURY TO PERSONS AND/OR DAMAGE TO PROPERTY IN CONNECTION WITH
ITS FACILITIES OR THE PRODUCTION OR TRANSMISSION OF ELECTRIC ENERGY BY OR
THROUGH SUCH FACILITIES, OR RELATED TO PERFORMANCE OR NON-PERFORMANCE OF THIS
AGREEMENT, INCLUDING ANY NEGLIGENCE ARISING HEREUNDER. IN NO EVENT SHALL ANY
PARTY BE LIABLE TO ANOTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY CLAIM ARISING OUT OF THIS AGREEMENT.
 
12.6 Headings
 

 
The descriptive headings of the Articles, Sections and Service Schedules of this
Agreement are used for convenience only, and shall not modify or restrict any of
the terms and provisions thereof.
 
12.7 Notice
 

 
Any notice or demand for performance required or permitted under any of the
provisions of this Agreement shall be deemed to have been given on the date such
notice, in writing, is deposited in the U.S. mail, postage prepaid, certified or
registered mail, addressed to the Parties
 
 
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at their principal place of business at 1 Riverside Plaza, Columbus, Ohio 43215,
or in such other form or to such other address as the Parties may stipulate.

 
12.8 Effect on Other Agreements
 

 
This Agreement supersedes and replaces the Restated and Amended Operating
Agreement among PSO, SWEPCO and AEPSC issued on February 2, 2009, effective as
of the date this Agreement becomes effective as set out in Section 2.1.
 
12.9 Interpretation
 

 
In this Agreement: (a) unless otherwise specified, references to any Article,
Section or Service Schedule are references to such Article, Section or Service
Schedule of this Agreement; (b) the singular includes the plural and the plural
includes the singular; (c) unless otherwise specified, each reference to a
requirement of any governmental entity or regional transmission organization
includes all provisions amending, modifying, supplementing or replacing such
governmental entity or regional transmission organization from time to time; (d)
the words “including,” “includes” and “include” shall be deemed to be followed
by the words “without limitation”; (e) unless otherwise specified, each
reference to any agreement includes all amendments, modifications, supplements,
and restatements made to such agreement from time to time which are not
prohibited by this Agreement; (f)  the descriptive headings of the various
Articles, Sections and Service Schedules of this Agreement have been inserted
for convenience of reference only and shall in no way modify or restrict the
terms and provisions thereof; and (g) “herein,” “hereof,” “hereto” and
“hereunder” and similar terms refer to this Agreement as a whole.
 
 
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ARTICLE XIII
REGULATORY APPROVAL
 
13.1 Regulatory Authorization
 

 
This Agreement is subject to and conditioned upon its approval or acceptance for
filing without material condition or modification by the Commission. In the
event that this Agreement is not so approved or accepted for filing in its
entirety or without conditions or modifications unacceptable to any Party, or
the Commission subsequently modifies this Agreement upon complaint or upon its
own initiative (as provided for in Section 13.2), any Party may, irrespective of
the notice provisions in Section 2.1, withdraw from this Agreement by giving
thirty (30) days’ advance written notice to the other Parties.
 
13.2 Changes
 

 
It is contemplated by the Parties that it may be appropriate from time to time
to change, amend, modify, or supplement this Agreement, including the Service
Schedules and any other attachments that may be made a part of this Agreement,
to reflect changes in operating practices or costs of operations or for other
reasons. Any such changes to this Agreement shall be in writing executed by the
Parties and subject to approval or acceptance for filing by the Commission.
 
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
attested by their duly authorized officers on the day and year first above
written.

PUBLIC SERVICE COMPANY OF OKLAHOMA
 
By  /s/ J. Stuart Solomon
Name:  J. Stuart Solomon
 Title:   President

 
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SOUTHWESTERN ELECTRIC POWER COMPANY
 
By  /s/ Venita McCellon-Allen
Name:  Venita McCellon-Allen

      Title:    President

 
AMERICAN ELECTRIC POWER SERVICE CORPORATION
 
By  /s/ Richard E. Munczinski
Name:  Richard E. Munczinski

     Title:   Senior Vice President
 
 
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SCHEDULE A
POOL ENERGY
 
14.1 Duration
 

 
      This Service Schedule A shall become effective and binding when the
Agreement of which it is a part becomes effective, and shall continue in full
force and effect throughout the duration of the Agreement unless terminated or
suspended.

 
14.2 Purpose
 

 
      This Schedule provides the basis for determining payments and receipts
among the Operating Companies for Pool Energy exchanges.

 
14.3 Receipts and Payments
 

 
      A selling Operating Company shall receive from a purchasing Operating
Company one hundred and ten percent (110%) of the Seller's Incremental Energy
Cost for Pool Energy sold.

 
A purchasing Operating Company shall pay for Pool Energy received one hundred
and ten percent (110%) of the Seller's Incremental Cost for Pool Energy.

 
 
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SCHEDULE B
DISTRIBUTION OF BENEFITS AND COSTS OF OFF-SYSTEM SALES AND PURCHASES
 
15.1 Duration
 

 
This Service Schedule B shall become effective and binding when the Agreement of
which it is a part becomes effective, and shall continue in full force and
effect throughout the duration of the Agreement unless terminated or suspended.
 
15.2 Purpose
 

 
This schedule establishes the basis for distributing among the Operating
Companies (i) the revenues and costs associated with off-System purchases and
sales of energy, capacity and other wholesale products and services and (ii)
other benefits and costs not otherwise assigned or allocated by this Agreement,
including amounts allocated to the Operating Companies pursuant to the SIA, if
any.  “SIA” means the System Integration Agreement entered into among the
operating companies of American Electric Power Company, Inc. in connection with
the merger approved by the Commission in American Electric Power Company and
Central and South West Corporation, Opinion No. 442, 90 FERC  ¶ 61,242, Order on
Rehearing, Opinion No. 442-A, 91 FERC ¶ 61,129 (2000).
 
15.3 Direct Assignment
 

 
The revenues and costs associated with off-System purchases and sales of energy,
capacity and other wholesale products and services initiated at the direction of
an Operating Company will be directly assigned to that Operating Company
whenever reasonably possible.  The revenues and costs associated with serving an
Operating Company’s Load, including the purchase of any energy deficits or sales
of any energy surpluses in the markets
 
 
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of the applicable regional transmission organization, will be directly assigned
to that Operating Company.

 
15.4 System Participation
 

 
The revenues and costs of off-System purchases and sales of energy, capacity and
other wholesale products and services not directly assigned to an Operating
Company pursuant to Section 15.3 shall be allocated among the Operating
Companies in proportion to the relative magnitude of each Operating Company of
the energy generated (net exports) or not generated (net imports) by such
Operating Company.
 
15.5 Other Distributions
 

 
Revenues and costs incurred during any month other than those allocated to the
Operating Companies pursuant to Sections 15.3 and 15.4, including benefits and
costs allocated pursuant to Schedule D of the SIA, if any, shall be allocated
among the Operating Companies ratably in proportion to the ratio of an Operating
Company’s maximum demand in effect for the relevant month to the sum of both
Operating Companies’ maximum demands in effect for that month.  The maximum
demand in effect for any month for a particular Operating Company is the maximum
demand experienced by said Operating Company during the twelve consecutive
months next preceding that month.
 
 
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SCHEDULE C
CAPACITY COMMITMENT CHARGE
 
16.1 Duration
 

 
This Service Schedule C shall become effective and binding when the Agreement of
which it is a part becomes effective, and shall continue in full force and
effect throughout the duration of the Agreement unless terminated or suspended.
 
16.2 Purpose
 

 
   This Schedule establishes the basis for Capacity Commitments between the
Operating Companies and the rates for the Capacity Commitment Charge and
associated energy.
 
16.3 Basis for Capacity Commitment
 

 
Either Operating Company may make available the other Operating Company unit
capacity consisting of a portion of the output of one or more specific
Generating Units owned or controlled by the committing Operating Company.  The
receiving Operating Company shall be entitled to receive energy from the
specified Generating Unit(s) up to an amount equal to the actual availability of
that Generating Unit or such other amount as is mutually agreeable.  The
capacity commitment shall be for a twelve month period or as otherwise mutually
agreed.
 
16.4 Provisions for Capacity Commitment Charge
 

 
            The monthly Capacity Commitment Charge for each specific Generating
Unit(s) from which capacity is committed shall be determined pursuant to the
following formula:

      A =       (1/12) (B) (C/D) (E)

Where:

 
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A =
Monthly Capacity Commitment Charge for the specified unit to be due each month
regardless of the availability of the specific unit.

 
B =
0.1772 (fixed charge rate for the committing Operating Company).

 
C =
Committing Operating Company's total dollar investment, at original cost, in the
specific Generating Unit as of December 31 of the year prior to the year of the
Capacity Commitment.

 
D =
Rated net dependable capability of the specific Generating Unit in megawatts.

 
E =
Megawatts of capacity committed from the specified unit.

 
16.5 Provision for Energy Charge
 

 
The rate for energy received by a receiving Operating Company from the specified
Generating Unit(s) shall be the Variable Cost of energy produced for the
specified Generating Unit(s) plus ten (10) percent of those costs or three (3)
mills per kilowatt hour, whichever is less.

 
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SCHEDULE D
CAPACITY COMMITMENT UNITS
 
17.1 Duration
 
This Service Schedule D shall become effective and binding when the Agreement of
which it is a part becomes effective, and shall continue in full force and
effect throughout the duration of the Agreement unless terminated or suspended.
 
17.2 Purpose
 
This Schedule identifies the Generating Units of the Operating Companies from
which Capacity Commitments shall be made pursuant to Section 7.3 and with
reference to which the Capacity Commitment Charge shall be determined in
accordance with Schedule C.
 
17.3 Commitment Units
 
Listed below are the Generating Units from which each of the Operating Companies
shall commit Capacity to other Operating Companies pursuant to Section
7.3.  Capacity Commitments shall be made from the first listed unit of the
committing Operating Company unless or to the extent that the Generating Unit is
not expected to be available during the commitment period.  In that event,
Capacity Commitments shall be made from the second listed unit of the committing
Operating Company.

 
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OPERATING COMPANY/
UNIT NAME
 
RATING
(MW)
YEAR
INSTALLED
PSO
   
   Riverside #2
465
1976
   Riverside #1
457
1974
SWEPCO
   
   Knox Lee #5
344
1974
   Wilkes #3
351
1971

 
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